Bank Leumi's (TASE: LUMI) credit card company today announced its financial results for the second quarter of 2009. Net profit rose 9% to NIS 36 million from NIS 33 million for the corresponding quarter of 2008, not including NIS 17 million for the sale of the company's holding in Gama Management and Clearing Ltd..
Leumi Card posted NIS 208 million revenue for the second quarter, 7% more than the NIS 194 million for the corresponding quarter. First half revenue totaled NIS 403 million, 6.6% more than in the corresponding half.
Credit card transactions totaled NIS 10.6 billion for the second quarter, 3.2% more than for the corresponding quarter, and 1.9% more than for the preceding quarter, a figure indicative of growth in consumer spending. Credit card transactions totaled NIS 20.5 billion in the first half, 2.5% more than in the corresponding half.
Leumi Card posted a net profit of NIS 68 million in the first half of the year, compared with NIS 65 million in the first half of 2008, not including the sale of Gama.
Leumi Card CEO Dan Cohen said, "The recession isn't over, but the public is again buying at a rate similar to the rate before the crisis. People are emerging from their bunkers, seeing that the world hasn’t collapsed, and are compensating themselves by shopping. We saw a substantial improvement of 6% growth in turnover in July and August."
Leumi Card's main growth engines are collaboration with retail clubs, such as its joint card with IDB Holding Corp. Ltd. (TASE:IDBH) supermarket chain Shufersal Ltd. (TASE:SAE;Pink Sheets: SSLTF), a designated card for Azrieli Group's malls, and Club 365 of department store chain New Hamashbir Lazarchan Ltd. (TASE:MSZB). Despite a 4% increase in advertising compared with the corresponding quarter, sales and marketing expenditure fell because the recession pushed down advertising costs.
Leumi Card increased the number of its non-bank credit cards by 12% in the first half of the year, to 362,000 at the end of June. Revenue from non-bank cards totaled NIS 60 million in the first half, 22% more than in the corresponding half. Non-bank retail credit growth slowed during the second quarter, however, rising 1.2% compared with the preceding quarter to NIS 969 million.
Leumi Card raised the average interest rate on its cards to 10.8% from 10.1% in 2008. The provision for doubtful debts rose 40% to NIS 14 million for the second quarter from NIS 10 million for the corresponding quarter.
Cohen predicts, "The rate of new cards issued can only grow in the future. The slowdown in the rate of growth in non-bank credit was due to the increase in insolvency and customers' lower demand for credit, and we've seen improvement since June."
Leumi card had 1.41 million active credit cards at the end of June, 84.8% of all cards issued, and 2.5% more than a year earlier.
Leumi Card had NIS 764 million in shareholders' equity at the end of June, and a capital adequacy ratio of 20%, although this will fall to 17% when Basel II - The New Basel Capital Accord of the Basel Committee on Banking Supervision comes into effect.
Bank Leumi owns 80% of Leumi Card and Azrieli Group owns 20%.
Published by Globes [online], Israel business news - www.globes-online.com - on August 20, 2009
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