"We're in a test period to see how mortgage consumers act following the coming into effect of the Bank of Israel's new regulations at the beginning of July. We already saw a 15-20% drop in mortgages in July compared with previous months," Leumi Mortgage Bank CEO Shuki Burshtein told "Globes" today.
"On the other hand," Burshtein continued, "the high issuance of mortgages during the second quarter was the result of Bank of Israel guidelines for loans and financing ratios. The circular came into effect in July, and many people rushed to take mortgages and close deals before the circular came into effect. Therefore, May and June had very high mortgage issuance."
Bank of Israel figures state that mortgage credit totaled NIS 25.5 billion in the first half of 2010, 56% more than in the first half of 2009. Bank Leumi (TASE: LUMI) subsidiary Leumi Mortgage Bank is Israel's second largest mortgage bank with about a quarter of the market.
In the first half, Leumi Mortgage Bank issued NIS 6.48 billion in new mortgages, 82% more than the NIS 3.56 billion issued in the corresponding half of 2009. Mortgage refinancings fell 47% to NIS 639 million.
Leumi Mortgage Bank posted a net profit of NIS 82 million in the first half, up from NIS 64 million in the first half of last year. The return on equity rose to 6.7% from 5.9% in the first half of 2009 and 5.7% for last year as a whole.
Leumi Mortgage Bank's financing profit rose to NIS 180 million in the first half from NIS 152 million in the corresponding half, due to an increase in loans and higher interest rates. The bank made no provision for doubtful debts, although it reported that NIS 23 million previous provisions were paid back.
Burshtein said, "The improvement in the economic situation have influenced borrowers. There was a sharp drop in the number of non-performing loans, while many borrowers who were previously struggling to pay are doing better and have covered the arrears. In extreme cases, we were forced to sell assets, and the borrowers were able to get a price that covered the outstanding balance."
Published by Globes [online], Israel business news - www.globes-online.com - on August 4, 2010
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