Israel Discount Bank Announces First Quarter Financial Results for 2014

Q1 Net Income was NIS 165 m, ROE was 5.4%
Disregarding the impact of FAS91 and the provision for the impairment of the FIBI shares: Net Income would have been NIS 205 m with an ROE of 6.7%
Basel III Capital Adequacy Ratio reached 9.1%

PR Newswire

TEL-AVIV, Israel, May 22, 2014 /PRNewswire/ -- Israel Discount Bank (DSCT.TA) today announces its financial results for the first quarter of 2014.

View photo

.
Israel Discount Bank Logo

Main highlights of the Q1 results, compared to Q4-13:

  • Met capital adequacy milestones ahead of plan. Presenting a Basel III CT-1 ratio of 9.1%.  
  • Continued improvement in asset quality reflected in a substantial decrease in Loan Loss Provisions out of Total Credit (LLP ratio) to 0.25% (0.41% in Q4).
  • Dynamic management of the investment portfolio led to capital gains of NIS 105 m.
  • Total Expenses decreased by 4%, mostly due to a decline in Legal Costs and other expenses.
  • Decrease of NIS 53 m in Net Interest Income, mainly due to negative CPI & low interest rate.
  • A provision for Mark-To-Market of the holdings in FIBI amounted to NIS 26 m in Q1-14.
  • Implementation of FAS91 reduced Net Income by NIS 14 m.

Lilach Asher Topilsky, CEO of Discount Group commented: "Against the backdrop of several external factors which negatively affected our results, such as the declining interest rate, the negative CPI, the implementation of FAS91, and the change in the accounting presentation of the investment in FIBI's shares, coupled with restrained credit growth and labor sanctions, the Discount Group succeeded in achieving several important objectives.

First, after a very long and challenging process, we present today a Core Tier 1 ratio of 9.1% in terms of Basel III, ahead of plan and above the regulatory demand.

Second, we continued to improve our asset quality and present a ratio of Loan Loss Provisions to Total Credit of 0.25%, in line with the Israeli banking sector's average.

Looking forward, we continue to prudently manage our capital and intend to meet our Basel III Core Tier 1 ratio of 9.3%-9.4% by the end of 2014. Meeting this year-end target, together with those already achieved, will allow us to return to Risk Weighted Assets growth in 2015. 

At the same time, our main challenge was and remains improving our Cost/Income ratio and restraining our costs. The cost program will be the main focus of our strategic plan, which will be presented at the end of August".    

Main metrics from the financial statements:

  • Net interest income for Q1 decreased by 5% during Q4-13 to NIS 1,018 m, mainly due to lower interest rates and a negative CPI.
  • Non-interest income for Q1 decreased by 6% to NIS 807 m, mainly due to the negative impact of FAS91 on commissions. Disregarding FAS91, non-interest income would have amounted to NIS 863 m, similar to the non-interest income in Q4-13.
  • Commissions declined substantially, by 8% to NIS 631 m, due to the implementation of FAS91. Disregarding FAS91, commissions would have amounted to NIS 687 m, almost the same as commissions in Q4-13, which amounted to NIS 684 m.
  • Non-interest financing income increased by 5% to NIS 124 m, mainly as a result of the dynamic management of the Bank's portfolio which led to capital gains, coupled with gains recognized from the Mark-To-Market of available-for-sale bonds.
  • Total operating expenses in Q1 were NIS 1,494 m, due to a decline of 4% during Q4-13. The quarterly decrease was mainly due to a decrease in legal expenses. Salary Expenses were 1.6% higher than Q4-13, as a result of the wage agreement which was signed on March 2014, in which it was agreed to pay a 1% inflation related increase in advance for 2014.
  • Loan loss provisions (LLP) out of total credit declined substantially to 0.25%, compared to 0.41% in the previous quarter.
  • Non-recurring items in Q4 were a tax benefit and a non-recurring provision for the MTM of the holdings in FIBI, in the amount of NIS 158 m.    

Main metrics from the balance sheet:

  • Total credit to the public stayed flat, in the amount of NIS 115.9 bln.
  • Total deposits from the public decreased by 0.8% to NIS 147.8 bln.
  • The Basel III capital adequacy ratio at the end of Q1 was 9.1%. The Bank's plan is to achieve a CT-1 target of 9.3%-9.4% by the end of 2014, in order to maintain a cushion for unexpected events while at the same time allowing for growth in the Bank's target business segments.

