"We experiencing slowing growth, due to the domestic and international business environment," said Israel Discount Bank (TASE: DSCT) CEO Giora Offer, who is leaving the bank. Discount Bank's net profit fell 53% to NIS 158 million for the second quarter from NIS 337 million for the corresponding quarter.
The return on equity fell to just 6.3% for the second quarter from 15.8% for the corresponding quarter.
Discount Bank's Achilles heel continues to be its capital adequacy ratio, which was 12.49% for the second quarter. Its Tier-1 capital adequacy ratio was 7.7% (under Basel II - The New Basel Capital Accord of the Basel Committee on Banking Supervision)), the lowest in the banking system. The bank's operating efficiency was 47.1% at the end of June, down from 56.5% a year earlier.
Discount Bank's provision for doubtful debts rose to NIS 261 million for the second quarter from NIS 231 million. The bank's salary expense rose 4.4% to NIS 754 million from NIS 722 million.
Financing profit before the provision for doubtful debts fell to NIS 1.09 billion for the second quarter from NIS 1.26 billion for the corresponding quarter. Total revenue (profit before the provision for doubtful debts) fell to NIS 1.74 billion from NIS 2.02 billion.
As with Israel's other banks, Discount Bank's mortgage business benefited from the country's booming real estate market. It granted NIS 2.2 billion in mortgages during the first half (including NIS 132 million in refinancings), 20% more than the NIS 1.8 billion in the first half of last year.
Discount Bank said that it expects the real estate market to stabilize in the second half of the year. "For the rest of 2010, we expect modest expansion, due to the increase in investment in residential construction and infrastructure projects." It also expects "stability in demand in demand areas in central Israel and the periphery, which will be accompanied by stable prices."
Discount Bank's share price fell 1.9% by midday to NIS 6.82, giving a market cap of NIS 6.82 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on August 31, 2010
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