Bank Hapoalim Reports 2011 Financial Results

Strong Growth in Core Banking Drives 2011 Business Momentum: Net Profit Increased by Almost 25% to NIS 2.7 Billion With Double-Digit ROE of 12.0%


TEL AVIV, Israel, March 29, 2012 (GLOBE NEWSWIRE) -- Bank Hapoalim (TASE:POLI) (ADR:BKHYY), Israel's leading financial group, today announced financial results for the fourth quarter and full year ended December 31, 2011.

Highlights of the 2011 financial statements:

  • Net Profit rose to NIS 2,746 million in 2011 compared with NIS 2,201 million in 2010, an increase of 24.8%.
  • Return on equity rose to 12.0% in 2011, compared with 10.4% in 2010.
  • Profit from financing activity totaled NIS 8,231 million in 2011, compared with NIS 7,775 million in 2010, an increase of 5.9%.
  • Total consolidated assets as at December 31, 2011 totaled NIS 356.7 billion, compared with NIS 321.1 billion at the end of 2010, an increase of 11.1%.
  • The Bank's total capital adequacy ratio continued its trend of improvement and reached 14.1% at the end of 2011, compared with 13.9% at the end of 2010.

Mr. Yair Seroussi, Chairman of the Board of Bank Hapoalim, commented:

"In 2011, Bank Hapoalim regained leadership of the banking sector. First and foremost, I would like to thank our employees, managers, and members of the Board of Management, primarily the Chief Executive Officer, for this impressive achievement. The outstanding financial results of Bank Hapoalim speak for themselves. We are beginning to reap the benefits of the clear multi-year strategic plan we presented three years ago.

Our 'back to basics' banking activity, our deep connection to our country, our values, and our focus on our customers have been the keys to the Bank's success. Bank Hapoalim is an essential pillar in the Israeli economy; these impressive results will enable us to continue to develop the Bank's activity and support the economy's growth.

This year, we continued to reinforce the Bank's resilience, based on a realistic understanding of the risks in the global macro-economic environment, while devoting substantial resources to the development of groundbreaking initiatives in banking, the improvement of service, and the advancement of banking activity within the various sectors of the Israeli economy.

Bank Hapoalim is a vibrant and creative organization, brimming with talent and motivation – a competitive organization focused on success. The quality of our banking service is derived primarily from the quality of our bankers. We appreciate our customers' confidence in us, and we will continue to develop the Bank's activity, according to the long-term strategic plan formulated by the Board of Directors," concluded Mr. Seroussi.

Mr. Zion Kenan, Chief Executive Officer of Bank Hapoalim, said:

"Today, I am proud to present the excellent financial results of Bank Hapoalim for 2011. Above all, these results demonstrate Bank Hapoalim's renewed leadership of the Israeli banking system, especially considering that they were achieved amid ongoing economic uncertainty and recurring turmoil in the global financial markets.

Our success within this challenging environment is a reflection of the loyalty of our customers, who choose us and honor us with their trust and appreciation, and of the professional skill and outstanding service they receive from all Bank Hapoalim employees, in Israel and globally. We combine this with the leadership of an excellent and extremely cohesive management team working together in harmony and synergy; these are the sources of our pride.

"The growth in net profit and the double-digit return on equity, alongside the improvement in capital adequacy, vividly reflect the strength of our core banking business and our commitment to achieve sustainable returns for the bank's shareholders, while taking into consideration the bank's risk appetite and the macro-economic conditions both in the Israeli economy and in the global economy," concluded Mr. Kenan.

Main developments in the Annual Report for the year 2011:

During this period, the Bank continued to successfully implement its three-year strategic plan. Impressive business results and double-digit return on shareholders' equity were achieved, in line with stated goals.

