Leumi Q3 profit higher than expected

Bank Leumi beat third-quarter net profit forecasts on Tuesday helped by higher interest income and lower expenses.

The country’s second-largest lender reported a profit of NIS 936 million, up from NIS 820m. a year earlier.

That beat the NIS 853m. expected by analysts in a Reuters poll, which did not fully account for the bank’s sale of shares in the Tel Aviv Stock Exchange worth NIS 47m.

Operating expenses fell 0.5%. Net interest income in the quarter rose 14.5% to NIS 2.196 billion while credit loss expenses jumped to NIS 198m. from NIS 3m. a year earlier.

The bank declared a quarterly dividend of NIS 375m., representing 40% of net income.

It said that as of November 8 it had purchased NIS 642m. worth of its own shares as part of a NIS 700m. buyback program approved in March.

The bank’s Tier 1 ratio, which measures equity capital as a proportion of risk-weighted assets, was 11.25% at the end of September, down from 11.43% at the end of 2017.

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Leumi shares were down 0.5%in late morning trade in Tel Aviv outpacing the broader bourse, which was down 0.8%.

“We continue to like Leumi as we see the bank returning to accelerated credit growth alongside ongoing streamlining measures,” said Barclays analyst Tavy Rosner. “Leumi will [also] return the most cash to shareholders in 2018 given its 65% effective payout ratio thanks to the... buyback plan alongside its 40% dividend payout ratio.”

Leumi’s newly launched online bank Pepper will also help the bank gain retail market share, he said.