- Q2 Net Income of NIS 192
m, ROE of 6.3%
- Excluding the provision for severance pay of NIS 195 million: Net income would have totaled
NIS 313 million with an ROE of
10.3%
- Basel III Capital Adequacy Ratio reached 9.2%
TEL-AVIV, Israel, Aug. 20, 2014 /PRNewswire/ -- Israel
Discount Bank (TASE: DSCT) today announces its financial
results for the second quarter of 2014.
Logo - http://photos.prnewswire.com/prnh/20120820/554838
Main Highlights of Q2-14 compared to Q1-14:
- Capital Adequacy – The group continued to meet its
capital milestones and presented a Basel III CT-1 ratio of
9.2%. The group has sufficient capital to support future
growth.
- Asset Quality – The group continued to improve asset
quality, reflected in a substantial decrease in Loan Loss
Provisions out of total credit (LLP ratio) to a negative ratio of
-0.12%.
- Retail growth – Consumer credit and SME credit recorded
a 4.7% and 1% growth respectively.
- Expenses – Excluding the change in the provision for
severance pay, primarily due to a provision of NIS 306 million for early retirement of
~250 employees, total expenses decreased by 3.8%.
- Subsidiaries – presented robust performance and
continued to contribute substantially to the group's net
income.
Key Factors impacting Q2-14 results:
- Negative provision of NIS 35
million for Loan losses due to several recoveries.
- Positive CPI (0.5% compared to -0.7% in Q1-14) contributed
58 NIS million to Interest
Income.
- Reduction of 6% in salary expenses, excluding provision for
severance pay.
- Reduction in Net Interest Income, due to lower Interest
rate.
- Non Interest financing income reduced by 8.1% mainly due to
TRUPS sale by IDB NY.
- Other Income decreased by 48% due to weaker performance of the
employees severance fund.
- Provision of NIS 195 million for
severance pay.
Strategic Plan:
On August 20, 2014, the Board of
Directors approved the Discount Group's strategic plan for the
years 2015-2019. The plan encompasses all of Discount Group's
spheres of activity, taking a pragmatic view of the group's
strengths and challenges. In the opinion of the Bank's management,
implementation of the plan will lead to a double digit CAGR in
net income, during the 5 year program, placing the Discount
Group at the forefront of the banking system in Israel by the end of the plans' period.
The plan has been constructed on three central pillars:
Cost Reduction:
- Reducing the size of the Discount Group's
workforce by more than 1,000 employees, some 700 of whom will leave
by the end of 2017. This reduction is based on the natural
retirement of approximately 600 employees during the period of the
plan, and on an early retirement program, under which some 250
employees will retire from the Bank during the coming year. The
financial statements include a provision for the planned retirement
program;
- Reducing the group's real estate
holdings in light of the downsizing of the workforce. In
addition, a comprehensive examination will be carried out to ensure
the most suitable and effective use of the group's real estate
assets, as well as to identify savings in procurement costs and
other expenses.
- Adapting the size of the branch
network and its character to the new environment in which the
Israeli banking sector and the group are facing. In the first stage it has been decided to close 10
branches.
- Accelerating the process of transferring operational functions
from the branches to the back-office.
Growth:
- Growing the retail segment, placing
emphasis on private customers and small businesses, at the Bank and
at its subsidiaries – Mercantile and CAL;
- Strengthening and expanding relationship
with existing clients leveraging low share of wallet
Change organizational culture:
- Creating a change-enabling
organization, focused on customer centric strong performance
management
Conference call Information - The Bank will be
hosting a conference call today at 16:00 (Israel); 14:00 (UK); 09:00 (EDT), during which
management will review the results and the strategic plan and be
available to answer questions.