Profit from financing activity before provisions for credit losses totaled NIS 8,231 million in 2011, compared with NIS 7,775 million in 2010, an increase of 5.9%. The improved performance resulted mainly from an increase in the profit from regular financing activity and from income from adjustments to fair value of derivative instruments versus an expense which was recorded in 2010. This increase was partially offset by the effect of the initial implementation of the directive concerning credit loss provisions.

Profit from regular financing activity (excluding one-off and other irregular items) in 2011 totaled NIS 7,953 million, compared with NIS 7,492 million in 2010, an increase of 6.2%, mainly as a result of an increase in the volume of activity and the increase in the interest rate.

The provision for credit losses totaled NIS 1,202 million in 2011 compared with NIS 1,030 million in 2010. The expense was mainly related to the provision for debts examined on a group basis, mainly resulting from an increase in credit risk. As of January 1, 2011 the directive concerning the measurement and disclosure of impaired debts, credit risk, and provisions for credit losses was implemented, and therefore data on provisions for credit losses for 2011 are not fully comparable to data for 2010.

Operating and other income totaled NIS 4,852 million in 2011, compared with NIS 5,052 million in 2010, a decrease of 4.0%. The decline was primarily driven by a decrease in income from capital market related activities and was offset by an increase in income from credit cards.

Operating and other expenses totaled NIS 8,365 million in 2011, compared with NIS 8,291 million in 2010, an increase of 0.9%, mainly related to higher salary expenses.

Contribution to the community - The Bank continues to lead the Israeli banking sector in the area of social responsibility, with a focus on education, culture and welfare.Employees were involved in a wide and extensive range of community-focused activities, including social involvement, monetary donations, and large-scale volunteer projects. The Bank Group's corporate social responsibility (CSR) activity in 2011 totaled a financial value of approximately NIS 47 million.

Developments in Balance Sheet Items

The consolidated balance sheet as at December 31, 2011 totaled NIS 356.7 billion, compared with NIS 321.1 billion at the end of 2010, an increase of 11.1%.

Net Credit to the public totaled NIS 246.5 billion compared with NIS 225.3 billion at the end of 2010, an increase of 9.4%, due to an increase in all segments of activity.

Deposits from the public totaled NIS 256.4 billion compared with NIS 234.0 billion at the end of 2010, an increase of 9.6%, mainly from an increase in core deposits from the retail and commercial segments, versus a decrease in corporate deposits.

Shareholder's equity totaled NIS 23,845 million as at December 31, 2011, compared with NIS 22,561 million at the end of 2010, an increase of 5.7%.

Total Capital adequacy ratio was 14.1% at the end of 2011 compared with 13.9% at the end of 2010. Core Tier 1 Capital stood at 7.90% at the end of 2011 compared with 8.04% at the end of 2010. The decrease in the capital ratio mainly resulted from the adoption of new accounting directives regarding the measurement of impaired debts.

Conference Call Information

Bank Hapoalim will host a conference call today at 5:00 PM Israel Time / 4:00 PM Greenwich Mean Time / 11:00 AM Eastern Time to review the Bank's 2011 financial results.

To access the call, please dial: 1-888-281-1167 in the U.S. and Canada or (972-3) 918-0685 for international participants. No password is required. The presentation slides, earnings release and the 2011 financial statement will be available at the Company's website, www.bankhapoalim.com, under Investor Relations, Financial Information.

A replay of the teleconference will be made available approximately two hours after the conference call is completed, through April 6, 2012 by telephone at (972) 3-9255937 (international). A webcast replay will also be available by audio playback on www.bankhapoalim.com, under Investor Relations, Financial Information.

About Bank Hapoalim

Bank Hapoalim is Israel's leading financial group. In Israel, the Bank Hapoalim Group has over 280 branches, eight regional business centers, a growing network of business branches and specialized industry relationship managers for major corporate customers. The Bank Hapoalim Group includes Isracard Ltd, Israel's leading credit card company as well as financial companies involved in investment banking, trust services and portfolio management. Internationally, Bank Hapoalim operates through branches, subsidiaries and representative offices, in North and Latin America, Europe, the Far East, Turkey and Australia. Bank Hapoalim is the only Israeli Bank listed on both the Tel Aviv and London Stock Exchange.  In addition, a Level-1 ADR is traded "over-the-counter" in New York.

