Financial Reports 1st Quarter 2007

The main factors contributing to an increase in the Group's profits in the first quarter:

Growth in profit from financing operations before provision for doubtful debts of NIS 63 million ($15.2 million), 15.6%, deriving mainly from the 12% growth in income from current activities and a NIS 22 million ($5.3 million) increase in revenues from interest collection on doubtful debts;

A decrease of NIS 69 million ($16.6 million), 58.0%, in the provision for doubtful debts, due mainly to an exceptional provision of NIS 54 million ($13.0 million) in the first quarter last year, due to application of the guidelines in the Bank of Israel circular regarding the way in which the provision for doubtful debts is to be calculated for credit on housing loans (mortgages). Additionally, the provision for doubtful debts decreased due to the reduction of the provision on loans according to length of arrears;

Profits from the investment in shares, net, of NIS 38 million ($9.1 million), due to a dividend received for the shares;

A NIS 44 million ($10.6 million) decrease in salaries and related expenses deriving from the recording of a provision for pension and severance pay of NIS 40 million ($9.6 million) in the same period last year, for the voluntary retirement plan adopted within the framework of the labor agreement signed with the employees' representatives in April 2006;

After-tax profit from extraordinary items of NIS 207 million ($49.8 million), net, including a NIS 199 million ($47.9 million) gain from the sale of the Group's provident fund activities and a gain of NIS 8 million ($1.9 million) from the sale of the Bank's holdings in Mofet Israel Technology Fund Ltd.

The main factors that slowed the increase in the Group's profits:

A decrease of NIS 10 million ($2.4 million) in other income, deriving mainly from the decrease in management fees from mutual funds, due to the sale of the mutual fund activities;

An increase of NIS 8 million ($1.9 million) in operating expenses aside from salaries and related expenses, deriving mostly from the increase in depreciation expenses due to the increase in the volume of investments in computerization and software.

Eli Yones: The results reflect continued achievement of the Bank's goals

"The results of the first quarter of 2007 reflect continued achievement of the goals of our work plan. The trend of ongoing improvement in the Bank's activities, on the income side, with growth of more than 15% in profit from financing operations, and on the expenses side, with a reduction in operating expenses in general, and in salary expenses in particular, which decreased by 13%.

The significant decrease in the volume of doubtful debts, of 58%, reduced the percentage of the provision to just 0.28% of the loan portfolio, a figure that once again indicates the quality of the Mizrahi-Tefahot loan portfolio.

In the pension consulting field, the Bank is prepared and ready to commence activity immediately, enabling us to expand income sources and to compensate for the loss of income from mutual and provident fund activities resulting from the Bachar Reform," said Bank President, Eli Yones.

Income from operating commissions: NIS 253 million ($60.9 million), growth of 2.4%.

Operating and other expenses: NIS 467 million ($112.4 million), a decrease of 7.2%.

Salary expenses: NIS 293 million ($70.5 million), a decrease of 13.1%.

Ratio of capital to elements of risk: 10.90%.

Key Activities and Events: January - May 2007

Sale of the Bank Group's provident fund operations - On March 5, 2007, the sale of the Group's provident fund operations (except for operations through Netivot - Management Company Ltd., in which the Bank holds 60% of its shares) was closed. On March 28, 2007, an agreement was signed for the sale of the provident fund management operations of Netivot.

Closing of Bank's acquisition of Bank Adanim shares - On February 9, 2007, following approval of an arrangement by the Court, the Bank acquired all of the shares of Bank Adanim held by other parties. Following the acquisition, Bank Adanim was converted from a public company to a private company wholly-owned by the Bank.

Acquisition of control in Bank Yahav - On March 27, 2007, the Bank signed a memorandum of principles, whereby it will acquire 50% of the issued capital of Bank Yahav for State Employees Ltd. and its related rights.

Registration for trading of complex capital notes - On May 21, 2007, a prospectus was published, whereby registered for trading were the complex notes issued by the Bank in November 2006, which constitute "Upper Tier II capital" for maintaining the minimum capital ratio.

Negotiations to acquire holdings in Isracard - On March 27, 2007, the Bank announced that it was conducting negotiations to acquire 10% of the share capital of Isracard Ltd. and Europay (Eurocard) Israel Ltd.

Dividend distribution - On May 14, 2007, the Bank's Board of Directors resolved to pay a dividend of NIS 200 million ($48.1 million). The payment date was fixed as June 13, 2007.

International activity - On April 4, 2007, the subsidiary, UMTB Securities Inc., received a license to trade securities trading in the U.S. capital markets and was admitted to the National Association of Securities Dealers (NASD). The subsidiary will provide broker dealer services to the Bank Group in the U.S. and is expected to commence operations in 2007; on February 2, 2007, the Bank received approval from the Central Bank of Uruguay to open a representative office in that country. The representative office, which was opened in May, will operate through a wholly-owned ancillary corporation of the bank, UMTB Uruguay SA.

Mizrahi Tefahot Bank Ltd. - Key Financial Statement Data

As of March 31, 2007 - in NIS millions

Key Balance Sheet Items

Profit and Profitability

Financial Ratios