After 21 years, Israel Discount Bank (TASE: DSCT) is once again planning to distribute a regular dividend to its shareholders. All of Israel's five largest banks are now officially distributing dividends. Discount Bank, managed by CEO Lilach Asher-Topilsky, plans to distribute up to 15% of its net profit each quarter as a dividend. The new policy will be applied to reports published in 2018, meaning starting in May 2018.
Discount Bank has distributed no dividend for 20 years, except for a single NIS 250 million dividend distributed in October 2008. The bank's board of directors, headed by chairperson Yossi Bachar, convened yesterday to approve the bank's work plan for next year, and approved the new dividend policy.
Discount Bank's capital ratio has been consistently weak, which prevented the bank from distributing a dividend. The bank has attained its capital targets in recent years, but was in no hurry to resume the distribution of dividends, preferring to utilize its surplus capital for aggressive growth in its credit portfolio, which grew by over 10% last year. At the same time, capital market investors have been anticipating a change in the bank's dividend policy for quite some time, given that Discount Bank was the only one of Israel's major banks that was not distributing dividends. The bank eventually concluded that the time was right for distributing a dividend.
The 15% dividend rate announced by Discount Bank is nevertheless the lowest among Israel's five largest banks; the other four distribute 30-50% of their net profits as dividends. Discount Bank's relatively modest dividend rate is designed to enable the bank to continue its credit growth strategy, while complying with the Bank of Israel's capital requirements.
Published by Globes [online], Israel Business News - www.globes-online.com - on December 27, 2017
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