Newly appointed Israel Discount Bank (TASE: DSCT) CEO Avi Levi has begun with a successful quarter. The bank has reported a second quarter profit of NIS 1.2 billion, 75% higher than in the corresponding quarter of 2022. In the first half of this year, net profit totaled NIS 2.46 million, 48% higher than in the first half of 2022.
The bank’s return on equity in the first half of this year was an annualized 19%, which compares with 14.9% in the first half of 2022.
The growth in the bank’s profit was mainly thanks to the rise in the Bank of Israel’s interest rate. The central bank began to raise rates almost eighteen months ago, but the effect was not marked in the 2022 second quarter financials.
Discount Bank’s net interest income in the second quarter of this year was NIS 2.9 billion, 41.5% more than in the corresponding quarter.
The rise in interest rates brings with it a rise in the risk that borrowers will not be able to meet their commitments, and the banks are therefore increasing their credit loss provisions.
In the second quarter, Discount Bank provided NIS 312 against credit losses, which compares with NIS 131 million in the corresponding quarter of 2022 and NIS 204 million in the first quarter of this year. In the first half of 2002, the bank’s credit loss provision expense totaled NIS 516 million, which compares with a net NIS 71 million in the first half of 2022.
Credit to the public totaled NIS 257 billion at the end of the second quarter, 5.1% more than at the end of 2022.
Discount Bank, which up to now has been the bank with the most conservative dividend policy, generally distributing 20% of its profit, has decided to raise its dividend to up to 40% of net profit. For the second quarter of this year, the dividend will be 30% of net profit, or NIS 356 million.
Credit card company Cal, in which Discount Bank still holds 72%, posted a net profit of NIS 82 million (NIS 89 million excluding one-time items) for the second quarter, similar to the profit for the second quarter of 2022. For the first half of this year, Cal’s net profit was NIS 345 million, 114.5% more than in the first half of 2022. The rise was mainly due to the sale of Cal House in Givatayim to G City for NIS 336 million at the end of March, as a result of which Cal recognized a one-time post-tax gain of NIS 231 million. Excluding this gain (and NIS 16 million of associated costs), the first half profit was NIS 174 million.
The minister of finance has decided that Discount Bank must sell its holding in Cal within three years (in accordance with the recommendations of the Strum committee, which also led to the sale of credit card companies Isracard and Max by Bank Hapoalim and Bank Leumi). Last week, Cal reported that it would not move to the new campus being built for Discount Bank in Rishon LeZion, and that it would sell its share of the campus to Discount Leasing, which it expects will yield a net gain of NIS 20 million.
Cal’s turnover from credit card transactions grew 12% in the first half of this year to NIS 80.4 billion. In the second quarter, it doubled its credit card provision in comparison with the second quarter of 2022 to NIS 53 million.
In consumer credit, the credit card companies’ main growth driver, Cal’s portfolio grew by 17% in comparison with the end of the second quarter of 2022 to NIS 8.8 billion.
Published by Globes, Israel business news - en.globes.co.il - on August 14, 2023.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.