Financial Report 3rd Quarter 2009

23 November, 2009

Collective bargaining agreement promises calm labor relations through 2015
On September 16, 2009, Bank management signed a new collective bargaining agreement with the employee union, which promises calm labor relations at the Bank through 2015. This follows the extension, several months ago, of the labor agreement with the Managers Council - also through 2015.
The new collective bargaining agreement, approved by the Board of Directors on October 19, 2009, is further to the current collective bargaining agreement, set to expire at the end of 2010, and establishes the continuation of calm labor relations by a further 6 years from today. It was further agreed that management may establish a voluntary retirement program for up to 200 employees during the term of the agreement, as well as granting management the option to terminate up to 50 permanent employees for incompatibility during said period.
The new agreement, unique to Mizrahi-Tefahot, would allow the Bank and its staff to continue benefitting from an optimal labor environment, focusing fully on tasks and challenges arising from the business plans.

A NIS 70 million provision for voluntary retirement program

Results of the third quarter of 2009 include a specific provision of NIS 70 million in respect of a voluntary retirement program to be offered to Bank employees as part of the new collective bargaining agreement.
Excluding this specific provision, net profit for the third quarter of this year would be NIS 202 million, compared to NIS 139 million in the corresponding period last year - a 45.0% increase. This profit reflects a 13.3% return on equity in the third quarter.

Capital adequacy, in Basle II terms, at 14%

In the third quarter, too, further to the trend in recent quarters, the Bank has increased its capital adequacy ratio. The ratio of total capital to risk elements, as of September 30, 2009, reached 12.48%, even prior to the Basle II rules taking effect. According to Bank calculations, the transition to measurement in accordance with Basle II rules would increase the Bank's capital adequacy ratio by about 1.5 percentage points, to approximately 14%, making Bank Mizrahi-Tefahot the only of the top 5 banks to significantly increase its capital adequacy as a result of this transition.
The Bank's Tier I capital adequacy ratio as of September 30 reached 7.00%. Note that this Tier I capital adequacy ratio is higher than the target set by the Board of Directors on June 29 of this year. On that date, the Bank Board of Directors instructed Bank management to act so as to have the original Tier I capital adequacy ratio for the Bank be no less than 6.7% by end of 2009.

Eli Yones:

We continue to make progress in line with our strategic plan, increase operating and other revenues and control expenses
"Financial results for the first nine months of this year indicate that we continue to make progress in line with our strategic plan, while continuing to grow the different revenue items and control expenses.
Thus, inter alia, operating and other revenues in the first nine months, excluding the impact of Bank Yahav's financial statements, increased by 8.2%, with operating commission revenues also growing from NIS 820 million to NIS 855 million and other revenues, also excluding Bank Yahav's financial statements, growing by 41.2%.
On the other hand, expenses continued to be under control, with operating and other expenses, excluding Bank Yahav's financial statements and excluding special items under payroll expenses, primarily the provision for the voluntary retirement program, showing a modest 3.0% increase.
The unique collective bargaining agreement signed with employee and manager unions, featuring a commitment to calm labor relations through 2015, also contributes significantly to the Bank's growth momentum and to total commitment by staff to achievement of business objectives. The agreement would allow the Bank to continue improving its efficiency, inter alia by continuing recruitment of young, well educated and professional employees, while changing the human capital mix at the Bank.
As of the end of the third quarter of this year, the share of loans to households, including mortgages, out of total Bank loans, rose to 67%. This further strengthens the Bank's low risk profile, setting Mizrahi-Tefahot apart from other banks in Israel, as the only truly retail-oriented bank. At the same time, the Bank continues to lead the Israeli mortgage market, with a market share in excess of 36%.
With regard to the impact of transition to Basle II rules on capital adequacy in the banking system, Mizrahi-Tefahot is also distinct from its competitors, in being expected to be the only bank to benefit from the transition to measurement rules based on Basle II. Had these rules been in effect today, the Bank's capital adequacy ration for the third quarter would have increased to 14%, with the Tier I capital adequacy ratio reaching 8% - highlighting the significant safety cushion from which the Bank benefits, as well as Mizrahi-Tefahot's capacity to divert capital and other resources for various uses, primarily continued growth and development of its business operations," said Bank President, Eli Yones

Mizrahi-Tefahot Bank Ltd. Highlights of financial statements

As of September 30, 2009 - NIS in millions

Major balance sheet items


September 30


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Profit and Profitability


First nine months of


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Provision for doubtful debts




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Operating and other expenses




Net profit




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Financial ratios


September 30




Credit to the public to balance sheet total



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Provision for doubtful debts out of credit to the public



Operating expenses to total expenses



Ratio of capital to risk elements




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