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Bank Hapoalim Announces 2013 Financial Results

Net Profit Totaled NIS 2,580 Million

Return on Equity of 9.3%

Core Tier 1 Capital Rose to 9.4%

Bank Continues Dividend to Shareholders of 15% of Net Profit

TEL AVIV, Israel, March 20, 2014 (GLOBE NEWSWIRE) -- Bank Hapoalim (TASE:POLI) (ADR:BKHYY), Israel's leading financial group, today announced financial results for the fourth quarter and full year ended December 31, 2013.

Highlights of the 2013 financial statements:

  • Net profit totaled NIS 2,580 million in 2013 compared with NIS 2,543 million in 2012.
  • Return on equity reached 9.3% in 2013, compared with 10.1% in 2012.
  • Total consolidated assets as at December 31, 2013 totaled NIS 380.2 billion, compared with NIS 376.4 billion at the end of 2012, an increase of 1.0%.
  • Shareholders' equity totaled NIS 29,060 million as at December 31, 2013, compared with NIS 26,755 million at the end of 2012, an increase of 8.6%.
  • Core Tier 1 capital ratio rose to 9.4% at December 31, 2013 compared with 8.9% at the end of 2012.
  • Tier 1 capital ratio in Basel 3 terms stood at 9.15%, above the minimum required by the Bank of Israel as of January 1, 2015.
  • Total capital adequacy ratio reached 15.6% at the end of 2013, compared with 15.7% at the end of 2012.
  • Dividend paid in 2013 - In line with the Bank's dividend distribution policy, the Board of Directors approved a payout in the amount of NIS 106 million with respect to fourth quarter 2013 net profit in order to complete a distribution of 15% of full year 2013 net profit, totaling NIS 382 million.

Mr. Yair Seroussi, Chairman of the Board of Bank Hapoalim, commented:

"The Israeli economy expanded by 3.3% in 2013, similar to the growth rate of 2012. Natural gas production contributed up to 0.9% of total growth according to the Bank of Israel. Exports of goods and services stagnated, primarily due to moderate global demand and the strength of the shekel exchange rate. A slowdown in exports was offset by a rebound in private consumption and investments.

The Bank of Israel continued lowering the benchmark interest rate in an effort to encourage growth. In 2013, global economic activity expanded moderately, financial risk levels were lower than previous year in particular among developed economies.

In 2013, Bank Hapoalim successfully executed its multi-year strategic plan which strengthened our position as the market leader in the Israeli banking system. During the year, management successfully carried out the Board of Directors' strategic initiatives which focused on strengthening the earnings growth engines of the Bank's key businesses.

It is noteworthy to mention the recognition Bank Hapoalim received as the leading financial institution in Israel. Especially from prestigious industry publications such as Euromoney and Global Finance, who both selected Bank Hapoalim as the Best Bank in Israel for 2013 as well as the Strategic Management Journal's Hall of Fame which singled out Bank Hapoalim as an exemplar for excellent strategic planning and management.

This international recognition was achieved thanks to our managers and employees, who are the most dedicated and professional in the Israeli banking system.

We believe in our ability to produce a low double-digit return on equity in the medium to long-term. This target reflects the Bank's risk appetite in light of changes in the economic environment and ever-increasing competition."

Mr. Zion Kenan, Chief Executive Officer of Bank Hapoalim, stated:

"The financial results that we present today are proof of the success of our strategy, which is based on two essential principles - growth and stability. The core banking and organizational capabilities of Bank Hapoalim ensure the continuation of our leadership position in the Israeli banking system. These results are particularly outstanding considering the complex business conditions in which we operate.

Our commitment to focus on growth drivers enabled Bank Hapoalim to increase net profit in 2013 despite a challenging interest rate environment, a gradual slowdown in certain areas of the economy, and challenges associated with the tough regulatory regime. We coped successfully with these challenges by providing professional customized services to our vast clientele, and through the successful implementation of our multi-channel concept - enabling our customers with direct access and execution of most banking transactions through the Internet as well as smartphones.

