The banks' financial reports for the second quarter of 2011 show a new trend in the mortgage market: for the first time since 2006, the amount of new mortgages fell compared with the preceding quarter. The banks issued NIS 13.6 billion in new mortgages in the second quarter, 0.2% less than in the corresponding quarter of 2010, and 4.8% less than in the first quarter of 2011.
Moreover, the fall in new mortgages was double-digit at three banks: Bank Leumi (TASE: LUMI), Israel Discount Bank (TASE: DSCT), and Bank of Jerusalem (TASE: JBNK).
Although new mortgages rose 9.3% to NIS 27.9 billion in the first half, compared with the corresponding half, the frenzied growth slowed.
Mortgage refinancing was only a minor factor in the first half, amounting to NIS 2.6 million, up 8% over the corresponding half. Refinancing accounted for 8.8% of total new mortgages. Government-subsidized mortgages totaled NIS 149 million in the first half, 46% less than in the corresponding half, as the government abandons the market altogether. Mortgages by persons eligible for subsidies fell to 0.5% of total mortgages from 9% in 2006.
The banks' aggregate profit from mortgages rose 19.8% to NIS 376 million in the first half from the corresponding half. Mizrahi Tefahot Bank (TASE:MZTF) posted a profit of NIS 168 million on its mortgage business and Leumi Mortgage Bank posted a profit of NIS 118 million. The two banks' profit accounted for 76% of the total profit compared with their combined market share of 56%.
Mizrahi Tefahot Bank was the first to exploit Bank Leumi's decision to cut back on its mortgage business and reduce its risk to the real estate sector. Mizrahi Tefahot Bank boosted its share of the mortgage market to 32.5% reversing a trend of several years.
Bank Hapoalim (TASE: POLI) was the second beneficiary from Bank Leumi's decision. Bank Hapoalim achieved its goal of regaining its 25% share of the market, which it last held several years ago, but at a cost of a Pyrrhic victory.
Although Bank Hapoalim, through Mishkan Hapoalim Mortgage Bank, granted NIS 3.3 billion in new mortgages in the second quarter, up 13.5% on the corresponding quarter, and NIS 7 billion in the first half, up 27.6%, but the profit on its mortgage business was only NIS 49 million in the first half, for a return on equity of 5.1%. Bank Leumi's profit on its mortgage business was 2.4 times as large
Leumi Mortgage Bank CEO Shuki Burshtein told "Globes", "We tightened lending and financing terms criteria in the second quarter. It's possible that some deals went to other banks."
Leumi Mortgage Bank granted NIS 2.9 billion in new mortgages in the second quarter, down 24% on the corresponding quarter, and granted NIS 6.5 billion in the first half, down 6%. Its share of the market fell to 23.2% in the first half and 21% in the second quarter.
It remains to be seen who was right: Leumi Mortgage Bank, which lowered its profile and tightened mortgage terms, or Mishkan Hapoalim Mortgage Bank and Mizrahi Tefahot Bank, which picked up the slack even as the market risk rose.
Among the smaller banks, Discount Mortgage Bank has a 7.6% share of the market, and increased its profit 15% to NIS 23 million in the first half. First International Bank of Israel (TASE: FTIN) kept its share of the mortgage market at 6.9%, Union Bank of Israel (TASE: UNON) reduced new mortgages by 8% to NIS 850 million, giving it 3% of the market, and the Bank of Jerusalem also reduced new mortgages and its market share fell to 2.8% in the first half.
Published by Globes [online], Israel business news - www.globes-online.com - on September 11, 2011
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