Conference call Information - The Bank will be hosting a conference call today at 16:00 (Israel); 14:00 (UK); 09:00 (EDT), during which management will review the results and be available to answer questions:  

Israel & Other International Dial-in Number                                 +972 3 918 0650               
United Kingdom Dial-in Number                                                   +0 800 917 9141               
United States Dial-in Number                                                        +1 888 407 2553

Presentation material will be available on our IR website prior to the call, accessible at www.discountbank.co.il/IR

DEVELOPMENTS IN CERTAIN INCOME STATEMENT ITEMS IN THE FIRST QUARTER OF 2014         
(Compared with Q4- 2013 and Q1-2013)

In NIS millions

2014

2013

Change in %

compared to


Q1

Q4

Q1

Q4-13

Q1-13

Interest income⁽⁴⁾

1,324

1,531

1,668

(13.5)

(20.6)

Interest expenses

306

460

624

(33.5)

(51.0)

Interest income, net

1,018

1,071

1,044

(4.9)

(2.5)

Credit loss expenses

75

123

145

(39.0)

(48.3)

Net interest income after credit loss expenses

943

948

899

(0.5)

4.9

Non-interest Income






Non-interest financing income

124

116

190

6.9

(34.7)

Commissions⁽⁴⁾

631

684

668

(7.7)

(5.5)

Other income

52

61

37

(14.8)

40.5

Total non-interest income

807

861

895

(6.3)

(9.8)

Operating and other Expenses






Salaries and related expenses

936

921

876

1.6

6.8

Maintenance and depreciation of buildings and equipment

298

316

307

(5.7)

(2.9)

Other expenses

260

320

289

(18.8)

(10.0)

Total operating and other expenses

1,494

1,557

1,472

(4.0)

1.5

Income before taxes

256

252

322

1.6

(20.5)

Provision for taxes on income

97

51

118

90.2

(17.8)

Income after taxes

159

201

204

(20.9)

(22.1)

Bank's share in income (loss) of affiliated companies,

 net of tax effect

⁽¹⁾⁽²⁾15 

⁽¹⁾(121)

68

-

(77.9)

Net income attributed to the non-controlling rights holders

 in consolidated companies

(9)

(8)

(9)

12.5

-

Net income attributed to Bank's shareholders

165

72

263

129.2

(37.3)

Net return on equity attributed to the Bank's shareholders

 in %⁽³⁾

5.4

2.4

9.2



Net income attributed to Bank's shareholders –

 disregarding the provision for impairment in value of the investment in the FIBI

⁽¹⁾191 

⁽¹⁾230 

263

(17.0)

(27.4)

Net return on equity attributed to the Bank's shareholders

 in % - disregarding the provision for impairment in value of the investment in the FIBI⁽³⁾

⁽¹⁾6.3 

⁽¹⁾7.7 

9.2





Footnotes:

(1)

For details regarding the provision for impairment in value of the investment in FIBI, see Note 14 C and D to the condensed financial statements.

(2)

For details as to the elimination of the Bank's share in the reserves of FIBI, previously recognized in other comprehensive income, see Note 14E to the condensed financial statements.

(3)

On an annual basis.

(4)

For details regarding the effect of the implementation of the instruction regarding the measurement of interest income (classification of certain commission income), see Note 1E(1) to the condensed financial statements.

 

COMPOSITION OF CREDIT TO THE PUBLIC BY SEGMENTS OF OPERATION


March 31, 2014

December 31, 2013


In NIS millions


% of total
credit to the public

In NIS millions

% of total
credit to the public

Rate of
change in %

Retail - household segment

39,801

34.3

40,056

34.6

(0.6)

Of which - housing loans

20,190

17.4

19,753

17.0

2.2

Retail - small business segment

13,108

11.3

13,000

11.2

0.8

Corporate banking segment

40,035

34.6

40,807

35.2

(1.9)

Middle market banking segment

19,384

16.7

18,612

16.1

4.1

Private banking segment

3,543

3.1

3,384

2.9

4.7

Total

115,871

100.0

115,859

100.0

-

BALANCE SHEET


 March 31, 2014

March 31, 2013

December 31, 2013

Change in %

compared to

In NIS millions


March 31, 2013

December
31, 2013

Total assets

197,996

200,135

200,507

(1.1)

(1.3)

Credit to the public, net

115,871

116,155

115,859

(0.2)

-

Securities

39,541

48,140

41,325

(17.9)

(4.3)

Deposits from the public

147,779

151,933

148,928

(2.7)

(0.8)

Equity attributed to the Bank's shareholders

12,534

11,948

12,233

4.9

2.5

Total equity

12,842

12,253

12,538

4.8

2.4

 

Logo - http://photos.prnewswire.com/prnh/20120820/554838

Company Contact                 
Tamar Koblenz             
Head of Investor Relations            
Tel: +972 3 5146593       
Tamar.koblenz@discountbank.co.il

Rates

View Comments (0)