Financial Reports 3rd Quarter 2012

Net profit in third quarter: NIS 260 million

Compared to NIS 255 million in the corresponding period last year

2.0% growth

Shareholders' equity: NIS 8.5 billion

An increase of 16% compared to September 30, 2011

Return on equity in the third quarter: 13.0%

Net profit for the first nine months: NIS 806 million

Compared to NIS 745 million in the corresponding period last year

8.2% growth

Return on equity for the first nine months: 13.5%

Financing revenues from current operations

for the nine-month period: NIS 2,362 million

An increase of 8.7%

compared to the corresponding period last year

Ratio of Tier I capital to risk elements: 8.23%

Compared to 7.70% as of September 30, 2011

Significant increase in capital base

As a result of Bank of Israel requirements with regard to capital adequacy, and in line with Bank intention to achieve a core capital ratio of 9.0% by early 2014 – as part of the new strategic plan for 2013-2017, the Bank's capital base increased by 16% over the corresponding period last year. The Tier I capital ratio to risk elements increased from 7.70% to 8.23% at the end of the third quarter of 2012, which naturally affects the rate of return on equity. By comparison, if not for the increase in capital base and in core capital ratio, return on equity in the third quarter of this year would have been 13.7%, compared to 14.9% in the corresponding period, and to 14.0% for the first nine months of 2012, compared to 14.3% in the corresponding period last year.

Maintaining impressive efficiency cost-income ratio

Along with continued growth and business volume, Mizrahi-Tefahot adhered to the outline of its strategic plan, with a modest increase of only 3.4% in operating and other expenses for the first nine months of this year. Consequently, the Bank consistently maintains its impressive cost-income ratio. In the third quarter, cost-income ratio for the Group was 57.0%, and 57.8% for the first nine months of the year. This compares with 57.9% for all of 2011.

A 6.0% increase in operating and other expenses at Bank Yahav, due inter alia to opening of new branches and expanded business volume, slightly moderated the improvement in cost-income ratio for the Group.

Moderate growth in loans to the public

At the end of the third quarter of 2012, Bank loans to the public amounted to NIS 126,602 million – an increase of 7.6% over the corresponding period last year.

The increase was primarily due to retail banking, which is typically well diversified with a lower associated risk. This operating segment, which includes the mortgage, household and small business segments, showed an increase of 10% at the end of September 2012, compared to the corresponding period last year.

Concurrently, business loans increased by a moderate 2.0%, with strict adherence to underwriting quality, taking careful, considered advantage of business opportunities.

Eli Yones: The Bank's business results reflect our success in further increasing profit even when the economy deteriorates

"The Bank's financial results: net profit of NIS 260 million for the third quarter and NIS 806 million for the first nine months of this year, reflect continued growth in our business, as well as our success in growing, signifcantly recruiting clients while increasing profits – even when the economy deteriorates.

This trend is reflected both by revenues, with an 8.7% increase in financing revenues from current operations for the first nine months of this year, and by expenses, with only a moderate 3.4% increase in operating and other expenses in the same period – in line with the Bank's strategic plan.

Developments of balance sheet items give a similar indication: Since the end of September 2011, the Bank's total assets increased by 7.4%, loans to the public increased by 7.6% and deposits from the public increased by 6.7%.

Concurrently, the Bank expanded its capital base by 16%, compared to the corresponding period last year, achieving a core capital ratio of 8.23%, compared to 7.70% in the corresponding period last year. This is in line with the Bank's intention to bring forward compliance with the regulatory requirement of 9.0% core capital ratio - to early 2014.

Mizrahi-Tefahot maintains its leadership position in the mortgage market, despite fierce competition and changes in this sector over the past year. According to Bank of Israel data, the Bank's average market share over the first nine months of 2012 in the housing loan market (for residential housing, including loans guaranteed by the State) was 34.1%. This was achieved while maintaining a financial spread in line with current risk associated with the residential real estate sector in general, and the mortgage market in particular.

Bank Yahav - which is part of Mizrahi-Tefahot Group - continues to consistently increase profit while significantly expanding business volume. In the first nine months of 2012, as well as in the third quarter of this year, the bank's profit increased by 38%, with return on equity in the third quarter reaching 14.7% and the core capital ratio climbing to 9.14%," said Bank President, Eli Yones.

Mizrahi-Tefahot Bank Ltd.

Highlights of financial statements

As of September 30, 2012 - NIS in millions

Major balance sheet items

Profit and Profitability

Financial Ratios