Discount Bank of NY falls on poor results

Clal Finance: This is a weak set of financials, which will weigh on the results of the group.

The recession has hit Discount Bank of New York hard. The vehicle for Israel Discount Bank’s activity in the US, which accounts for 40% of the bank’s total activity, suffered from a rise in doubtful debt provisions in the second quarter, bringing its return on equity to just 4.2%, compared with 9.2% in the second quarter of 2008.

Discount Bank of New York made a profit of $6.6 million in the second quarter, 23% less than in the corresponding quarter last year. For the first half year, net profit fell 49% in comparison with the first half of 2008, to $15.3 million. Provisions for doubtful debts totaled $13.5 million in the second quarter, compared with $5 million in each of the previous five quarters. Net profit was also hit by a $3 million fall in operating revenue.

The bank also wrote $5.6 million off its assets portfolio, mainly because of a fall in value of bonds that it holds. Deposits fell 5% to $5.7 billion.

On the positive side, shareholders’’ equity rose 5.2% to $646.7 million, and the bank’s capital adequacy ratio rose to 11.72% from 10.81% in the corresponding period last year. The bank’s share price fell sharply in response to the results, which indicate a worsening in its business activity.

”This is a weak set of financials, which will weigh on the results of the group, Clal Finance head of research Yuval Ben Zeev said. “It seems that the extra capital and liquidity at Discount New York are not being translated into an improvement in profits. We will review our recommendation for the bank’s stock.”

Published by Globes [online], Israel business news - www.globes.co.il - on August 4, 2009

© Copyright of Globes Publisher Itonut (1983) Ltd. 2009

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