For more information about Bank Hapoalim, please visit us online at www.bankhapoalim.com.

Principal Data of the Bank Hapoalim Group        
   NIS millions        
Profit and Profitability           
           
  2011 2010 2009 2010 2009
Profit from financing activity before provisions for credit losses 8,231 7,775 6,718 5.9% 22.5%
Operating and other income 4,852 5,052* 5,039* (4.0%) (3.7%)
Total income  13,083 12,827* 11,757* 2.0% 11.3%
Provisions for credit losses 1,202 1,030 2,017 16.7% (40.4%)
Operating and other expenses 8,365 8,291* 7,457* 0.9% 12.2%
Net operating profit attributed to the shareholders of the Bank 2,741 2,185* 1,272* 25.4% 115.5%
Profit from extraordinary transactions, after taxes, before attribution to non controlling interests 5 16 28 (68.8%) (82.1%)
Net profit attributed to the shareholders of the Bank 2,746 2,201 1,300 24.8% 111.2%
           
           
Balance Sheet – Principal Data           
    December 31   Change vs. 
  2011 2010 2009 2010 2009
Total balance sheet 356,688 321,089* 309,757* 11.1% 15.2%
Net credit to the public  246,495 225,288 215,788 9.4% 14.2%
Securities  34,411 31,604 28,055 8.9% 22.7%
Deposits from the public  256,417 233,965 231,993 9.6% 10.5%
Bonds and subordinated notes  32,933 27,608 23,112 19.3% 42.5%
Shareholders' equity  23,845 22,561* 20,097* 5.7% 18.6%
Total problematic debts as reported in the past    14,895 16,636    
Total problematic credit risk under the new directive**  12,799 14,575***   (12.2%)  
Of which: impaired balance-sheet debts** 7,044 8,316   (15.3%)  
           
Main Financial Ratios          
      2011 2010 2009
Net loan to deposit ratio     96.1% 96.3% 93.0%
Net loan to deposit ratio including bonds and subordinated notes      85.2% 86.1% 84.6%
Shareholders' equity to total assets     6.7% 7.0%* 6.5%*
Core Tier I capital to risk-adjusted assets     7.9% 8.0%* 7.5%*
Tier I capital to risk-adjusted assets     8.7% 8.9%* 8.3%*
Total capital to risk-adjusted assets     14.1% 13.9%* 13.5%* 
Financing margin from regular activity(a)     2.52% 2.59% 2.36%
Cost-income ratio     63.9% 64.6%* 63.4%*
Rate of provisions for credit losses for the period, of total credit to the public(b)     0.48% 0.49% 0.90%
Net return of operating profit attributed to shareholders of the Bank on equity     12.0% 10.3%* 6.6%*
Net return of profit attributed to shareholders of the Bank on equity     12.0% 10.4%* 6.8%*
Basic net profit per share in NIS attributed to shareholders of the Bank     2.07 1.66* 0.99*
Diluted net profit per share in NIS attributed to shareholders of the Bank     2.05 1.65* 0.98*
* Restated, due to the retroactive implementation of the directives of the Supervisor of Banks regarding financial reporting on employee benefits.           
Most of the change is in the items "operating and other income," "other expenses," and "shareholders' equity.          
" For further details, see Note 1(E)(18) in the Financial Statements.          
** Net of the individual allowance and the allowance according to the extent of arrears.          
*** Pro forma data.          
(a) Calculation: Financing profit from regular activity is divided by monetary assets generating financing income.           
(b) In 2011, calculated as the provisions for credit losses as a percentage of the recorded balance of credit to the public.           
In previous years, calculated as the specific provision for the period as a percentage of total credit to the public.           
Profit and Profitability          
  For the three months ended
  Dec. 31 2011 Sept. 30
 2011
June 30 2011 March 31 2011 Dec. 31 2010
  NIS millions
Profit from financing activity before provisions for credit losses 2,087 1,750 2,142 2,252 2,133
Operating and other income 1,146 1,207 1,224 1,275 1,315*
Total income  3,233 2,957 3,366 3,527 3,448*
Provisions for credit losses 363 498 327 14 100
Operating and other expenses 2,197 2,033 2,013 2,122* 2,310*
Net operating profit attributed to the shareholders of the Bank 670 470 711 890* 701
Profit from extraordinary transactions, after taxes, before attribution to noncontrolling interests 2 1 1 1 12
Net profit attributed to the shareholders of the Bank 672 471 712 891* 713
           
