Banks' first half profits down 20%

The economic slowdown has reached the banks. The aggregate net profit of the five big banks fell 20% to NIS 3.22 billion in the first half of 2012. Higher provisions for credit losses was the main cause of the drop, as well as lower income from fees, mainly because of the decline in capital market activity, reflected in low turnover on the Tel Aviv Stock Exchange (TASE).

The freeze, and even dip, in credit to the public at most of the banks in the first half also stood out. However, retail credit, especially mortgages, rose strongly, and is now the credit growth engine.

Hapoalim remains Israel's most profitable bank

Leumi Q2 profit halved despite higher revenue

Discount Bank Q2 net profit down 28%

First Int'l Bank Q2 profit up 43%

Mizrahi Tefahot Q2 net profit jumps 17%

Bank Hapoalim (TASE: POLI) posted the largest net profit, of NIS 1.27 billion in the first half, but this was still 21% less than the profit in the corresponding half of last year. Mizrahi Tefahot Bank (TASE:MZTF) had the largest return on equity of the five big banks, at 14.3%, after posting 11.4% net profit growth compared with the corresponding half.

Only Bank Hapoalim and Mizrahi Tefahot Bank achieved double-digit return on equity. Most of the banks believe that they will report a further drop in profits for the rest of the year, because of the likely worsening economic slowdown.

Bank Leumi (TASE: LUMI) reported the lowest return on equity, at just 6% for the first half, because of its weak financial report for the second quarter. Large write-offs on credit and a write-down on the bank's stake in Orange franchisee Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR) combined to halve the bank's profit to NIS 280 million for the second quarter, resulting in a return on equity of just 4.7% for the quarter. In the first half, the bank's profit was NIS 711 million, 36.4% less than in the corresponding half.

"Economic activity in Israel is at a lower level, the economy's risk level has risen, and the customers feel it," said Bank Leumi EVP head of economics and finance division Yaakov (Kobi) Haber. "Nonetheless, things should be taken in the right proportion, we don�t seem to be beaded for a recession."

Published by Globes [online], Israel business news - www.globes-online.com - on August 30, 2012