Discount Bank of Israel published its 2022 financials this morning, and reported a 26% rise in annual net profit to NIS 3.5 billion. Return on equity in 2022 was 15.1%, which compares with 13.6% in 2021. The bank will distribute a dividend of NIS 187.8 million, 20% of its fourth quarter profit of NIS 939 million. Profit in the fourth quarter of 2021 was NIS 529 million.
The bank reported total credit to the public of NIS 241 billion at the end of 2022, which represents 13.1% annual growth, but noted that demand for credit moderated in the fourth quarter, as the economy slowed. Housing credit (mortgages) grew by 21.1% over the year, credit to mid-size businesses grew by 16.6%, credit to large businesses grew by 15.9%, and credit to households (excluding mortgages) grew by 8.6%.
The growth in its credit portfolio along with rising interest rates boosted the bank’s income by 23.4% to NIS 12.9 billion. In the fourth quarter, income totaled NIS 3.7 billion, up 34.2% in comparison with the corresponding quarter of 2021.
Interest income grew by an astonishing 50% in the fourth quarter of 2022 in comparison with the fourth quarter of 2021, to NIS 2.54 billion net.
Credit losses totaled NIS 407 million in 2022, which compares with net recoveries of NIS 693 million in 2021.
In his remarks in financial statements, Discount Bank chairperson Shaul Kobrinsky comments on the government’s decision to separate credit card company Cal from the bank. Discount Bank holds 72% of Cal. "Although in our view this decision is mistaken and will not contribute to boosting competition in the banking system, we respect the decision and are acting to implement it as required. Splitting off Cal will lead to a minor fall in net profit and in return on equity, and to a substantial improvement in Discount’s operating efficiency." Kobrinsky writes.
Kobrinsky also comments on the reforms to Israel’s legal system currently being enacted by the government. This follows the warning sounded by the bank’s CEO Uri Levin of the effect of the reforms on the economy in a meeting with Prime Minister Benjamin Netanyahu.
"In January 2023," Kobrinsky writes, "the government began to advance a plan for carrying out substantial changes in the legal system in Israel that have aroused significant dispute among the Israeli public. In the opinion of economic experts in Israel and around the world, these changes are liable to have an adverse effect on the financial markets and on the strength of the Israeli economy."
Elsewhere in its report, Discount Bank makes reference to warnings issued by rating agencies Fitch and Moody’s of a possible negative impact of the changes on Israel’s sovereign credit rating.
The bank even managed to include comment on the collapse of Silicon Valley Bank at the end of last week, saying, "This development is liable to have an adverse effect on the technology sector in Israel that is difficult to estimate at this time. The bank does not expect a material effect on its results as a consequence."
Published by Globes, Israel business news - en.globes.co.il - on March 13, 2023.
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