Mizrahi Tefahot Bank (TASE:MZTF), headed by Moshe Lari, saw a predictable downturn in profit in 2020, while raising its share of the banking market thanks to the acquisition of Union Bank of Israel, which it completed last year.
Mizrahi Tefahot posted a profit of NIS 1.61 billion for 2020, 12.6% less than the NIS 1.84 billion profit for 2019. In the fourth quarter, Mizrahi Tefahot completed the acquisition of Union Bank, the sixth largest bank in Israel at the time. Excluding the effect of the acquisition, which was not reflected in Mizrahi Tefahot's 2019 financials, the net profit for 2020 was NIS 1.54 million.
Return on equity in 2020 was 9.5%, or 9.3% excluding Union Bank. Return on equity in 2019 was 11.9%.
The main reason for the decline in profit was the effect of the coronavirus pandemic, which led to a steep rise in credit loss provisions, from NIS 364 million in 2019 to NIS 1.05 billion last year. In the fourth quarter, however, credit loss provisions fell back to a normal level. No extra provision was required with the addition of Union Bank's credit portfolio.
Net profit for the fourth quarter was NIS 506 million, or NIS 439 million excluding Union Bank, similar to the profit for the fourth quarter of 2019, which was NIS 440 million.
At the end of 2020, credit to the public totaled NIS 245.5 billion, 20% more than at the end of 2019. Excluding Union Bank, credit to the public grew by 7.9% last year, with the growth largely occurring in the fourth quarter.
By the end of 2020, Mizrahi Tefahot Bank had extended credit totaling NIS 5.1 billion in the framework of the special state-guaranteed funds set up to provide finance during the coronavirus pandemic. The bank says that this represents 23% of the funds' total, which is much more than its share of the general credit market.
On mortgage payments that were frozen with the outbreak of the pandemic, the banks says that "there is a clear trend of customers returning to regular repayments." The total amount of housing credit on which repayments were deferred was NIS 45.6 billion, but of this only NIS 3 billion is still in the deferred payment portfolio. The bank says that the payment deferral scheme will be ended by June this year. "Only loans representing less than 2% of the mortgage portfolio are still being fully deferred," the bank states. It believes that repayments on most of these loans will be restored unless the economic situation worsens, and that "the phenomenon of deferred repayments will be behind us."
Mizrahi Tefahot is Israel's third largest bank, and the country's largest mortgage lender.
Published by Globes, Israel business news - en.globes.co.il - on March 9, 2021
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