Balance Sheet – Principal Data          
  Dec. 31 2011 Sept. 30 2011 June 30 2011 March 31 2011 Dec. 31 2010
           
Total balance sheet 356,688 341,993 323,808  319,682*   321,089* 
Credit to the public, net  246,495 244,577 234,069 229,835 225,288
Securities  34,411 27,789 27,701 28,932 31,604
Deposits from the public  256,417 242,931 233,237 231,769 233,965
Bonds and subordinated notes  32,933 32,050 29,962 28,295 27,608
Shareholders' equity  23,845 23,076 22,732  22,434*  22,561* 
Total problematic credit risk under the new directive**  12,799 13,233 13,263 13,590  14,575*** 
Of which: impaired balance-sheet debts net of individual provision  7,044 7,170 7,530 7,840 8,316
           
Main Financial Ratios          
  For the three months ended 
  Dec. 31 2011 Sept.30 2011 June 30 2011 March 31 2011  Dec. 31 2010
Net loan to deposit ratio  96.1% 100.7% 100.4% 99.2% 96.3%
Net loan to deposit ratio including bonds and subordinated notes  85.2% 88.9% 88.9% 88.4% 86.1%
Shareholders' equity to total assets 6.7% 6.7% 7.0% 7.0%* 7.0%*
Core Tier I capital to risk-adjusted assets 7.9% 7.7% 7.9% 7.9%* 8.0%*
Tier I capital to risk-adjusted assets 8.7% 8.5% 8.7% 8.7%* 8.9%*
Total capital to risk-adjusted assets 14.1% 13.6% 14.1% 13.9%* 13.9%*
Financing margin from regular activity(a)(b) 2.39% 2.55% 2.64% 2.62% 2.61%
Cost-income ratio 68.0% 68.8% 59.8% 60.2%* 67.0%*
Rate of provisions for credit losses for the period, of total credit to the public(a)(c)  0.58% 0.80% 0.55% 0.02% 0.45%
Net return of operating profit attributed to shareholders of the Bank on equity(a) 11.9% 8.5% 13.2% 17.0%* 13.3%*
Net return of profit attributed to shareholders of the Bank on equity(a) 11.9% 8.5% 13.2% 17.0%* 13.5%*
Basic net profit per share in NIS attributed to shareholders of the Bank 0.51 0.36 0.54 0.67* 0.54
Diluted net profit per share in NIS attributed to shareholders of the Bank 0.5 0.35 0.53 0.67 0.54
* Restated, due to the retroactive implementation of the directives of the Supervisor of Banks regarding financial reporting on employee benefits. Most of the change is in the items "operating and other income," "other expenses," and "shareholders' equity." For further details, see Note 1(E)(18) in the Financial Statements.          
** Net of the individual allowance and the allowance according to the extent of arrears.          
*** Pro forma data          
(a) Calculated on an annualized basis.           
(b) Calculation: Financing profit from regular activity is divided by monetary assets generating financing income.           
(c) In periods referring to 2011, calculated as the provisions for credit losses as a percentage of the recorded balance of credit to the public. In 2010, calculated as the specific provision for the period as a percentage of total credit to the public.           


            

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