Hapoalim boosts dividend as high interest rates fuel profits

Bank Hapoalim on Monday reported a 21% rise in quarterly profit as banks continue to benefit from high interest rates, allowing them to increase dividends.

Hapoalim earned NIS 2.01 billion ($554 million) in the first quarter, for a 17% return on equity, it said. It was raising its dividend payout for the period to 40% of quarterly net income, or NIS 803m., from 30%, it added.

Helped by aggressive Bank of Israel interest-rate hikes to fight inflation, Hapoalim’s net interest income jumped 49% to NIS 4.04b. It posted credit-loss expenses of NIS 185m. after it recovered NIS 600m. from the credit-default provision a year earlier.

Inflation stands at 5%, hovering around a 2008 high and well above the government’s 1%-3% target. The central bank has raised the key rate to 4.75% from 0.1% last April.

Jefferies analyst Joseph Dickerson said Hapoalim, Israel’s largest lender by loans to the public, moved to a 40% payout sooner than expected. He maintained a hold rating on the stock with a NIS 37 price target.

Barclays analyst Tavy Rosner kept an overweight rating with a NIS 48 target.

Over the past 12 months, Hapoalim has paid out NIS 2.3b. in dividends, although so far in 2023, its share price is only up 1% – half the gain in the Tel Aviv banking index.

Israel Discount Bank last week raised its dividend payout to 30% of net profit from 20%. Leumi, Israel’s largest bank by assets, which will report earnings on Tuesday, and Mizrahi Tefahot also pay 30% of net profit.

Hapoalim has expanded its credit portfolio by 8.3% over the past year.

The bank’s ratio of common equity Tier 1 capital-to-risk components rose to 11.36% from 11.25% at the end of 2022. (Reuters)