Net Profit for Q2 of 2008 Totaled NIS 594 Million
Capital Adequacy Ratio At End of Q2-08 Reached 11.0%
TEL AVIV, Israel, Aug. 28, 2008 (GLOBE NEWSWIRE) -- Bank Hapoalim (TASE:POLI) (LSE:BKHD) (Pink Sheets:BKHYY) reported today its financial results for the second quarter of 2008.
Highlights of the financial statements:
-- Net Profit for the second quarter of 2008 totaled NIS 594 million
compared with a loss of NIS 1,567 million in the previous quarter
and a profit of NIS 1,002 million in the same quarter last year.
-- Return on equity for the second quarter of 2008 was 13.8%, on an
annualized basis compared with a negative return in the previous
quarter and 23.0% in the same quarter last year.
-- Net operating profit for the second quarter of 2008 totaled NIS
545 million compared with a loss of NIS 2,005 million in the
previous quarter and a profit of NIS 716 million in the same
quarter last year.
-- Net return of operating profit on equity for the second quarter
of 2008 was 12.6%, on an annualized basis compared with a
negative return in the previous quarter and 16.1% in the same
quarter last year.
-- The Bank's capital adequacy at the end of the second quarter of
2008 stood at 11.01% compared with 9.74% at the end of the first
quarter of 2008 and 10.26% at the end of 2007. Tier 1 Capital
reached 7.65% at the end of the second quarter of 2008 compared
with 6.88% at the end of the first quarter of 2008 and 7.50% at
the end of 2007.
-- Profit from financing activity before provision for doubtful
debts totaled NIS 1,943 million in the second quarter of 2008
compared with a loss of NIS 2,012 million in the previous quarter
and a profit of NIS 1,995 million in the same quarter last year.
-- The provision for doubtful debts totaled NIS 252 million in the
second quarter of 2008 compared with NIS 32 million in the
previous quarter and NIS 202 million in the same quarter last
year.
The ratio of the specific provision for doubtful debts to the
balance of balance-sheet credit to the public reached 0.44% in
the second quarter of 2008. The ratio to the balance of overall
balance-sheet and off-balance-sheet credit risk to the public
reached 0.25% in the second quarter of 2008.
-- Problematic debt for the Bank Group decreased from NIS 14.7
billion at the end of 2007 to NIS 12.2 billion in the second
quarter of 2008, a decrease of 16.5%, while non-income- bearing
debt declined from NIS 3.8 billion at the end of 2007 to NIS 3.4
billion at the end of the second quarter of 2008, a decrease of
11.9%.
-- Operating and other income totaled NIS 1,205 million in the
second quarter of 2008 compared with NIS 1,284 million in the
previous quarter and NIS 1,254 million in the same quarter last
year, a decrease of 6.2% and 3.9%, respectively.
-- Income from Credit cards - the contribution of the subsidiary
"Isracard" to the Bank's operating income totaled NIS 339 million
in the second quarter of 2008 compared with NIS 328 million in
the previous quarter and NIS 300 million in the same quarter last
year, an increase of 3.4% and 13.0%, respectively.
-- Operating and other expenses totaled NIS 1,911 million in the
second quarter of 2008 compared with NIS 2,268 million in the
previous quarter and NIS 1,868 million in the same quarter last
year, a decrease of 15.7% and an increase of 2.3%, respectively.
-- Contribution to the community - The community-service activities
of the Bank's employees are varied and extensive, and take the
form of community involvement, monetary donations, and
wide-ranging volunteer activities. This activity of the Bank
Group in the second quarter of 2008 had a monetary value of
approximately NIS 20 million.
Chairman of the Board of Directors Dan Dankner commented:
"The slowdown in growth in the developed countries (especially in the United States) and the sharp upsurges in raw-material prices started to take a toll on economic activity in Israel in the second quarter of 2008. We believe the economy now faces external conditions that could slow its growth in the second half of the year, and possibly in 2009 as well. These trends are apparent in most of the world's advanced economies.
"The crisis in the financial markets, primarily in the United States, has not passed over the Israeli banking industry, including the Bank Hapoalim Group. Recall, in May 2008 the Bank sold the entire portfolio of mortgage-backed securities held at its New York branch. I am certain that this was the right move to make, and the results of the second quarter prove that the sale did not have a significant impact on the Bank's financial strength.
"In line with the strategy we adopted at the beginning of this year, we have continued to take steps aimed at improving our capital-adequacy ratio. In the first quarter, the Bank's overall ratio of capital to risk-adjusted assets was 9.7%. Our objective was to reach a ratio of 11% by the end of this year and improve the ratio to 12% by the end of 2009. The 11% target has already been attained, at the end of the first half of 2008, by raising capital from York Capital, raising capital through subordinated notes, selling the entire MBS portfolio, and reducing risk assets abroad.
"Bank Hapoalim will pursue its accelerated business development process in Israel and abroad and will continue to be a leading, innovative bank providing its customers with the highest-quality financial products and services in the market."
CEO Zvi Ziv commented:
"The financial results for the second quarter of 2008 are affected by the first signs of a slowdown in economic activity in Israel, as a result of the crisis in global financial markets, while, at the same time, they prove that the Bank's core business remains strong, despite the losses incurred from the MBS crisis and especially considering the fact that this was the first quarter for which the Bank ceased to collect management fees from provident funds, a significant revenue source in the past.
"Note that several factors weighed down our results, including accounting asymmetries arising from differences between fair value and measurement on an accrual basis in credit derivatives, as well as the fact that significant steps taken by the Bank during the first half of the year are not expected to generate benefits until a later date. Among these measures, it is important to note our voluntary-retirement program, which is expected to reduce payroll expenses in the long term.
