Financial Report 1st Quarter 2009
19 May, 2009
Expansion of Bank's Capital Base
Since early this year, Mizrahi-Tefahot took several steps aimed at expanding the bank's capital base. In the first quarter, and in subsequent months, the Bank conducted multiple issuances on the capital market, by which the Bank successfully raised upper Tier II capital and Tier II capital amounting in total to NIS 807 million.
Upper Tier II capital
In the first quarter of 2009, the Bank raised NIS 400 million in exchange for allotment of complex capital notes, considered to be upper Tier II capital. In May, the Bank raised a further NIS 37 million as upper Tier II capital, and year to date, the total upper Tier II capital raised amounts to NIS 437 million. This is out of the annual plan approved by the Board of Directors aimed at raising upper Tier II capital of up to NIS 500 million.
Tier II capital
In the first quarter, the Bank raised subordinated capital notes amounting to NIS 337 million, considered to be Tier II capital. In April, the Bank issued additional subordinated capital notes amounting to NIS 33 million, considered to be Tier II capital, and in total, year to date, the Bank raised Tier II capital amounting to NIS 370 million.
Continued growth in mortgage market share
According to Bank of Israel data, Mizrahi-Tefahot Group originated in the first quarter of this year housing loans amounting in total to NIS 2.6 billion, out of a total loan amount of NIS 6.3 billion originated by the entire banking system - an average market share of nearly 41.5% in the first three months of 2009. This compares with a monthly market share of 34.3% for the Group on average in 2008.
Credit portfolio composition
Uniquely in the banking system, the composition of the Mizrahi-Tefahot credit portfolio shows a significant share of credit to the retail sector. As of end of March 2009, credit to the retail sector, including mortgages, accounts for over 60% of the Bank's total credit. This fact, especially significant in times of economic down-turn, directly affects the Bank's risk profile - which is relatively low. The unique composition of the credit portfolio also supports the relatively low rate of provision for doubtful debts out of total credit.
Completion of Bank Adanim merger
In accordance with the decision by the Bank Board of Directors dated November 24, 2008 to approve the merger of Bank Adanim with the Bank, the Registrar of Corporations' approval of the merger was received on February 23, 2009, thereby all conditions for this merger have been met. As of said date Bank Adanim has ceased to exist as a separate company, and its assets and liabilities were merged into Bank Mizrahi-Tefahot.
Eli Yones:
Achievements in 2008 and continued growth in retail banking provide appropriate infrastructure for facing next year's challenges
"Despite the worsening state of the economy due to the global financial crisis, primarily reflected in higher provisions for doubtful debts, and despite the shrinking financial margin due to lower interest rates - a sector-wide phenomenon which also impacts the Bank - Mizrahi-Tefahot succeeded in maintaining stability in its current operations, with a 14.6% increase in net profit in the first quarter of this year, compared to the final quarter of 2008.
As for income, the Bank continues to grow with an increase better than 15.5% in income from operating commissions, and excluding the impact of consolidation of Bank Yahav's financial statements, income from operating commissions grew by 5%.
Along with efforts to grow income, the Bank continues its restraining expenditure policy. Thus, for example, the Bank recorded a minute increase of only 1.6% in payroll and associated expenses, excluding impact of consolidation of Bank Yahav's financial statements and excluding the impact of non-recurring accounting recording of the extended exercise period of the stock option plan for management and staff.
The merger of Bank Adanim with the Bank, completed in the first quarter, is also intended to reduce expenditure and should result in significant cost savings for headquarter expenditure, while maintaining the points of sale.
Bank Yahav, in which Mizrahi-Tafahot holds a 50% stake, continued to pursue its operational plan, and has recruited over 5,000 new customers in the first quarter. Expansion of Bank Yahav's license would allow it to significantly expand the scope of its operations in various areas, gaining access to a wide customer base other than State employees.
Mizrahi-Tefahot continues to expand its capital base, raising over NIS 800 million year to date as Tier II and upper Tier II capital, at attractive yield levels achieved thanks to Bank performance, stability and low risk level typical of its operations.
The policy of expanding the capital base would continue in accordance with the 2009 work plan, in order to reach, by year end, the capital adequacy target of 12% set by the Board of Directors, while continuing growth of Bank credit operations", says Bank President, Mr. Eli Yones.
Mizrahi-Tefahot Bank Ltd. Summary financial statement data
As of March 31, 2009 - NIS in millions
Major balance sheet items
|
|
December 31 |
Change in % |
|
|---|---|---|---|
|
|
2007 |
2008 |
|
|
Securities |
4,096 |
8,268 |
- |
|
Credit to the public |
75,117 |
92,123 |
22.6 |
|
Deposits from the public |
73,237 |
94,548 |
29.1 |
|
Shareholders' equity |
5,621 |
6,055 |
7.7 |
|
Balance sheet total |
94,690 |
116,977 |
23.5 |
Profit and Profitability
|
|
December 31 |
Change in % |
|
|
2007 |
2008 |
|
|
|
Profit from financing operations before provision for doubtful debts |
549 |
584 |
6.4 |
|
Provision for doubtful debts |
41 |
119 |
- |
|
Operating and other revenues |
238 |
317 |
12.0 |
|
Operating and other expenses |
501 |
605 |
8.20 |
|
Net profit |
180 |
110 |
(38.9) |
|
Net return on equity |
13.5% |
7.5% |
|
Financial ratios
|
|
December 31 |
|
|
2007 |
2008 |
|
|
Credit to the public to balance sheet total |
79% |
79% |
|
Deposits from the public to balance sheet total |
77% |
81% |
|
Shareholders' equity to balance sheet total |
5.9% |
5.2% |
|
Provision for doubtful debts out of credit to the public |
0.22% |
0.52% |
|
Operating expenses to total expenses |
60.2% |
67.1% |
|
Ratio of capital to risk components |
11.28% |
11.61% |
