Hapoalim profit gains on low credit loss provision

The country’s largest lender Bank Hapoalim reported a forecast- beating rise in quarterly profit on Thursday after making far lower than expected provisions to deal with the COVID- 19 crisis.

The bank said net profit came in at NIS 816 million ( in the third quarter, compared with NIS 736m. last year. That was above a forecast of NIS 531m. returned by a Reuters poll of analysts.

Net interest income fell to NIS 2.2b. in the July to September period from NIS 2.28b.

Citing a “high reserve build in the first half of 2020, the bank recorded a materially lower net provision for credit losses” of just NIS 193m. in the quarter, it said, compared with analysts’ expectations of NIS 542m.

A year earlier it recorded income from credit losses of NIS 40m.

Over the first nine months of 2020, its provision reached NIS 2.13b.

“Israeli banks entered the current crisis in good shape thanks to years of conservative lending practices,” said Barclays analyst Tavy Rosner.

“While we are likely to see increased provisions in the near term, we see the banks as capable of weathering current challenges.”

He added that nearly NIS 7b. in excess capital and ongoing efficiency measures which are expected to flow through to 2021 “should support structural return on equity growth.”

Hapoalim said due to the pandemic, some NIS 43.3b. of loans had been deferred by the end of September, with NIS 21.4b. still in deferral.

Of the NIS 20.8b. of mortgage loans that were deferred,

NIS 7.4b. remain in deferral.

Its Tier 1 equity to risk assets ratio – a measure of financial strength – stood at 11.53% at the end of September, down from 11.87% a year earlier.

Bank Hapoalim agreed in April to pay nearly $ 875m. to the US government to resolve charges it conspired with American taxpayers and others to hide over $ 7.6 billion in Swiss and Israeli accounts.

( Reuters)