During the year, we improved the quality of the credit portfolio through tightening risk management and successfully reducing portfolio concentration, all while increasing business profitability. We launched a modern, state-of-the-art trading room, further establishing Bank Hapoalim's position as a leader in the Israeli capital market.

Earlier this year, the bank signed a wage agreement with our Employees' Union which positioned us ahead of the local market. In addition, management launched a significant streamlining effort with the view of enhancing our competitive advantage in the market and adapting to changes in the operating environment.

We will continue to implement the Board of Director's three-year strategic plan which is based on a thorough analysis of the economic, regulatory as well as business environment and relies on the ability of the Bank's performance and professionalism of the staff. As always, we will continue to promote and develop the quality of our most important asset - our human resources."

Main developments in the Annual Report for the year 2013:

Profit from financing activity in 2013 totaled NIS 8,423 million, compared with NIS 8,415 million in 2012, an increase of 0.1%, mainly as a result of an increase in the volume of activity.

The provision for credit losses totaled NIS 874 million in 2013 compared with NIS 987 million in 2012. The rate of provision as a percentage of credit to the public reached 0.34% at the end of 2013 compared with 0.39% at the end of 2012.

Fees and other income totaled NIS 5,241 million in 2013, compared with NIS 5,222 million in 2012, an increase of 0.4%.

Operating and other expenses totaled NIS 8,965 million in 2013, compared with NIS 8,825 million in 2012, an increase of 1.6%, which includes a provision of approximately NIS 440 million for the efficiency plan, which is primarily based on early retirement expense. Excluding this provision, operating expenses decreased year-over-year.

Corporate social involvement and contribution to the community -

The Bank continues to lead in a varied and extensive range of community-oriented activities that take the form of social involvement, employee-volunteer activities and monetary donations, especially in the areas of education, culture and social welfare. The Bank Group's corporate social activity in 2013 totaled a financial value of approximately NIS 46 million.

Developments in Balance Sheet Items

The consolidated balance sheet as at December 31, 2013 totaled NIS 380.2 billion, compared with NIS 376.4 billion at the end of 2012, an increase of 1.0%.

Net credit to the public totaled NIS 251.6 billion compared with NIS 249.2 billion at the end of 2012, an increase of 1.0%, driven primarily by increases in the retail, small business and commercial segments.

Credit to retail customers totaled NIS 100.4 billion compared with NIS 95.0 billion at the end of 2012, an increase of 5.7%, including consumer credit which totaled NIS 31.4 billion compared with NIS 29.4 billion at the end of 2012, an increase of 6.9%. Mortgages totaled NIS 57.9 billion compared with NIS 53.7 billion at the end of 2012, an increase of 7.7%.

Credit to small businesses totaled NIS 26.2 billion compared with NIS 24.2 billion at the end of 2012, an increase of 8.4%.

Credit to the commercial (middle-market) segment totaled NIS 31.1 billion compared with NIS 27.1 billion at the end of 2012, an increase of 15.1%.

Deposits from the public totaled NIS 276.5 billion compared with NIS 271.4 billion at the end of 2012, an increase of 1.9%.

Shareholders' equity totaled NIS 29,060 million as at December 31, 2013, compared with NIS 26,755 million at the end of 2012, an increase of 8.6% mainly stemming from retained earnings.

Conference Call Information

Bank Hapoalim will host a conference call today at 5:00 PM Israel Time / 3:00 PM UK Time / 11:00 AM Eastern Time to review the Bank's 2013 financial results.

To access the call, please dial: 1-888-281-1167 in the U.S. and Canada or (972-3) 918-0685 for international participants. No password is required. The presentation slides, earnings release and the 2013 financial statement will be available at the Company's website, www.bankhapoalim.com, under Investor Relations, Financial Information.