"Other significant measures were carried out during the first half of the year: We concluded the sale of Bank Massad and Bank Yahav, which generated profits for the Bank, and we stepped up preparations for the launch of pension-advising activity. In the corporate sector, volumes of activity have continued to grow while strictly maintaining the quality of our credit portfolio. In fact, this quarter, the volume of problematic debt in the Bank continued to decrease significantly, despite the increase in credit balances and the relative worsening of economic conditions during the second quarter.
"After putting behind us the MBS crisis, albeit with a heavy price, we continue to devote maximum energy on all fronts to realize the Bank's business plans and cope with the challenges of the future."
Highlights of the financial statements for the second quarter of 2008:
Net Profit - the decrease in net profit, compared to the same period last year, is mainly a result of the following:
Profit from financing activity - financing profit, before provisions for doubtful debts, decreased by 2.6%, especially due to the differences in measurement of credit derivatives on a fair value basis in contrast to measurement of balance sheet financial activity on an accrual basis. Provision for doubtful debts - increased by 24.8% compared to the same quarter last year, mainly due to an increase in specific provisions related to a small number of borrowers. Operating Income - decreased by 3.9% compared to the same quarter last year, mainly due to the completion of the sale of provident fund management rights, the cessation of inclusion of Bank Massad and a decrease in income from capital market activity and investment in shares due to a decline in volumes of activity in the market.
Developments in Balance-Sheet Items
The consolidated balance sheet as at June 30, 2008 totaled NIS 300.9 billion, compared with NIS 303.0 billion at the end of 2007, a decrease of 0.7%.
Credit to the public totaled NIS 211.6 billion, an increase of 3.2% compared to the end of 2007. Appreciation of the shekel against most foreign currencies moderated the increase in credit to the public at a rate of 2.9%. Likewise, balances decreased by NIS 1.9 billion, as a result of the cessation of consolidation of Bank Massad data following its sale.
Deposits from the public totaled NIS 227.0 billion, a decrease of 2.1% compared to the end of 2007. The decline in deposits from the public was caused by, among other things, the appreciation of the shekel against most foreign currencies and as a result of the cessation of consolidation of Bank Massad data following its sale.
About Bank Hapoalim
Bank Hapoalim is Israel's leading financial group. In Israel, the Bank Hapoalim Group includes financial companies involved in investment banking, credit cards, trust services and portfolio management. The Group also has holdings in non-banking sectors.
Internationally, Bank Hapoalim operates through 44 branches, subsidiaries and representative offices, in North and Latin America, Europe, the Far East, Turkey and Australia. In these markets, the Bank is engaged in trade, corporate finance, private banking and retail banking.
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.
Principal Data of the Bank Hapoalim Group
----------------------------------------------------------------------
Profit and
profitability For the three For the six
months ended months ended
on June 30 Change on June 30 Change
------------- ------ ------------- ------
2008 2007 2008 2007
------ ------ ------ ------
Profit (loss) from
financing activities
before provision for
doubtful debts 1,943 1,995 (2.6%) (69) 3,775 (101.8%)
Provision for doubtful
debts 252 202 24.8% 284 383 (25.9%)
Operating and other
income 1,205 1,254 (3.9%) 2,489 2,621 (5.0%)
Operating and other
expenses 1,911 1,868 2.3% 4,179 3,717 12.4%
Operating profit (loss)
before taxes 985 1,179 (16.5%) (2,043) 2,296 (189.0%)
Provision for taxes (tax
benefit) on operating
profit (loss) 431 440 (2.1%) (521) 928 (156.1%)
Operating profit (loss)
after taxes 554 739 (25.0%) (1,522) 1,368 (211.3%)
Operating profit (loss) 545 716 (23.9%) (1,460) 1,406 (203.8%)
Net profit from
extraordinary
transaction after taxes 49 286 (82.9%) 487 231 110.8%
Net profit (loss) 594 1,002 (40.7%) (973) 1,637 (159.4%)
Balance Sheet - Principal
Items
---------------------------------------------------------------------
30.6.08 30.6.07 31.12.07 30.6.07 31.12.07
------- ------- -------- ------- --------
Total balance sheet 300,909 290,829 302,991 3.5% (0.7%)
Credit to the public 211,575 191,705 205,016 10.4% 3.2%
Securities 31,313 46,017 48,115 (32.0%) (34.9%)
Deposits from the public 226,955 224,880 231,750 0.9% (2.1%)
Debentures and
subordinated notes 19,111 17,914 18,812 6.7% 1.6%
Shareholders' equity 18,758 19,214 18,778 (2.4%) (0.1%)
Principal financial ratios
----------------------------------------------------------------------
30.6.08 30.6.07 31.12.07
------- ------- --------
Shareholders' equity to total assets 6.2% 6.6% 6.2%
Tier I Capital to risk-adjusted assets 7.65% 7.5% 7.5%
Total Capital to risk-adjusted assets 11.01% 10.38% 10.26%
Credit to the public to total assets 70.3% 65.9% 67.7%
Deposits to the public to total assets 75.4% 77.3% 76.5%
Operating income to operating expenses 59.6% 70.5% 66.1%
Operating expenses to total income 172.7% 58.1% 65.2%
Provision for doubtful debts to credit to
the public (balance sheet and off-balance
sheet)(a) 0.2% 0.2% 0.1%
Rate of provision for taxes 25.5% 40.4% 39.1%
Return of operating profit (loss) on equity,
net(a) (15.3%) 15.6% 12.3%
Return of net profit (loss) on equity(a) (10.3%) 18.3% 14.1%
Return of net profit
(loss) on total assets(a) (0.6%) 1.1% 0.9%
(a) Annualized