Bank Hapoalim is the largest bank in Israel, with a 37.1% share of the banking system for 1996. Bank Leumi ranks second with a 28.2% market share of banking assets. Discount Bank is in third place, with 15.8% of assets. First International Bank of Israel holds 6.9% and Mizrachi Banki, 5.7%. All other banks holds a total 6.3% share of Israel’s total banking assets, according to the 1996 Statistical Yearbook on the Israeli Banking Corporations, published today by Bank of Israel Supervisor of Banks Ze'ev Abeles.
Israel’s commercial banks’ total assets as of December 1996 were NIS 405 billion. Equity for the five largest banks was NIS 24.3 billion last year, compared with NIS 23 billion in 1995. Net profit for 1996 was NIS 2 billion compared with NIS 1.8 billion in 1995. The average level of profitability in the banking system was 8.6%, the highest in three years.
However, allocation of dividends last year reduced net profits for all the banks. First International’s profits were down 56%, while Bank Hapoalim’s fell 40%. Bank Leumi’s profits were reduced by 36%, as were Discount Bank’s.
The review reveals that bank salary expenses rose last year by NIS 392 million, to an aggregate NIS 6.7 billion, compared with NIS 6.3 billion in 1995. This 6.3% growth means that in cumulative terms, salary expenses have risen over 14% since 1993. 1996 salaries themselves rose only 3.3% or NIS 140 million more than in 1995, while related expenses such as bonuses, pensions and severance pay grew sharply by 12.4%, or NIS 250 million.
The data shows the average gross bank salary , rose to NIS 124 million per annum in 1996. This means a NIS 10,700 monthly wage or twice the average salary in Israel. Bank wages rose 2.2% in real terms last year, compared with a 1.4% rise for the rest of the job market.
Overall per job costs, including bonuses and National Insurance payments, rose sharply by 5.1% in 1996, reaching NIS 189,000 per year, or NIS 15,800 per month. It should be noted there was a cumulative 8% rise in overall per job costs within three years.
Annual per employee costs were NIS 176,000 at First International and Mizrachi Bank, NIS 182,000 at Bank Hapolaim, NIS 207,000 at Discount Bank and NIS 210,000 at Bank Leumi. The spread was wider at the smaller banks, from NIS 144,000 at Mercantile Discount Bank to NIS 198,000 at Union Bank.
The survey reveals that that number of banks in Israel is declining. As December 1996, 45 banks were in operation, compared with 46 in 1995 and 67 in 1980. Today, there is only one sector-related service bank - Leumi Industrial Development Bank - compared with five such banks in previous years.
Net profits for Israeli bank branches operating abroad rose 10.4% in 1996 to $100 million compared with $90 million in 1995. The increase in overseas bank profits detracted from profits in Israel by some NIS 161 million, due primarily to the freeze in the dollar-shekel exchange rate.
In western Europe, net profits rose 64.7%. In the US and Canada, they fell by some $2 million, due to the drop in activity volume and revenues on operating commissions.
The average wage for Israeli bank employees working at branch offices in the US and Canada rose 12% in 1996 to $63,300. Salaries stayed stable in western Europe at $81,600 per year.
Balance of credit to apartment-buyers at mortgage banks rose 14.5% reaching NIS 77 billion by December 1996. The total amount of new loans to the public rose a moderate 1.8% in 1996, to NIS 22 billion. Mortgages to apartment buyers rose 6% while overall credit to banks and construction companies was reduced 22%. Credit to contractors, to fund new building starts, was also reduced by 22%. However, the balance owed to mortgage banks grew 13% in 1996 to NIS 87 billion.
Total operating expenses increased 4% last year to NIS 11.3 billion, compared with NIS 10.8 billion in 1995. Total operating revenues rose a negligible 0.8%, reaching only NIS 6.1 billion.
In this item, the freeze on commissions caused a 7.4% drop in revenues, to NIS 3.85 billion in 1996, compared with NIS 4.2 billion in 1995. Other non-interest and non-commission revenues fell by 6% to NIS 1.1 billion.
Bank revenues on securities fell 8.3%, coming in addition to the 69.3% plunge of 1995. Bank revenues on securities were only NIS 33.9 million in 1996. Revenues from mutual fund management fees fell 14% in 1996, completing a cumulative 36% drop over a two year period. Revenues on mutual fund management were only NIS 756 million in 1996. The value of the banks’ provident fund portfolio fell from NIS 98.8 billion in 1995 to NIS 87.7 billion in 1996.