Financial Reports 1st Quarter 2010

Return on equity in view of the Bank's strategic plan

 In November 2008, the Bank updated its strategic plan, setting a target of 18% return on equity for 2013.  Several assumptions underlie the plan, one of which is a requirement of Tier I capital ratio (original, initial capital) to be no less than 6.7%. In the first quarter of this year, the Bank achieved 10.8% return on equity, With Tier I capital being at 8.0%. Had the Bank's Tier I capital ratio in this period been 6.7%, as the strategic plan assumed, then return on equity in the first quarter of 2010 would have been 12.8%. 

Ratio of capital to risk elements 

According to the Supervisor of Banks' circular dated March 25, 2010, credit provided to buyer groups intended to construct 10 or more apartments, would be classified during construction and through its completion as indebtedness of a corporation in the real estate sector. Accordingly, this credit would be weighted at 100% for calculation of capital adequacy. After completion of construction and delivery of units to buyers, in the absence of any unusual circumstances, the credit to group members would be classified as housing credit, and would be treated as such in accordance with the different provisions. The Bank's ratio of capital to risk elements at the end of the first quarter was 14.31%, compared to 14.25% at the end of 2009.

The Bank has elected to implement the new directives in these financial statements, even though the deadline for their implementation, according to the Supervisor's circular, is June 30, 2010. Implementation of the Supervisor's directives has increase risk assets at the Bank by NIS 1 billion. This increase in risk assets decreased the ratio of capital to risk elements as of the end of the quarter by 0.17%, to 14.14%. 

International recognition for Mizrahi-Tefahot achievements 

Further to being crowned "2009 Bank of the Year in Israel" by two international magazines, The Banker and Global Finance, Mizrahi-Tefahot was once again selected as the best bank in Israel by Global Finance magazine for 2010, and as one of 25 leading banks in developed markets around the world for 2010. According to magazine editors, Mizrahi-Tefahot is worthy of this notable title, thanks to its diligent, responsible handling of client needs in this challenging economic period, as well as to its relatively good results. Recently, Global Finance published its list of the best banks around the world for custodial services in 2010, a list which included, as it did last year, Mizrahi-Tefahot on this respectable list, thanks to a winning combination of service quality, technology leadership and competitive prices.  

Eli Yones:

 Quarterly results point to continued improvement in Bank operations, maintaining the pace of growth in revenues and expenses, in line with the strategic plan  

"The certain recovery in the economy, along with continued improvement in Bank operations, enabled us to significantly increase our profitability, from NIS 110 million in the first quarter of 2009, to NIS 172 million in the current quarter, and to record double-digit return on equity, at 10.8%, compared to 7.5% in the corresponding period last year, and to 8.5% in all of 2009 (10.4% excluding provision for voluntary retirement). 

  Improved operations are reflected in both revenues and expenses, maintaining the Bank in line with its strategic plan.

Most notable with regard to revenues are the almost 8% increase in profit from financing operations - from NIS 584 million in the first quarter of 2009 to NIS 630 million in the current quarter - as well as the 6.5% increase in revenues from operating commissions - from NIS 309 million in the first quarter last year, to NIS 329 million in the current quarter.  

 Concurrently, the Bank has successfully maintained a moderate increase in expense items. Operating and other expenses, including payroll expenses, increased by NIS 25 million (or 4.1%) compared to the corresponding period last year, primarily due to an increase in software maintenance expenses. Payroll expenses increased by a more moderate 2.7% - only NIS 10 million - over the corresponding period last year. 

 At the same time, provision for doubtful debts decreased by over 52%, from NIS 119 million in the first quarter of 2009, to NIS 57 million in the current quarter. The decrease is due to a decrease in provision by extent of arrears with respect to mortgages, and to supplementary provision for doubtful debts with respect to problem debts.  

The transition to calculation of capital adequacy in Basle II terms, best reflected the low risk profile typical of the Bank, due to the significant share of retail operations in general, and housing loans in particular, out of the total credit portfolio. As of the end of the first quarter, the share of credit to households, including mortgages, was 68% of the Bank's total credit in Israel. The Bank's overall capital adequacy - after implementation of the Supervisor of Banks' directives with regard to buyer groups - reached 14.14% at the end of the first quarter, of which Tier I capital adequacy at 8.0%, reflecting significant excess capital which may be used for a range of needs and uses," said Bank President, Eli Yones

Return on equity in view of the Bank's strategic plan

 In November 2008, the Bank updated its strategic plan, setting a target of 18% return on equity for 2013.  Several assumptions underlie the plan, one of which is a requirement of Tier I capital ratio (original, initial capital) to be no less than 6.7%. In the first quarter of this year, the Bank achieved 10.8% return on equity, With Tier I capital being at 8.0%. Had the Bank's Tier I capital ratio in this period been 6.7%, as the strategic plan assumed, then return on equity in the first quarter of 2010 would have been 12.8%. 

