Improved efficiency boosts Leumi's Q2 results

Rakefet Russak-Aminoach  photo: Ron Kedmi
Rakefet Russak-Aminoach photo: Ron Kedmi

Bank Leumi's voluntary early retirement program has brought its efficiency ratio to below 60%.

Bank Leumi (TASE: LUMI), headed by Bank Leumi CEO Rakefet Russak-Aminoach, reported its results for the second quarter of 2017 this morning. The outstanding feature of the bank's financials is the improvement in its efficiency ratio. Leumi posted a profit of NIS 876 million for the quarter. This is 10% less than in the corresponding quarter of 2016, but in that quarter the bank benefitted from one-time items, the most important of which was income from the sale of shares in Visa Europe.

The bank's return on equity in the second quarter of 2017 was 11.3%. For the first half-year, return on equity was 9.6%, with profit totaling almost NIS 1.5 billion.

Bank Leumi will distribute a dividend of NIS 175 million on its second quarter profit.

As mentioned, the bank has managed to restrain, and even cut, its salary costs, which totaled NIS 1.28 billion in the second quarter of 2017, compared with NIS 1.55 billion in the corresponding quarter of 2016. Its efficiency ratio, which over the years had been considered weak, managed to reach 62.2% for the first half-year, and in the second quarter even fell below 60%. In the past, the ratio had been above 70%.

The improvement in the efficiency ratio was achieved thanks to a voluntary early retirement program introduced by Russak-Aminoach. The bank recently announced a further program, for shedding 500 employees.

Alongside the reduction in costs, Bank Leumi managed to grow in its core activity. Financing income grew by more than 6% to NIS 2.16 billion, while fee income too grew slightly, crossing the NIS 1 billion mark in the second quarter.

The bank's credit portfolio continues to expand, although at a moderate pace, increasing by 1% since the beginning of 2017 to NIS 264 billion. The bank says that the strengthening of the shekel impeded growth in the portfolio, and that were it not for that factor growth would have been more than double the reported rate.

Published by Globes [online], Israel business news - www.globes-online.com - on August 15, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

Rakefet Russak-Aminoach  photo: Ron Kedmi
Rakefet Russak-Aminoach photo: Ron Kedmi
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