A replay of the teleconference will be made available approximately two hours after the conference call is completed, through March 28, 2014 by telephone at (972) 3-9255937 (international). A webcast replay will also be available by audio playback on www.bankhapoalim.com, under Investor Relations, Financial Information.

About Bank Hapoalim

Bank Hapoalim is Israel's leading financial group. In Israel, the Bank Hapoalim Group has over 270 branches, seven regional business centers, a network of 22 business branches and specialized industry relationship managers for major corporate customers.

The Bank Hapoalim Group includes Isracard Ltd, Israel's leading credit card company as well as financial companies involved in investment banking, trust services and portfolio management.

Internationally, Bank Hapoalim operates through branches, subsidiaries and representative offices, in North and Latin America, Europe, the Far East, Turkey and Australia. Bank Hapoalim is listed on the Tel Aviv Stock Exchange as well as through a Level-1 ADR traded "over-the-counter" in New York.

For more information about Bank Hapoalim, please visit us online at www.bankhapoalim.com.

Principal Data of the Bank Hapoalim Group
(NIS millions)
Profit and Profitability
For the year ended
December 31, 2014 Change vs.
2013 2012 2011 2012 2011
Net financing income** 8,423 8,415 7,884 0.1% 6.8%
Fees and other income 5,241 5,222 5,204 0.4% 0.7%
Total income 13,664 13,637 13,088 0.2% 4.4%
Provision for credit losses 874 987 1,202 (11.4%) (27.3%)
Operating and other expenses 8,965 8,825 8,365 1.6% 7.2%
Net profit attributed to shareholders of the Bank 2,580 2,543 2,746 1.5% (6.0%)
Balance Sheet – Principal Data
December 31, 2014 Change vs.
2013 2012 2011 2012 2011
Total balance sheet 380,246 376,388 356,662 1.0% 6.6%
Net credit to the public 251,600 249,182 246,495 1.0% 2.1%
Securities 60,912 52,070 34,411 17.0% 77.0%
Deposits from the public 276,525 271,411 256,417 1.9% 7.8%
Bonds and subordinated notes 33,980 35,677 32,933 (4.8%) 3.2%
Shareholders' equity 29,060 26,755 23,819 8.6% 22.0%
Total net problematic credit risk* 16,279 13,284 12,354 22.5% 31.8%
Of which: net impaired balance sheet debts* 6,817 6,701 7,044 1.7% (3.2%)
Main Financial Ratios
2013 2012 2011
Net loan to deposit ratio 91.0% 91.8% 96.1%
Net loan to deposit ratio including bonds and subordinated notes 81.0% 81.1% 85.2%
Shareholders' equity to total assets 7.6% 7.1% 6.7%
Core Tier 1 capital to risk-adjusted assets 9.4% 8.9% 7.9%
Total capital to risk-adjusted assets 15.6% 15.7% 14.1%
Financing margin from regular activity(a) 2.12% 2.31% 2.47%
Cost-income ratio (d) 62.4% 63.4% 63.9%
Total income to assets(b) 3.7% 3.8% 4.0%
Total expenses to assets(c) 2.4% 2.5% 2.6%
Provision for credit losses as a percentage of the average recorded balance of credit to the public 0.34% 0.39% 0.50%
Net return of profit attributed to shareholders of the Bank on equity 9.3% 10.1% 12.0%
Basic net earnings per share in NIS attributed to shareholders of the Bank 1.96 1.92 2.07
* Net of the individual allowance, the allowance according to the extent of arrears, and the collective allowance for problematic credit risk.
** Net financing income includes net interest income and non-interest financing income (expenses).
(a) Financing profit from regular activity (see the Board of Directors' report, in the section Profit and Profitability – Development of Financing Profit) is divided by total financial assets after allowance for credit losses, net of non-interest bearing balances in respect of credit cards.
