Bank Hapoalim (TASE: POLI)released its 2018 financials this morning. Net profit attributable to shareholders was NIS 97 million in the fourth quarter of 2018, down 84% from the NIS 612 million profit posted in the corresponding quarter of 2017. The decline in profit was mainly due to the increase in the bank's provision against the results of the investigation by the US authorities of the group's transactions with US customers and against the legal costs involved.
The bank made a provision of NIS 982 million in the fourth quarter, bringing the total provision to NIS 2.2 billion, and there may be further provisions and legal expenses arising from developments in the bank's negotiations with the US Department of Justice in the affair in which the bank is suspected of aiding US customers to evade taxes.
Excluding the provisions for the US investigation and the costs of winding up the bank's activity in Switzerland, net profit for the fourth quarter was NIS 991 million, which compares with a profit excluding extraordinary items in the fourth quarter of 2017 of NIS 908 million.
The bank says that the main factors that affected its results excluding extraordinary items in the fourth quarter of 2018 were a rise in financing profit from regular activities thanks to growth of NIS 286 million in commercial and housing credit; growth in profits on the realization of stocks and bonds amounting to NIS 182 million; a NIS 54 million decline in employee compensation expenses; and a rise of NIS 200 million in credit losses.
Bank Hapoalim's net profit for 2018 as a whole was NIS 2.595 billion, which compares with NIS 2.66 billion in 2017, representing a 2.5% drop. Return on equity was 7.1% in 2018, which compares with 7.5% in 2017.
Excluding the provision against the US investigation, the bank posted a net profit of NIS 3.579 billion in 2018, and return on equity was 9.7%. The bank's credit portfolio grew 6.3% in 2018, to NIS 282.5 billion.
Bank Hapoalim reports that it continues to implement its streamlining program, and that it shed 502 jobs in 2018. The efficiency ratio excluding the provision against the US investigation was 57.8% in 2018, which compares with 59.1% in 2017. Compensation expenses fell 2.7%.
The bank's tier 1 capital adequacy ratio at the end of 2018 was 11.16%, higher than required by the regulator and the board of directors' target.
Published by Globes, Israel business news - en.globes.co.il - on March 18, 2019
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