For the first time in its history, Mizrahi Tefahot Bank (TASE:MZTF) reported a net profit of over NIS 1 billion. Full-year net profit rose to NIS 1.04 billion in 2011 from NIS 801 million in 2010, giving a return on equity of NIS 14.6%.
The bank's earnings per share of NIS 4.57 for 2011 was well above the "Globes"-Psagot Investment House Ltd. analysts' consensus of NIS 4.09. The bank's fourth quarter earnings per share of NIS 1.32 beat the analysts' consensus of NIS 0.97.
Mizrahi Tefahot Bank's core capital adequacy ratio is 7.77%. It needs to reach a ratio of 9% by 2015, which means that it must increase its capital by NIS 1.5 billion. This should not be difficult given the bank's current growth in its profitability.
"The return on equity is stable and higher than at competitors. We will easily achieve the strategic target of a return on equity of 15%," said Mizrahi Tefahot Bank CEO Eli Yones. "We have the highest return on equity at the lowest risk, belying the academic perspective, which holds that a high return on equity is achieved by high risk. This is thanks to rapid growth and streamlining. Things do not happen by themselves."
Fourth quarter revenue rose 34.7% to NIS 299 million from NIS 222 million for the corresponding quarter.
Mizrahi Tefahot Bank's profit from financing operations, before the provision for credit loss, rose 9.6% to NIS 3.24 billion in 2011 from NIS 2.96 billion in 2010. Profit from financing operations, excluding interest income from problem debt and adjusted for derivatives rose by 16.3%. Two-thirds of the financing income came from retail banking operations. Profit from financing operations from households rose by 26%, reflecting the bank's expansion and successful customer recruitment in recent years.
The provision for credit loss fell 29% to NIS 338 million in 2011 from NIS 473 million in 2010. The provision amounted to 0.28% of outstanding credit in 2011, down from 0.44% in 2010.
Mortgages generate one third of the profits
Yones continues to stand out in the salary tables, with a salary cost of NIS 10.2 million in 2011, NIS 6.4 million of which is accounted for by options received in 2009. He also owns 0.56% of the bank's shares, worth NIS 45 million.
Mizrahi Tefahot Bank is Israel's largest mortgage bank. Mortgages generated a profit of NIS 368 million in 2011, 35% of the bank's total profit. Mortgage profit rose 26% from NIS 292 million in 2010. However, it should be noted that new mortgages granted by the bank were flat at NIS 16.6 billion in 2011. The average mortgage rose to NIS 382,000 in 2011 from NIS 356,000 in 2010.
Mizrahi Tefahot Bank's share price fell 0.6% in morning trading to NIS 34.28, giving a market cap of NIS 7.75 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on March 26, 2012
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