Bank Leumi (TASE: LUMI), headed by Bank Leumi CEO Rakefet Russak-Aminoach, has reported a profit of over NIS 1 billion for the first quarter of 2019. A substantial contribution of NIS 200 million was made to this profit by the sale of the Leumi Card credit card business to US private equity firm Warburg Pincus, while there was also a considerable improvement in recovery of loans to large businesses. The bank continues to distribute a dividend, and is also launching a second share buyback program, so that within two years it will have bought back its own shares to the tune of NIS 1.4 billion.
Bank Leumi's share price is currently up by more than 2% on the Tel Aviv Stock Exchange.
The bank reported a first quarter profit of NIS 1.09 billion, 50% higher than in the first quarter of 2018. As mentioned, one-time gains made a substantial contribution, chiefly the sale of the bank's 80% stake in Leumi Card, which brought it a pre-tax gain of NIS 314 million. As far as is known, the after-tax gain was over NIS 200 million.
The improved quarterly profit was also thanks to the fact that, whereas in the corresponding quarter of 2018 the bank reported credit losses of some NIS 130 million, in the first quarter this year it posted an NIS 18 million gain on recovery of loans that had previously been written off, giving a positive difference of nearly NIS 150 million on this item.
The bank's return on equity in the first quarter was an impressive 12.7%, on an annual basis, which compares with 9.7% in the corresponding quarter and 9.5% in 2018 as a whole. Even excluding Leumi Card from both quarters, annualized return on equity showed significant improvement, from 8.6% in the first quarter of 2018 to 10.1% the first quarter this year.
The bank has announced a second share buyback program, again amounting to NIS 700 million. The new program will take place over the coming year, to May 2020. The previous NIS 700 million share buyback program was executed between March and November 2018. The bank is also distributing a dividend of NIS 437 million, representing 40% of its net quarterly profit.
Bank Leumi continues to present growth in credit to the public, which also grew considerably in relation to deposits from the public. Credit to the public grew 2.2% in the quarter. The bank explains that "a substantial part of the growth arises from credit give to Leumi Card during the first quarter of the year." Similarly, fee income fell mainly because of the loss of fees from Leumi Card, although it also fell across most segments of the bank's business.
Like its competitors, Bank Leumi saw a rise in its tier 1 capital adequacy ratio, which reached 11.65% at the end of the first quarter, while it also continues to present improvement in efficiency, with the ratio between operating expenses and operating revenue falling to the impressive level of 57.9%, excluding the one-time gain from the sale of Leumi Card. This compares with a ratio of a little over 60% for 2018 as a whole.
Published by Globes, Israel business news - en.globes.co.il - on May 27, 2019
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