Israel Discount Bank opened the reporting season for the major banks this morning, posting a record profit of NIS 1.27 billion for the first quarter of this year, 29% higher than in the corresponding quarter of 2022. Excluding asset sales and provisions arising from divestment from credit card company Cal, the net profit for the quarter came to NIS 1.20 billion, versus NIS 668 million in the first quarter last year.
The high profit brought the bank’s return on equity for the first quarter of this year to 20.1%, which compares with 18.3% for the corresponding quarter of last year. Excluding certain items, return on equity for the first quarter of 2023 was 19%, versus 12.4% in the corresponding quarter. The bank has decided to raise its dividend to 30% of net profit, instead of its normal policy of a 20% distribution. The first quarter dividend will total NIS 381 million.
The rise in profit is thanks to growth in the bank’s credit portfolio, which totaled NIS 249 billion at the end of March, representing growth of 3.5%.
At the same time, the bank benefitted from the rise in interest rates, which began in the second quarter of 2022. Interest income totaled NIS 2.74 billion, 52% more than in the corresponding quarter, and 8% more than in the final quarter of 2022.
Higher interest rates also helped credit card subsidiary Cal to record interest income of NIS 194 million, 21% more than in the corresponding quarter.
Cal also recognized a NIS 231 million post-tax gain from the sale of its building in Givatayim. Against that, it recognized one-time post-tax expenses of NIS 40 million for the phantom option granted to El Al, NIS 8 million for the move of its offices to Rishon LeZion, and NIS 5 million in extra operating expenses.
In total, Cal's profit for the first quarter was NIS 267 million, of which Discount Bank’s 70% share came to NIS 190 million.
Whereas rival bank Bank Leumi has recorded a NIS 1 billion write-down on its 14.2% holding in US bank Valley National, whose share price has fallen by more than 50% so far this year, Discount Bank’s US branch Israel Discount Bank of New York posted a quarterly profit of $30 million, slightly higher than in the corresponding quarter. The bank’s investment unit Discount Capital on the other hand posted a 65% lower profit, of NIS 27 million,
Discount Bank made credit loss provisions of NIS 204 million, 0.33% of its portfolio, in the first quarter of this year, which compares with net recoveries of NIS 60 million in the corresponding quarter.
It will be recalled that, last month, the bank’s CEO, Uri Levin, announced his intention to leave after three and a half years in the post.
Published by Globes, Israel business news - en.globes.co.il - on May 17, 2023.
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