(b) Total income divided by the average balance of total assets.
(c) Total operating and other expenses, divided by the average balance of total assets.
(d) Excludes expenses for efficiency plans. Comparative figures have been restated.
Profit and Profitability
For the three months ended
December 31, 2013 September 30, 2013 June 30, 2013 March 31, 2013 December 31, 2012
NIS millions
Net financing income** 2,073 2,117 2,176 2,057 2,111
Fees and other income 1,394 1,278 1,282 1,287 1,314
Total income 3,467 3,395 3,458 3,344 3,425
Provision for credit losses (59) 375 301 257 54
Operating and other expenses 2,562 2,133 2,135 2,135 2,354
Net profit attributed to shareholders of the Bank 651 653 655 621 652
Balance Sheet – Principal Data
December 31, 2013 September 30, 2013 June 30, 2013 March 31, 2013 December 31, 2012
NIS millions
Total balance sheet 380,246 374,216 378,483 370,317 376,388
Net credit to the public 251,600 249,341 247,120 247,782 249,182
Securities 60,912 60,998 61,137 59,461 52,070
Deposits from the public 276,525 269,632 274,601 265,297 271,411
Bonds and subordinated notes 33,980 34,819 35,874 36,222 35,677
Shareholders' equity 29,060 28,391 27,808 27,279 26,755
Total net problematic credit risk* 16,279 13,870 13,264 13,561 13,284
Of which: net impaired balance sheet debts* 6,817 6,624 7,030 6,856 6,701
Main Financial Ratios
For the three months ended
December 31, 2013 September 30, 2013 June 30, 2013 March 31, 2013 December 31, 2012
Net loan to deposit ratio 91.0% 92.5% 90.0% 93.4% 91.8%
Net loan to deposit ratio including bonds and subordinated notes 81.0% 81.9% 79.6% 82.2% 81.1%
Shareholders' equity to total assets 7.6% 7.6% 7.3% 7.4% 7.1%
Core Tier 1 capital to risk-adjusted assets 9.4% 9.3% 9.2% 9.1% 8.9%
Total capital to risk-adjusted assets 15.6% 15.7% 15.7% 15.6% 15.7%
Financing margin from regular activity(a)(b) 2.13% 2.20% 2.16% 2.07% 2.07%
Cost-income ratio(e) 61.2% 62.8% 61.7% 63.8% 65.8%
Total income to assets(c) 3.8% 3.8% 3.7% 3.7% 3.8%
Total expenses to assets(d) 2.8% 2.3% 2.3% 2.3% 2.6%
Provision for credit losses as a percentage of the average recorded balance of credit to the public(a) (0.09) 0.59% 0.48% 0.41% 0.09%
Net return of profit attributed to shareholders of the Bank on equity(a) 9.4% 9.6% 9.9% 9.5% 10.3%
Basic net earnings per share in NIS attributed to shareholders of the Bank 0.49 0.50 0.50 0.47 0.49
* Net of the individual allowance, the allowance according to the extent of arrears, and the collective allowance for problematic credit risk.
** Net financing income includes net interest income and non-interest financing income (expenses).
(a) Calculated on an annualized basis.
(b) Financing profit from regular activity (see the Board of Directors' report, in the section Profit and Profitability – Development of Financing Profit) is divided by total financial assets after allowance for credit losses, net of non-interest bearing balances in respect of credit cards.
(c) Total income divided by the average balance of total assets.
(d) Total operating and other expenses, divided by the average balance of total assets.
(e) Excludes expenses for efficiency plans. Comparative figures have been restated.

CONTACT: Press: Ofra Preuss, Bank's Spokesperson Tel: +972-3-567-3635; Fax: +972-3-567-3500 spokesperson@ mailpoalim.co.il Investors: Effie Werber, Head of Investor Relations Tel. +972-3-567-3440; Fax: +972-3-5673470 effie.werber@mailpoalim.co.ilSource:Bank Hapoalim