- Israel : 1 809
216057
- International: +44 1452 555566
- USA: 1 866 966 9439
- U.K: 0 800 694 0257
The conference call will be accompanied by a WEBEX presentation,
which can be accessed through our IR website-
www.discountbank.co.il/IR
|
DEVELOPMENTS IN
CERTAIN INCOME STATEMENT ITEMS IN THE SECOND QUARTER OF
2014
|
|
In NIS
millions
|
2014
|
2013
|
Change in % compared
to
|
|
Q2
|
Q1
|
Q2
|
Q1-14
|
Q2-13
|
|
Interest
income(4)
|
1,581
|
1,324
|
1,758
|
19.4
|
(10.1)
|
|
Interest
expenses
|
481
|
306
|
717
|
57.2
|
(32.9)
|
|
Interest income,
net
|
1,100
|
1,018
|
1,041
|
8.1
|
5.7
|
|
Credit loss
expenses
|
(35)
|
75
|
141
|
-
|
-
|
|
Net interest
income after credit loss expenses
|
1,135
|
943
|
900
|
20.4
|
26.1
|
|
Non-interest
Income
|
|
|
|
|
|
|
Non-interest
financing income
|
114
|
124
|
236
|
(8.1)
|
(51.7)
|
|
Commissions(4)
|
637
|
631
|
668
|
1.0
|
(4.6)
|
|
Other
income
|
27
|
52
|
20
|
(48.1)
|
35.0
|
|
Total non-interest
income
|
778
|
807
|
924
|
(3.6)
|
(15.8)
|
|
Operating and
other Expenses
|
|
|
|
|
|
|
Salaries and related
expenses
|
1,072
|
936
|
933
|
14.5
|
14.9
|
|
Maintenance and
depreciation of buildings and equipment
|
299
|
298
|
303
|
0.3
|
(1.3)
|
|
Other
expenses
|
261
|
260
|
268
|
0.4
|
(2.6)
|
|
Total operating
and other expenses
|
1,632
|
1,494
|
1,504
|
9.2
|
8.5
|
|
Income before
taxes
|
281
|
256
|
320
|
9.8
|
(12.2)
|
|
Provision for taxes
on income
|
83
|
97
|
89
|
(14.4)
|
(6.7)
|
|
Income after
taxes
|
198
|
159
|
231
|
24.5
|
(14.3)
|
|
Bank's share in
income (loss) of affiliated companies, net of tax effect
|
5
|
(1)(2)15
|
42
|
(66.7)
|
(88.1)
|
|
Net income attributed
to the non-controlling rights holders in consolidated
companies
|
(11)
|
(9)
|
(10)
|
22.2
|
10.0
|
|
Net income
attributed to Bank's shareholders
|
192
|
165
|
263
|
16.4
|
(27.0)
|
|
Net return on equity
attributed to the Bank's shareholders in %(3)
|
6.3
|
5.4
|
9.0
|
|
|
|
Net income
attributed to Bank's shareholders – disregarding the provision for
impairment in value of the investment in the FIBI
|
313
|
(1)191
|
263
|
63.9
|
19.0
|
|
Net return on equity
attributed to the Bank's shareholders in % - disregarding the
provision for impairment in value of the investment in the
FIBI(3)
|
10.3
|
(1)6.3
|
9.0
|
|
|
|
|
Footnotes:
|
|
(1) For details
regarding the provision for impairment in value of the investment
in FIBI, see Note 14 C and D to the condensed financial
statements.
|
|
(2) For details as to
the elimination of the Bank's share in the reserves of FIBI,
previously recognized in other comprehensive income, and its
classification to the statement of income, see Note 14E to the
condensed financial statements.
(3) On an annual
basis.
|
|
(4) For details
regarding the effect of the implementation of the instruction
regarding the measurement of interest income (classification of
certain commissions), see Note 1E(1) to the condensed financial
statements.
|
|
(5) For details
regarding changes in the provision for severance pay, net, mostly
the retirement plan, see Note 21 to the condensed financial
statements.
|
|
COMPOSITION OF
CREDIT TO THE PUBLIC BY SEGMENTS OF OPERATION
|
|
June 30,
2014
|
December 31,
2013
|
|
|
In NIS
millions
|
|
% of total
credit to the public
|
In NIS
millions
|
% of total
credit to the public
|
Rate of
change in %
|
|
Retail - household
segment
|
40,361
|
35.0
|
(1) 40,056
|
34.6
|
0.8
|
|
Of which - housing
loans
|
19,835
|
17.2
|
19,753
|
17.0
|
0.4
|
|
Retail - small
business segment
|
13,234
|
11.5
|
(1) 13,000
|
11.2
|
1.8
|
|
Corporate banking
segment
|
38,047
|
33.0
|
40,807
|
35.2
|
(6.8)
|
|
Middle market banking
segment
|
19,934
|
17.4
|
18,612
|
16.1
|
7.1
|
|
Private banking
segment
|
3,585
|
3.1
|
(1) 3,384
|
2.9
|
5.9
|
|
Total
|
115,161
|
100.0
|
115,859
|
100.0
|
(0.6)
|
|
(1) Reclassified, see
note 12 b (2) to condensed financial statement
|
|
BALANCE
SHEET
|
|
June 30,
2014
|
June 30,
2013
|
December 31,
2013
|
Change in %
compared to
|
|
In NIS
millions
|
March 31,
2013
|
December 31,
2013
|
|
Total assets
|
196,040
|
197,207
|
200,507
|
(0.6)
|
(2.2)
|
|
Credit to the public,
net
|
115,161
|
115,121
|
115,859
|
-
|
(0.6)
|
|
Securities
|
39,191
|
48,832
|
41,325
|
(19.7)
|
(5.2)
|
|
Deposits from the
public
|
145,350
|
149,502
|
148,928
|
(2.8)
|
(2.4)
|
|
Equity attributed to
the Bank's shareholders
|
12,716
|
11,991
|
12,233
|
6.0
|
3.9
|
|
Total equity
|
13,030
|
12,291
|
12,538
|
6.0
|
3.9
|
Company Contact
Tamar Koblenz
Head of Investor Relations
Tel: +972-3-5146593
Tamar.koblenz@idbank.co.il