TEL AVIV, Israel, May 29, 2008 (PRIME NEWSWIRE) -- Bank Hapoalim reported today its financial results for the First Quarter of 2008.
Highlights of the financial statements:
-- The Bank posted a loss of NIS 1,567 million in the first quarter
of 2008. Losses from the realization of mortgage-backed securities,
decline in value of other asset-backed securities and a loss in the
credit-derivatives portfolio totaling NIS 3,760 million as well as
an additional NIS 300 million for a voluntary retirement program
were recorded in the first quarter. Excluding these effects, net
profit would have totaled about NIS 1 billion, compared with NIS
635 million in the same quarter last year, an increase of 57.3%.
-- The Bank's capital adequacy at the end of the first quarter of
2008 stood at 9.74% compared with 10.26% at the end of 2007. Tier
1 Capital reached 6.88%. Taking into consideration the share issue
to York Capital in April 2008, the Bank's capital adequacy ratio
is approximately 10% while Tier 1 reached 7.2%. The Bank has
adopted a policy aimed at increasing its overall ratio of capital
to risk-adjusted assets to 11% by the end of 2008 and 12% by the
end of 2009.
-- Return on equity for the first three months of 2008 was negative.
The rate of net return on equity in 2008, as estimated by the Bank
based on the data available to it today, is expected to reach
7%-10%, and a return of operating profit on equity of 2%-4%.
-- Loss from financing activity before provision for doubtful debts
totaled NIS 2,012 million in the first three months of 2008. The
loss resulted from the effects of the crisis in the United States,
which was expressed in losses in asset-backed securities and in a
loss in the credit-derivative portfolio, as mentioned above. The
loss was offset by an increase in financing income on financial
capital invested in the various linkage segments, an increase in
the volume of financial activity of the Bank Group, and an
increase in respect of income from interest on problematic debts
not previously recorded.
-- Net profit from extraordinary transactions after taxes totaled
NIS 438 million in the first three months of 2008, as a result of
the sale of provident-fund management rights, including profit from
the sale of Gadish.
-- The provision for doubtful debts decreased by 82.3% and totaled
NIS 32 million in the first quarter of 2008. The decrease in the
provision resulted from the collection of debts which were
written-off in the past, in the amount of NIS 110 million, and
from the continued improvement in borrowers' repayment capability.
The decrease in the volume of the specific provision year-on-year
derived from the corporate sector, mainly in the construction &
real-estate and agriculture sectors.
The ratio of the specific provision for doubtful debts to the balance
of balance-sheet credit to the public reached 0.14% in the first
quarter of 2008, compared with 0.43% in the same period last year.
The ratio to the balance of overall balance-sheet and off-balance-
sheet credit risk to the public reached 0.08% in the first quarter
of 2008, compared with 0.24% in the same period last year.
Problematic debt for the Bank Group decreased in the first quarter
of 2008 from NIS 15.1 billion to NIS 13.6 billion, a decrease of
10.2%, while non-income- bearing debt declined from NIS 3.8 billion
at the end of 2007 to NIS 3.4 billion at the end of the first quarter
of 2008, a decrease of 9.6%.
-- Operating and other income totaled NIS 1,284 million in the first
three months of 2008. Income from fees from securities activity
and operating fees from provident and mutual funds increased.
Income from distribution fees of mutual funds and management fees
of provident funds decreased. The decrease in provident-fund
management fees mainly resulted from the sale of the majority of
the Bank's provident-fund management rights during 2007.
-- Operating and other expenses totaled NIS 2,268 million in the
first three months of 2008. The increase in expenses mainly
resulted from the voluntary-retirement program; the effects of
the wage agreement on provisions for benefits; and the decline in
the value of severance compensation funds, as a result of a
decline in prices in the capital market. In May, a decision was
taken to offer an additional voluntary-retirement program, at a
cost of NIS 300 million. This cost was attributed to the statement
of profit and loss in the first quarter of 2008.
-- Contribution to the community - The community-service activities
of the Bank's employees are varied and extensive, and take the
form of community involvement, monetary donations, and wide-ranging
volunteer activities. This activity of the Bank Group in the first
quarter of 2008 had a monetary value of approximately NIS 12
million.
Developments in Balance-Sheet Items
The consolidated balance sheet as at March 31, 2008 totaled NIS 308.9 billion, compared with NIS 303.0 billion at the end of 2007, an increase of 2.0%.
Credit to the public totaled NIS 210.9 billion, an increase of 2.9% compared to the end of 2007.
Deposits from the public totaled NIS 231.5 billion, similar to the balance at the end of 2007.
Chairman of the Board of Directors Dan Dankner commented:
"The Bank made a difficult decision to sell its entire portfolio of MBS held in New York. This decision was designed, among other things, to eliminate the uncertainty with regard to the Bank's investments in MBS. I am confident that this step has strengthened us and increased investors' and the market's confidence in the Bank.
In addition, the loss in the first quarter also reflects the Board of Directors' decision to allocate NIS 300 million to a voluntary-retirement program for employees who have expressed a wish to retire within the program. A total of NIS 550 million has been allocated to enable the early retirement of over 500 employees.
Over the next year, we will continue to implement our multi-year strategy, which includes expansion in all areas of our operations in Israel and abroad. Already this year, over 25 new branches will be opened in Israel. We intend to increase the scope of our activity in all areas of corporate, commercial and retail banking. I have no doubt that over time, Bank Hapoalim will continue to be Israel's leading bank -- a global bank providing its customers with financial services and products of the highest quality."
CEO Zvi Ziv commented:
"Following long and comprehensive deliberations, the decision to sell the MBS portfolio paves the way to a renewed accelerated focus on our regular banking business.
An analysis of Bank Hapoalim's financial statements for the first quarter of 2008 indicates that despite the turmoil in the U.S. economy, the Israeli economy has demonstrated resilience. This is reflected in the net profit from the corporate sector in Israel which grew by 31.9% compared with the same period last year, as a result of an increase in profit from financing activity and a decrease in the volume of the provision for doubtful debts.
This year we continue to develop our business activity in all areas: opening branches in the Retail Area, expanding our corporate operations, and of course, providing pension-advisory services to self-employed clients and preparing to receive a license to provide pension advice to the general public. We have invested extensive resources in this area and trained hundreds of advisors, and I am certain that Bank Hapoalim will lead the market in this area as well, providing its customers with advice at the highest professional level on all matters related to medium and long-term savings."