Ratio of capital to risk elements 

According to the Supervisor of Banks' circular dated March 25, 2010, credit provided to buyer groups intended to construct 10 or more apartments, would be classified during construction and through its completion as indebtedness of a corporation in the real estate sector. Accordingly, this credit would be weighted at 100% for calculation of capital adequacy. After completion of construction and delivery of units to buyers, in the absence of any unusual circumstances, the credit to group members would be classified as housing credit, and would be treated as such in accordance with the different provisions. The Bank's ratio of capital to risk elements at the end of the first quarter was 14.31%, compared to 14.25% at the end of 2009.

The Bank has elected to implement the new directives in these financial statements, even though the deadline for their implementation, according to the Supervisor's circular, is June 30, 2010. Implementation of the Supervisor's directives has increase risk assets at the Bank by NIS 1 billion. This increase in risk assets decreased the ratio of capital to risk elements as of the end of the quarter by 0.17%, to 14.14%. 

International recognition for Mizrahi-Tefahot achievements 

Further to being crowned "2009 Bank of the Year in Israel" by two international magazines, The Banker and Global Finance, Mizrahi-Tefahot was once again selected as the best bank in Israel by Global Finance magazine for 2010, and as one of 25 leading banks in developed markets around the world for 2010. According to magazine editors, Mizrahi-Tefahot is worthy of this notable title, thanks to its diligent, responsible handling of client needs in this challenging economic period, as well as to its relatively good results. Recently, Global Finance published its list of the best banks around the world for custodial services in 2010, a list which included, as it did last year, Mizrahi-Tefahot on this respectable list, thanks to a winning combination of service quality, technology leadership and competitive prices.  

Eli Yones:

 Quarterly results point to continued improvement in Bank operations, maintaining the pace of growth in revenues and expenses, in line with the strategic plan  

"The certain recovery in the economy, along with continued improvement in Bank operations, enabled us to significantly increase our profitability, from NIS 110 million in the first quarter of 2009, to NIS 172 million in the current quarter, and to record double-digit return on equity, at 10.8%, compared to 7.5% in the corresponding period last year, and to 8.5% in all of 2009 (10.4% excluding provision for voluntary retirement). 

  Improved operations are reflected in both revenues and expenses, maintaining the Bank in line with its strategic plan.

Most notable with regard to revenues are the almost 8% increase in profit from financing operations - from NIS 584 million in the first quarter of 2009 to NIS 630 million in the current quarter - as well as the 6.5% increase in revenues from operating commissions - from NIS 309 million in the first quarter last year, to NIS 329 million in the current quarter.  

 Concurrently, the Bank has successfully maintained a moderate increase in expense items. Operating and other expenses, including payroll expenses, increased by NIS 25 million (or 4.1%) compared to the corresponding period last year, primarily due to an increase in software maintenance expenses. Payroll expenses increased by a more moderate 2.7% - only NIS 10 million - over the corresponding period last year. 

 At the same time, provision for doubtful debts decreased by over 52%, from NIS 119 million in the first quarter of 2009, to NIS 57 million in the current quarter. The decrease is due to a decrease in provision by extent of arrears with respect to mortgages, and to supplementary provision for doubtful debts with respect to problem debts.  

The transition to calculation of capital adequacy in Basle II terms, best reflected the low risk profile typical of the Bank, due to the significant share of retail operations in general, and housing loans in particular, out of the total credit portfolio. As of the end of the first quarter, the share of credit to households, including mortgages, was 68% of the Bank's total credit in Israel. The Bank's overall capital adequacy - after implementation of the Supervisor of Banks' directives with regard to buyer groups - reached 14.14% at the end of the first quarter, of which Tier I capital adequacy at 8.0%, reflecting significant excess capital which may be used for a range of needs and uses," said Bank President, Eli Yones

Major balance sheet items

Profit and Profitability

Financial ratios