Financial Reports 3rd Quarter 2007

19 November, 2007


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

  • Growth in profit from financing operations before provision for doubtful debts of NIS 84 million ($20.9 million), 5.9%, deriving mainly from the 8.3% growth in income from current activities and a NIS 50 million ($12.5 million) increase in revenues from interest collection on doubtful debts, which was offset in part by the effect of the accounting for derivatives at fair value.
  • A decrease of NIS 63 million ($15.7 million), 26.1%, in the provision for doubtful debts, deriving mainly from an exceptional provision of NIS 54 million ($13.5 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).
  • An increase of NIS 32 million ($8 million), 4.3% in operational commissions, mainly derived from the rise in the amount of commissions from customer trading in the capital market and from credit card activities.
  • An increase of NIS 13 million ($3.2 million), 40.6%, in the profits from investment in shares, net, deriving mainly from the increase in dividends received for shares. · Non-recurring provision for pension and severance pay in the same period last year, deriving mainly from the recording of a NIS 208 million ($51.8 million) provision for a retirement plan, that was included in the labor agreement signed with representatives of employees in April 2006.
  • After-tax profit from extraordinary items of NIS 233 million ($58.1 million), net, in the first nine months of 2007, including a NIS 217 million ($54.1 million) gain from the sale of the Group's provident fund activities and a gain of NIS 8 million ($2.0 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 57 million ($14.2 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 25 million ($6.2 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.


President Eli Yones: We are meeting the goals of our business plan, quarter after quarter

"The Bank's results for the third quarter testify to our success in meeting the goals of our business plan, quarter after quarter. As in prior quarters, in the third quarter, the Bank also posted growth in its current activities - continuing the trend of recent quarters.

The merger between Mizrahi and Tefahot, which will soon close its third year, has proven itself as a growth engine of the highest level and a key factor in the expansion of the Bank's business activities as a leading player in the retail sector in general, and in mortgage banking in particular.

Two processes now on the Bank's agenda will further strengthen this positive trend when completed in the first months of 2008: the acquisition of 50% of Bank Yahav and the signing of an agreement with Isracard to issue a Mizrahi-Tefahot brand credit card.

At the same time, the Bank continues to benefit from growth in dealing room activity and in the rising number of customers, also of other banks, who use the sophisticated pension consultancy services of Mizrahi-Tefahot, the only bank holding a pension consultancy license for salaried and self-employed individuals.

Adhering to the dividend policy decided upon last year by the Board of Directors, the Bank is also sharing its third quarter profits with shareholders, distributing a NIS 75 million ($18.7 million) dividend. This is the third dividend of Year 2007 and the fifth consecutive dividend granted since the third quarter of 2006. In total, since September last year, the Bank has distributed a total of NIS 725 million ($180.7 million), creating substantial value for its shareholders", says the Bank's President Eli Yones.


Effect of the crisis in the U.S. mortgages market

The Bank's total investment in instruments exposed directly or indirectly to the U.S. mortgages market or to leveraged funds of any kind reached $35 million. Of this sum, approximately $12 million constitutes an investment with exposure to the overall mortgage market in the United States. The remaining investments have exposure to companies that is widely dispersed in other business sectors. Most of the debentures are rated AAA and AA.

The market value of these investments, as of September 30, 2007, was $21 million. $6 million of the adjustment to market value (NIS 24 million, before tax), was recorded as an expense in the statement of profit and loss, and the balance, $8 million (NIS 32 million, before tax), was recorded directly to shareholders' equity.



Mizrahi Tefahot Bank Ltd. Key Financial Statement Data

As of September 30, 2007 - in NIS millions

Key Balance Sheet Items


September 30










Loans to the public




Deposits from the public




Shareholders’ equity




Total assets














Profit and Profitability

First nine months






Profit from financing operations before provision for doubtful debts




Provision for doubtful debts




Operating and other income




Operating and other expenses




Net profit




Return on equity of net profit




Net profit excluding effect of non-recurring items




Return on equity of net profit excluding effect of non-recurring items




















Financial Ratios

September 30




Loans to the public to total assets



Deposits from the public to total assets



Shareholders’ equity to total assets



Provision for doubtful debts out of loans to the public



Operating and other expenses to total financial and operating income



Ratio of capital to elements of risk
















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