Israel Discount Bank (TASE: DSCT) reported good results in the first quarter of 2019, with a NIS 405 million profit, 27% more than in the first quarter of 2018 and 25% more than in the fourth quarter of 2018, when the bank reported large one-time expenses.
Discount Bank, managed by CEO Lilach Asher-Topilsky, reported return on equity in the first quarter was an annualized 9.6%, compared with 8.6% in the corresponding quarter last year and 9.3% in all of 2018. The bank also announced that it would distribute a NIS 61 million dividend, after reporting a 10.17% tier-one equity ratio, better than in the corresponding quarter last year, but somewhat less than in 2018 as a whole.
Discount Bank improved its profit indices, while at the same time continuing to expand its activity. The bank's credit portfolio grew 3.3% to NIS 170 billion in the first three months of the year. The bank's credit increased almost 10% in comparison with the end of the first quarter of 2018. Deposits at the bank also increased, and the ratio of credit to deposits was higher than both at the end of 2018 and the end of the first quarter of last year. Deposits by the public in the first quarter were 1% greater than in the corresponding quarter last year.
The general increase in Discount Bank's credit was fairly moderate; it depends on what the bank is willing to pay and what it charges its customers. The question is therefore at what prices the bank is conducting its business. Discount Bank reported that together with the ongoing growth in its credit portfolio, its main source of activity and revenue, there was a beneficial drop in the proportion of provisions for losses from credit to the public. Other indices of impaired debt and write-offs were also lower.
Nevertheless, taking into account the increase in its credit portfolio, Discount Bank also reported a rise in expenses for credit losses, which totaled NIS 141 million in the first quarter, considerably more than the NIS 112 million that it reported in the corresponding quarter last year, but far less than the NIS 196 million reported in the fourth quarter of 2018.
Discount Bank's revenue from interest rose in comparison with the corresponding quarter last year, even though it was the same as in the fourth quarter of 2018. Revenue from fees also increased, albeit more modestly. Discount Bank, which in the past has had poor efficiency ratios in comparison with the rest of the local banking market, is improving in this aspect, and is on schedule for meeting Asher-Topilsky's 60% target.
The improvement at Discount Bank was not confined to its subsidiaries. The bank's solo account profit was NIS 237 million, 91% more than in the corresponding quarter last year. Discount Bank's securities nostro portfolio account contracted by 6% in the first quarter this year.
During the first quarter, Discount Bank signed a wage agreement with its employees for 2019-2021. Like Bank Leumi, Discount Bank signed a deal to sell its holdings in Super-Pharm in April. The sale of these holdings to George Horesh was completed in May. Following the sale of these holdings and dividend declared by the bank before the date on which the sale was completed, Discount Bank will post a NIS 24.1 million pre-tax profit (NIS 19.5 million after taxes). The bank's report also states that its acquisition of Municipal Bank, formerly Dexia Israel, is proceeding as planned. The Israel Competition Authority (formerly the Antitrust Authority") has yet to rule on the sale.
Published by Globes, Israel business news - en.globes.co.il - on May 16, 2019
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