Financial Reports 2nd Quarter 2007

20 August, 2007

Receipt of Pension Consultancy License

Further to the sale of the assets of the mutual funds and provident funds that had been managed by the Bank or companies it controls, and upon completion of its preparations, on August 7, 2007, Mizrahi-Tefahot received a pension consultancy license from the Supervisor of the Capital Market in the Ministry of Finance. Receipt of the license enables the Bank to enter a new area of activity and to become the first bank in Israel to provide pension consultancy services to salaried and self-employed customers.

The Bank signed a distribution agreement with more than 20 companies that manage provident funds and pension funds, constituting 80% of the relevant market share, and is working to sign additional distribution agreements with other managment companies.

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

  • Growth in profit from financing operations before provision for doubtful debts of NIS 60 million ($14.1 million), 6.4%, deriving mainly from the 9% growth in profit from current activities and a NIS 16 million ($3.8 million) increase in gains from the realization of bonds and from a NIS 25 million ($5.9 million) increase in revenues from interest collection on doubtful debts.
  • A decrease of NIS 67 million ($15.8 million), 37.2%, in the provision for doubtful debts, deriving mainly from an exceptional provision of NIS 54 million ($12.7 million) in the first quarter of 2006, due to the 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.
  • After-tax profit from extraordinary items of NIS 230 million ($54.1 million), net, in the first half of 2007, including a NIS 218 million ($51.3 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. and capital gains from the sale of assets.

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

  • A decrease of NIS 34 million ($8.0 million) in other income, deriving mainly from the decrease in management fees income from mutual funds and provident funds, due to the sale of the mutual fund and provident 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: We are meeting our goals; pension consultancy - a platform for growth

"The 70% growth in net profit - and after neutralizing the effect of non-recurring items, more than 19% - compared with the results of the same period last year, combined with the improvement in efficiency parameters, is an expression of the trend that has continued uninterrupted, quarter after quarter, and indicates that we are meeting the goals of our business plan.

We are continuing to improve on the income side - with growth of 9% in profit from financing operations, and on the expenses side - with a very significant decrease in operating expenses in general, and in salary expenses in particular, combined with the decrease in the provision for doubtful accounts. Mizrahi Tefahot creates value for its shareholders as evident by the decision to distribute a dividend, the second time this year, in accordance with the dividend policy adopted last year by the Bank's Board of Directors. Receipt of a pension consultancy license in early August, thus becoming the first bank in Israel holding a consultancy license for salaried and self-employed individuals, constitutes for us an additional opportunity to expose our diverse and unique range of products and services to many customers who are not presently our customers. We definitely view our sophisticated and innovative consultancy approach as a platform for growth and expansion of the customer base of Mizrahi-Tefahot", says the Bank's President Eli Yones.

Income from operating commissions - NIS 509 million ($119.8 million) - growth of 2.4%. Operating and other expenses - NIS 949 million ($223.3 million) - a decrease of 18.8%. Salary expenses - NIS 587 million ($138.2 million) - a decrease of 28.0%.

 

Board of Directors' resolution regarding capital adequacy ratio

In May 2007, the Board of Directors adopted a resolution, to instruct the Bank's management to take action, so that commencing from the financial statements for the second quarter of 2007, capital adequacy (including Upper Tier II capital) will not fall below 11.2%. This resolution is a continuation of the resolution of the Bank's Board of Directors from April 2006, whereby the capital adequacy ratio, excluding Upper Tier II capital, will not fall below 10%.

Ratio of capital to elements of risk - 11.66%. Ratio of capital to elements of risk excluding Upper II capital - 10.44% Operational coverage ratio - Total operating and other income to total operating and other expenses in the Group reached 64.7% in the first half of 2007, compared with 53.1% in the same period last year and 57.4% in the full-year 2006.

 

 

Mizrahi Tefahot Bank Ltd. Key Financial Statement Data

As of June 30, 2007 - in NIS millions

Key Balance Sheet Items

 

June 30

Percentage

change

2007

2006

Securities

7,115

5,194

37.0

Loans to the public

72,285

66,885

8.1

Deposits from the public

76,845

72,096

6.6

Shareholders’ equity

5,434

4,996

8.8

Total assets

96,648

88,771

8.9

 

 

 

 

 

 

 

 

 

 

Profit and Profitability

 

First half

Percentage

change

2007

2006

Profit from financing operations before provision for doubtful debts

996

936

6.4

Provision for doubtful debts

113

180

(37.2)

Operating and other income

614

621

(1.1)

Operating and other expenses

949

1,169

(18.8)

Net profit

577

340

69.7

Return on equity of net profit

23.1%

14.5%

 

Net profit Excluding Effects of Non-Recurring Items

347

291

 

Return on equity of net profit Excluding Effects of Non-Recurring Items

13.6%

12.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Ratios

 

June 30

2007

2006

Loans to the public to total assets

75%

75%

Deposits from the public to total assets

80%

81%

Shareholders’ equity to total assets

5.62%

5.63%

Provision for doubtful debts out of loans to the public

0.31%

0.54%

Operating and other expenses to total financial and operating income

58.9%

75.1%

Ratio of capital to elements of risk

11.66%

10.29%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

לדיווחים והודעות קודמים