Financial Reports 3rd Quarter 2022
Net profit in the third quarter of 2022: NIS 1,178 million
Compared to NIS 845 million in the corresponding period last year
Increase of 39.4%
Net profit for the first nine months: NIS 3,385 million
Compared to NIS 2,509 million in the corresponding period in 2021
And net profit of NIS 3,188 million for all of 2021
Accelerated growth in loans to the public:
At the end of the third quarter amounted to NIS 304.1 billion,
Increase of 17.1% compared to the corresponding period in 2021
In the first 9 months, the loan portfolio increased by NIS 32.7 Billion
Return on equity in the third quarter: 20.8%
Return on equity in the first nine months: 20.6%*
Cost-Income Ratio:
In the third quarter of 2022: 43.3%
In the first nine months of this year: 43.8%
Dividend distribution amounting to NIS 353.4 million – 30% of the profit in the third quarter
* Excluding net capital gain from realized assets, included on the financial statements
for the first quarter, return on equity was 18.9%
Continuous growth in times of higher inflation and interest rates
The business results recorded by Mizrahi-Tefahot in the first nine months of this year reflect continued growth in the Bank's current operations, in view of changes in the local and global macro-economic environment.
In the first nine months of 2022, the Bank recorded net profit of almost NIS 3.4 billion, an increase of 34.9% compared to the corresponding period last year. Net profit in the third quarter of this year was higher by 39.4% compared to the corresponding period last year, amounting to NIS 1,178 million. Growth was also posted in major balance sheet items, including loans to the public – primarily business loans – and deposits from the public, with consequent increase in financing revenues and commissions.
Similar to the economy as a whole, the banking system is also affected by changes to macro-economic conditions in Israel and world-wide year-to-date. This is in view of multiple interest rate hikes by central banks, designed to curb higher prices and to return the inflation rate to its normative range.
In the first nine months of this year, the Consumer Price Index in Israel rose by 4.4%, compared to an increase of 2.2% in the corresponding period last year. The Bank of Israel interest rate, which at the end of the first quarter of this year was still at 0.1%, reached 2.0% at the end of the third quarter, after 4 subsequent hikes. Since then, the Bank of Israel raised its interest rate twice more, and it currently stands at 3.25%.
Transition of Union Bank customers to Mizrahi Tefahot has been concluded
The process of merging Union Bank into Mizrahi Tefahot continued in 2022, with the intention to complete it by end of this year, as planned.
The transition process of Union Bank customers and banking activity to Mizrahi Tefahot was recently concluded successfully. Within this process, tens of thousands of retail and business customers were onboarded by the Bank, as well as mortgage portfolios, nostro operations and Union Bank's consumer credit department. The customer transition, which started in the first quarter of 2021, was gradual and controlled, to ensure a friendly, human transition experience as well as swift and favorable onboarding at Mizrahi Tefahot.
Along with the customer onboarding, 35 Union Bank branches were gradually closed, in order to ensure that the bank continues to operate and provide service until such time as it would cease to exist. By end of this year, all Union Bank branches would be closed, except for 8 branches that would join the branch network as Mizrahi Tefahot branches.
Furthermore, Mizrahi Tefahot also onboarded Union Bank employees in various positions at branches and headquarters units. The onboarding of these professional, experienced employees is a significant injection of force for the Bank, and would allow it to optimally address the many challenges and the business targets set by the Bank for the coming years.
Moshe Lari: Bank profit in the first nine months reflects continuous growth in operations, in view of changes in the macro-economic environment
"The results posted by Mizrahi Tefahot in the third quarter of 2022 and in the first nine months of this year reflect continuous growth of Bank business, in view of changes to the local and global macro-economic environment in recent months, and the impact thereof on banking operations in general and on Mizrahi Tefahot's balance sheet in particular.
"This growth in Bank business is evident in developments of major balance sheet items as of the end of the third quarter of 2022 compared to the year-ago period: Total assets amounted to NIS 429.8 billion, an increase of 13.2%; loans to the public amounted to NIS 304.1 billion, an increase of 17.1% – with loans to the business sector in various segments increasing by 29.7% in this period; deposits from the public amounted to NIS 345.3 billion, an increase of 13.6%; and shareholder equity amounted to NIS 23.0 billion, an increase of 10.4% compared to September 30, 2021.
"Growth in Bank business, higher inflation followed by higher interest rates in the market affected both revenues and expenses with respect to credit losses. Financing revenues in the first nine months of this year amounted to NIS 7,844 million, compared to NIS 6,045 million in the corresponding period last year, an increase of 29.8%. Concurrently, expenses with respect to credit losses in the first nine months of this year amounted to NIS 341 million, or 0.15% of total loans to the public, net (in annual terms). This was primarily due to increase in groupbased provision, due to growth of the business loan portfolio and to reflect the higher interest rates in the market and the potential implications thereof on real activity. In the corresponding period in 2021, an income of NIS 263 million was recorded, with respect to decrease in provisions for credit losses.
"The project of merging Union Bank into Mizrahi Tefahot has reached the final stretch and should be completed, from business and legal aspects, by the end of 2022. The merger with Union Bank contributes to Mizrahi Tefahot not only from aspects of growth in banking operations and increased customer base, but also from improving competitiveness and the Bank's ability to lead and finance large transactions in the market. The success of this project is a result of the professional work, outstanding dedication and commitment of work teams from both banks, who have been working hard for two years now, with full co-operation from employees in the branches.
"All Bank employees should be commended and appreciated for their outstanding effort, which enabled the Bank to achieve its objectives and to post outstanding results.
"Following approval by the Board of Directors, the Bank will distribute a dividend of NIS 353.4 million, or 30% of third-quarter profits. This is in addition to a dividend of NIS 315.9 million paid out at the end of August with respect to profits of the second quarter of 2022" said Bank President & CEO Moshe Lari.
