Mizrahi-Tefahot to focus on business sector

Eldad Fresher Photo: Tamar Matsafi

Mizrahi-Tefahot Bank released its new strategic plan this morning, pledging higher dividends.

Mizrahi Tefahot Bank (TASE:MZTF) published its strategic plan for the next few years this morning. The bank set out the activities that will be its growth engines, among them the business sector. The bank will increase credit to businesses in all segments: small, medium and large. The bank also announced that from 2017 it intends to distribute 30% of its profits as dividends.

"The new strategic plans sets forth clear targets for business development, alongside tight risk management, and focuses on four main subjects: growth, efficiency, profitability, and dividends," the bank's statement says.

As mentioned, the bank plans to increase its focus on business sectors. The bank seeks to keep a significant portion of activity among private customers and in mortgages, but in the coming years the bank's growth engine will be the business division. This will manifest itself in growth in the group's market share to 20% and later in the opening of new branches, up to a target of 200 branches in the banking group in 2021.

The bank seeks to maintain high operating efficiency levels. "This target will be achieved by cultivating a corporate culture that supports efficiency and streamlining in the work routine; optimization of the branch network and real estate assets; improvement in the workforce and increased output per bank clerk, while maintaining good, stable labor relations over time and transferring more activities from the branch network to headquarters operations. These measures will assist the bank in presenting a high quality efficiency ratio of under 60% throughout the plan period, and even under 55% in 2021," the bank's announcement says.

"The continuing, consistent growth in profits will enable the bank to present a stable double-digit return on equity in the coming years and to reach a return of about 11.5% in 2021, assuming that the interest rate environment remains at its current level. Return on equity could reach 14.5% in a normal macro environment and with a moderate rise in interest rates.

"At the same time the bank plans gradually to raise its dividend return. Under the bank's updated dividend policy, which has received the approval of the Supervisor of Banks, in 2017 the bank will raise the rate of dividend distribution from its net profit to 30%, and from 2018 the board of directors will examine the possibility of raising the distribution further, in accordance with the degree to which the goals of the new strategic plan have been attained, and subject to approval by the Supervisor of Banks."

Mizrahi-Tefahot CEO Eldad Fresher said, "The decision to adopt a growth strategy has proved itself in a series of important achievements, such as consolidation of Mizrahi-Tefahot's position as the third largest bank in Israel while reporting a stable return on equity, and the highest over time, as well as the best efficiency ratio, good even by comparison with the average in the OECD countries. These things, together with early achievement of the regulatory targets for capital, leverage and liquidity, enable us to launch a new and challenging strategic plan for the years ahead."

Published by Globes [online], Israel business news - www.globes-online.com - on November 22, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

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Eldad Fresher Photo: Tamar Matsafi
Eldad Fresher Photo: Tamar Matsafi
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