Financial Reports Annual 2007
Profit from financing operations before provision for doubtful debt, net of provision for impairment of Bank investments in leveraged funds amounting to NIS 19 million, increased by NIS 101 million.
The major factors which moderated growth in Group operating profit:
Increase of NIS 10 million in provision for doubtful debt and other credit instruments. This increase is primarily due to a NIS 19 million provision for impairment of Bank investments in instruments directly or indirectly exposed to the US mortgage market, or to leveraged funds of all types. As of March 31, 2008, the Bank recorded a provision for impairment equal to the entire amount of these investments (out of an original investment amounting to NIS 157 million, or US $35 million).
Decrease of NIS 45 million in operating and other revenues, due to a NIS 36 million dividend received for stocks in Q1 of last year and not received in the current quarter, as well as loss of provident fund management fee revenues amounting to NIS 22 million, due to sale of provident fund operations. Excluding the aforementioned items, operating revenues grew in Q1 of 2008 by NIS 13 million, compared to the same quarter last year.
Increase of NIS 15 million in operating expenses other than salary and benefits. Note that operating and other expenses in Q1 of 2007 were low compared to their annual average, so that in effect Q1 of 2008 saw no increase in these expenses.
Growth in business operations, branch system and headcount
Mizrahi-Tefahot continues to consistently expand its business operations, and specifically the retail banking segment, while expanding the Bank's customer base by tens of thousands of new customers.
In order to support these developments, the Bank has conducted a close review of both branch layout and alignment of headcount with the growth rate of operations over time. As a result of a meticulous process of standardization, the Bank recruited in 2007 and through the end of Q1 of 2008, a total of 270 new employees, who were mostly assigned to branches, for staffing points of sale and new branches, and to continue improvement of quality of service and marketing capacity at existing branches. Some of the new employees were assigned to the call center - which is a major factor in new customer recruitment operations and in ongoing service to existing and new customers. This process has been completed.
Salary and benefits for the Group in Q1 amounted to NIS 312 million, compared to NIS 293 million in the same period last year - 6.5% growth.
Excluding the impact of cost of expanded business operations and a temporary NIS 2 million increase in provision for paid leave, the increase in salaries and benefits alone amounted to 2.4%.
Dividend distribution
Below are details of dividends distributed by the Bank since 2006 through the publication date of these financial statements (in reported amounts):
Payment date |
Dividend per share |
Dividend paid (NIS in millions) |
September 13, 2006 |
57.00 |
125 |
December 19, 2006 |
91.41 |
200 |
June 13, 2007 |
90.49 |
200 |
September 19, 2007 |
56.46 |
125 |
December 19, 2007 |
33.82 |
75 |
February 19, 2008 |
33.80 |
75 |
June 11, 2008 |
33.78 |
(declared on May 19, 2008)75 |
Eli Yones:
The results reflect continued expansion of business operations
"The Results for the first quarter of 2008 reflect continued expansion of our business operations and achievement of the goals set in our business plan. This is reflected both in operating profit - with an increase of almost 18% in the Bank's financing profit - and also in salary expenses which reflect, inter alia, the massive growth in the number of new customers, and as a result - the growth in number of branches and points of sale along with continued expansion of our direct banking systems, spearheaded by our call center. Revenues show continued improvement and the Bank continues to successfully compensate for the loss of revenues from provident fund management fees, following the implementation of the Bachar reform. It is also noteworthy that Bank achievements in Q1 are even more impressive in view of the effect on net profit of the decision to completely write off the balance of the investments in leveraged US funds. This process was made out of a conservative approach and realistic valuation of the investments, as of the date of publishing these financial statements, as well as of the uncertainty of recovery of their value in the near future. Recently, the Board of Directors approved a unique incentive plan for managers, which forges a close link between the Bank's business results from current operations and managers' benefits. The fact that the term of the incentive plan aligns with that of the 5-year strategic plan we launched several months ago, ensures the full commitment of our dedicated, professional managers to the Bank's business goals and objectives", says Bank President Eli Yones.
Mizrahi-Tefahot Bank Ltd. Summary financial statement data
As of March 31, 2008 - NIS in millions
Major balance sheet items
March 31 |
Change in % |
||
|
2008 |
2007 |
|
Securities |
4,096 |
6,894 |
(40.6) |
Credit to the public |
75,117 |
71,452 |
5.1 |
Deposits from the public |
73,237 |
75,250 |
(2.7) |
Shareholders' equity |
5,621 |
5,427 |
3.6 |
Balance sheet total |
94,690 |
95,747 |
(1.1) |
Profit and Profitability
|
March 31 |
Change in % |
|
|
2008 |
2007 |
|
Income from financing operations before provision for doubtful debt |
549 |
467 |
17.6 |
Provision for doubtful debt |
41 |
50 |
(18.0) |
Operating and other revenues |
283 |
328 |
(13.7) |
Operating and other expenses |
501 |
467 |
7.3 |
Net income |
180 |
370 |
(51.4) |
Net return on equity |
13.5% |
32.1% |
- |
Net operating profit |
180 |
163 |
10.4 |
Net operating profit return on equity |
13.5% |
13.3% |
- |
Financial ratios
March 31 |
|
||
|
2008 |
2007 |
|
Credit to the public to balance sheet total |
79% |
75% |
|
Deposits from the public to balance sheet total |
77% |
79% |
|
Shareholders’ equity to balance sheet total |
5.94% |
5.67% |
|
Provision for doubtful debt out of credit to the public |
0.22% |
0.28% |
|
Operating expenses to total expenses |
60.2% |
58.7% |
|
Ratio of capital to risk components |
11.28% |
10.90% |
|