Financial Reports 1st Quarter 2022

24 May, 2022

Net profit in the first quarter: NIS 1,154 million
Compared to NIS 676 million in the corresponding period last year
Increase of 70.7%

Return on equity in the first quarter: *21.9%
Compared to 14.1% in the corresponding period and 15.8% for 2021

Financing revenues in the first quarter: NIS 2,261 million
Compared to NIS 1,880 million in the first quarter of 2021
Increase of 20.3%

Outstanding growth in credit to the public: NIS 282.9 billion for Q1
Increase of 13.4% compared to the corresponding period last year

In the first quarter, the loan portfolio increased by NIS 11.5 billion
Similar to the average annual performance in 2015-2020**
Cost Income Ratio***: 43.2%

* Excluding capital gain from realized properties amounting to NIS 279 million, return on equity is 16.6%
** Excluding Union Bank credit
** Excluding the aforementioned capital gain, cost-income ratio in the first quarter is 48.8%

Accelerated credit growth, while proactively managing the Bank's capital

In line with improvements in the local economy in the first quarter of 2022, and despite the Omicron outbreak in January,
an accelerated growth in credit to the public was recorded.

As of the end of the first quarter, total credit amounted to NIS 283 billion, compared to NIS 249.5 billion at the end of the
corresponding period – an increase of 13.4%. The portfolio growth was evident in most segments both in retail and
business operating segments, which posted double-digit growth. Thus, inter alia, at the end of the first quarter of this year,
credit to large businesses amounted to NIS 25.6 billion, an increase of 23.2% over the corresponding period; credit to
medium businesses reached NIS 11.4 billion – an increase of 17.3% compared to end of the first quarter of 2021; and
housing loans at the end of the first quarter of this year amounted to NIS 181 billion – an increase of 14.2% compared to
the corresponding period last year.

Concurrently, the Bank continues to take diverse actions with regard to capital management in order, inter alia, to support
its activity growth momentum. In this regard, in March the Bank signed an innovative transaction to insure a housing loans
portfolio, amounting to NIS 3.7 billion, with an international re-insurer who is among the top 10 re-insurers world-wide.
Through this move, which is unprecedented in the Israeli banking system, the Bank released additional capital for various
other requirements and utilizations.

Implementation of the Union Bank merger plan and its contribution to Group's profit

Since September 30, 2020, the completion date of the Union Bank acquisition transaction, the Bank has been acting to
execute the merger of Union Bank into Mizrahi Tefahot, in accordance with a specified plan prepared for this purpose. To
date, 16 of 35 Union Bank branches have been closed and tens of thousands of customers have been transitioned to
Mizrahi Tefahot branches, in a move carried out jointly by teams from both banks, to ensure a smooth, friendly transition.

Until the completion of this merger, planned for end of 2022, additional 11 branches would be closed, so that upon
conclusion of this process 8 Union Bank branches would remain, primarily in locations where Mizrahi Tefahot currently
has no banking presence. Concurrently, the retirement plan is carried out for Union Bank employees not planned to be
absorbed by Mizrahi Tefahot, as set forth in the special collective agreement signed last year at Union Bank. Employee
retirement is gradual, in line with the branch integration, to maintain service continuity at Union Bank through completion
of the merger.

Concurrently, even prior to completion of the merger and to benefiting from synergies and improved efficiency, Union
Bank continues to contribute to Group profit – even beyond early estimations. In the first quarter of this year, Union Bank
contribution amounted to NIS 212 million, primarily consisting of capital gains from realized properties. This, in addition
to current profit from the Bank acquisition transaction.

Moshe Lari: Bank results in the first quarter of 2022 indicate accelerated growth in view of continued economic recovery

"Reported results for the first quarter of 2022 reflect an all-time record: Net profit of NIS 1,154 million and outstanding return on equity at 21.9%. Even excluding extra-ordinary capital gains, amounting to NIS 279 million net, with respect to realized properties, the Bank posted remarkable net profit and return on equity, indicating an accelerated growth trend beyond the typical pace experienced by the Bank in recent years, as well as expansion across most operating segments.

"The growth momentum, which is also in view of continued improvement in the economy in the first quarter of this year, is reflected across key balance sheet items, headed by credit to the public, which increased significantly by 13.4% over the corresponding period in 2021.In the first three months of this year, the credit portfolio grew by NIS 11.5 billion, 4.2% compared to end of 2021, reflecting an annualized growth rate of 16.9%. Growth in the credit portfolio was also evident in the mortgage segment – which continues to see strong demand and record performance – as well as in the business segments. Note, in this regard, that recently Mizrahi Tefahot was ranked by the Ministry of Economics and Industry as an "Outstanding Bank" in bank friendliness index for small and medium businesses.

"As for revenues, an increase of 16.3% in financing revenues from current operations was robust, amounting to NIS 1,815 million in the first quarter, compared to NIS 1,560 million in the corresponding period last year. Commission revenues amounted to NIS 520 million, compared to NIS 477 million in the corresponding period last year, an increase of 9.0%. At the same time, the Bank was successful in maintaining discipline in expenses, with only a minor increase of 3.5% in operating and other expenses. These expenses amounted to NIS 1,388 million in the first quarter, compared to NIS 1,341 million in the first quarter of last year. This has allowed the Bank to achieve a high-quality cost-income ratio of 48.8%, excluding capital gain from realized properties.

"As of the end of the first quarter, the Bank capital ratios meet the conditions for dividend distribution, in accordance with Bank policy. Due to the Supervisor of Banks' draft directive issued in March, whereby loans designated for purchase of land for development or construction, with an LTV higher than 75% of value of the acquired property, shall carry a risk weighting of 150%, instead of 100% – and the fact that should this be finalized, the directive would also apply retroactively, the Bank decided that at this point in time, it would be preferable not to distribute a dividend. This is in orded to maintain sufficient capital to allow the Bank to further continue its growth momentum and to optimally address the growing demand for credit", said Bank President & CEO Moshe Lari.


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