Bank Leumi (TASE: LUMI) has reported a strong 2017. The bank, headed by Rakefet Russak-Aminoach, posted a profit of NIS 3.2 billion for last year, nearly 14% more than in 2016. This is expected to be the highest profit among Israel's banks, given the provisions that Bank Hapoalim (TASE: POLI) is making against the outcome of the investigation of its business in the US.
Bank Leumi's profit represents a return on equity of 9.8%. Because of its results and its excess capital after reaching the Bank of Israel's capital adequacy target, Bank Leumi has published a NIS 700 million share buyback program. "There is no stronger way of testifying to the confidence of the board and management in the bank's financial robustness and in its strategic plan for the coming years," Russak-Aminoach said today. The program will get underway on April 1, and will be valid for one year. Share purchases will be made in such a way that the bank's capital adequacy ratio will be at least 10.9%. At the end of 2017, the ratio was 11.4%.
This program is in addition to a dividend of 40% of the bank's profit. For the fourth quarter, Bank Leumi will distribute a dividend of NIS 342 million. The total dividend for 2017 is NIS 969 million. In the fourth quarter, the bank posted a profit of NIS 854 million, representing a return on equity of 10.8%. A major contribution to the result came from the sale of Bank Leumi's main Tel Aviv branch for NIS 265 million. Provisions for credit losses were low in the quarter, at just NIS 26 million.
Bank Leumi's financing income rose 7% last year to NIS 8 billion, while credit losses were less than 0.1% of its portfolio. Further streamlining reduced salary expenses by NIS 150 million. Bank Leumi's headcount fell by more than 400 in 2017. In the past six years, since Russak-Aminoach became CEO, the bank has shed nearly 3,000 employees.
The salary cost of Russak-Aminoach and chairman David Brodet was NIS 2.9 million each, in accordance with the restrictions on executive compensation in financial companies, limiting it to 35-times the lowest salary in any company or bank. This legal restriction does not, however, apply to the bank's subsidiaries, and so while the salary cost of the CEO and chairman was less than NIS 3 million each, Leumi USA president and CEO Avner Mendelson had a salary cost of nearly NIS 8 million last year, of which NIS 3.8 billion was bonuses.
Other high earners in the Leumi group were Leumi Partners CEO Yaron Bloch, with a salary cost of NIS 4.31 million, and Bank Leumi (UK) CEO Gil Karni, with a salary cost of NIS 4.2 million.
Published by Globes [online], Israel business news - www.globes-online.com - on March 6, 2018
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