Bank Leumi (TASE: LUMI) published its 2023 financials this morning, showing an annual net profit of NIS 7 billion, 9% lower than in 2022. The decline in net profit was due to a write down of NIS 1.1 billion of the value of Leumi’s 14.2% stake in US bank Valley National. Excluding the one-time write down, net profit for 2023 was NIS 8.1 billion.
Leumi’s return on equity in 2023 was 13.7%, which compares with 17% in 2022. The bank will distribute a dividend of NIS 365 million on its fourth quarter profit. This represents 20% of the quarterly profit, in line with Bank of Israel guidelines calling for lower dividend payouts following the outbreak of war. Dividend distributions and share buybacks in 2023 totaled NIS 2.35 billion.
Net interest income, which accounted for most of the bank’s profit last year because of the high interest rate environment and the growth in its credit portfolio, was NIS 16 billion, 21% higher than in 2022.
Growth in mortgages
Bank Leumi’s credit portfolio grew by 9% last year. The bank targeted mortgages as an important growth engine, despite the fact that the market was suffering from weakness, mainly because of high interest rates. The mortgage portfolio grew by 9% in 2023, the highest growth rate among all the banks, to a total of NIS 132.1 billion. Leumi accounted for 30% of all new mortgage loans last year, making it the main competitor of Mizrahi Tefahot Bank, the largest player in the home loans market.
By contrast, credit to private customers, excluding mortgages, shrank by 7% last year to NIS 30.2 billion, again because of high interest rates, which led to a decline in new applications for credit and to many customers repaying existing loans.
For the same reason, credit to small businesses declined by 1.9% to NIS 26.2 billion. Commercial credit, on the other hand, grew by 3%, to NIS 62.6 billion, while corporate credit, including to the real estate sector, grew by 16%, to NIS 127.4 billion at the end of the year.
Higher credit loss provisions
The high interest rate environment and the effects of the war led the bank to increase its provisions for credit losses substantially. Provisions in 2023 totaled NIS 2.4 billion, almost five times the NIS 500 million of provisions made in 2022.
Deposits from the public totaled NIS 567.8 billion at the end of 2023, representing year-on-year growth of 2%. In 2023, the total balance on non-interest bearing current accounts fell by 24%, or almost NIS 50 billion, to NIS 150.4 billion.
Published by Globes, Israel business news - en.globes.co.il - on March 19, 2024.
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