Lower debt provisions boost Hapoalim's 2004 profit 55%

The business sector contributed mostHapoalim's increased profit - NIS 363 million compared with NIS 95 million in 2003.

Bank Hapoalim (LSE: BKHD; TASE: POLI) posted a net profit of NIS 2.11 billion for 2004, 55.3% more than in 2003. This was a record profit for a large Israeli bank, and the highest annual profit in Bank Hapoalim's history. The profit reflects a return on equity of 15.2%, compared with 10.4% in 2003.

Bank Hapoalim posted a profit of NIS 470 million for the fourth quarter of 2004, 36.2% more than for the corresponding quarter of 2003.

The increase in the bank's profit for 2004 was due to a 5.3% increase in financing profit to NIS 7.07 billion, and a 25.1% drop in its provision for doubtful debts to NIS 1.77 billion.

The provision for doubtful fell to 0.96% of Bank Hapoalim's credit portfolio in 2004 from 1.23% in 2003. Another significant contributor to the bank's profit was a 15% rise in operating revenue to NIS 4.2 billion. These trends were partly offset by a 7% increase in operating expenses to NIS 6.4 billion.

A breakdown by sectors indicates that the business sector contributed the most to the increase in Bank Hapoalim's profit. Bank Hapoalim earned a profit of NIS 363 million from the business sector in 2004, compared with NIS 95 million in 2003. The increase in the bank's profit from the business sector explains 36% of the rise in the bank's net profit.

Another significant factor contributing to Bank Hapoalim's profit was a one-time profit of NIS 279 million from an issue by Signature Bank (Nasdaq:SBNY). Bank Hapoalim recently announced that it planned to sell the rest of its 59% stake in Signature Bank, which will generate a profit of hundreds of millions of shekels.

When the financial report was published, Bank Hapoalim chairman Shlomo Nehama said that the bank planned to achieve a return on capital in excess of 14% in 2005.

Bank Hapoalim also announced today that it would distribute a NIS 339 million dividend (NIS 0.27 per share) on April 14. Arison Holdings will get NIS 55.8 million, and the Dankner group NIS 23.8 million.

Bank Hapoalim distributed NIS 1.2 billion in dividends in 2004. The bank has a specific dividend policy, under which at least half of its net profit is be distributed as a dividend every year. The bank's board reaffirmed this policy at today's meeting.

Published by Globes [online], Israel business news - www.globes.co.il - on March 21, 2005

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