Mizrahi Tefahot Bank (TASE:MZTF), run by CEO Eli Yones, today published its strategic plan for 2013-17, in which it set a return on equity target of 17%.
Early in the bank's capital market presentation, it says, "Over the past eight years, we have set targets, and we are on courseto achieve the return on equity target of 15%. Now is the time for a new plan."
Mizrahi Tefahot Bank's board of directors, under chairman Jacob Perry, approved the new plan, after several days of in-depth discussions, during which Yones and other executives presented the bank's targets in a range of areas for the coming years.
The return on equity target is 17% in 2017, based on a core capital adequacy ratio of 7.5%. On the basis of the core capital adequacy of at least 9% that the bank must reach by the end of 2014, pursuant to Bank of Israel regulations, the adjusted return on equity target for 2017 is 14.5%.
Mizrahi Tefahot Bank's board instructed management to bring forward implementation of the Bank of Israel's regulations, and to prepare to reach a core capital adequacy ratio of at least 9% by early 2014, while maintaining appropriate safety margins.
The board also decided that during the period of the new five-year plan, the bank will keep its dividend policy. Under this policy, provided that the core capital adequacy ratio does not fall below the board's target, the bank will distribute 40% of its net profit from ordinary operations and 80% of its profit from extraordinary operations as a dividend each year.
The main growth engines and targets in the plan are a credit mix with at least 60% exposure to householders, continued organic growth by the bank's core businesses, growth through operating efficiency, improvement in the bank's capital efficiency, and instilling and deepening a customer-oriented organizational culture, internally and externally.
Mizrahi Tefahot Bank said that the operating efficiencies would include the transfer of all the bank's logistics, training, operating, and computer systems units to a new technology center in Lod. The plan also states that Mizrahi Tefahot Bank was the only bank to have moved its headquarters to the Ramat Gan Diamond Exchange, generating substantial savings in municipal taxes.
Yones said that the decision to launch the new strategic plan now, was taken because the bank was about to achieve its return on equity target in its current strategic plan, while consistently and steadily presenting the highest growth and profitability rates in the banking system for years, and maintaining the lowest risk profile among the big banks.
Published by Globes [online], Israel business news - www.globes-online.com - on July 23, 2012
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