Bank Hapoalim Announces Third Quarter 2021 Results
- Q3 net profit NIS 1.2 billion; return on equity 11.8%.
- In line with strategy, credit portfolio grew by 3.6% for the quarter, across all segments, thereby completing 11.1% growth in the first nine months of 2021.
- Total income increased by 3.1% vs. last quarter due to the growth in the bank's core activity.
- The bank recently completed a Tier 2 green subordinated notes issuance in the amount of USD 1 billion - the largest-ever issuance overseas by an Israeli financial entity.
- The board of directors of the bank approved a dividend distribution of 30% of third quarter net profit, in the amount of NIS 362 million, as well as NIS 500 million in respect of net profit of the first half of 2021.
TEL AVIV, Israel, Nov. 15, 2021 /PRNewswire/ -- Bank Hapoalim (TASE: POLI) (ADR: BKHYY) today announced its financial results for the third quarter ended September 30, 2021.
Key highlights
- Net profit in the third quarter of 2021 totaled NIS 1,207 million, compared with NIS 1,419 million in the last quarter and NIS 816 million in same quarter last year. The results were supported by strong underlying business performance, mainly credit growth and an increase in fees, profits from investment in shares, income from credit losses, and the positive CPI. Net profit for the first nine months of 2021 totaled NIS 3,980 million.
- Return on equity (ROE) for the quarter stood at 11.8%, compared with 14.5% in the previous quarter and 8.8% in the same quarter last year. ROE for the first nine months of 2021 stood at 13.1%.
- Shareholder's equity grew by 9.6% versus last year, to NIS 42.7 billion.
- The Common Equity Tier 1 (CET1) capital ratio as at September 30, 2021, stood at 11.18%, well above both current regulatory (9.20%) and internal (9.5%) capital targets. Upon the expiration of the temporary order (December 31, 2021), if it is not extended or updated, the board of directors intends to update its internal target for the CET-1 capital ratio to 10.5%.
- The total capital ratio as at September 30, 2021, stood at 13.69%. The USD 1 billion Tier 2 issuance which the bank finalized in October will be recorded in the capital of the fourth quarter. As of today, based on third-quarter balances, the issuance will contribute roughly 84 basis points to the total capital ratio.
- The board of directors of the bank approved a dividend distribution of 30% of third quarter net profit, in the amount of NIS 362 million, as well as NIS 500 million in respect of the net profit of the first half of 2021. The total amount to be paid is NIS 862 million; the date of payment is December 8, 2021.
Balance sheet
- Net credit to the public totaled NIS 335.3 billion, compared with NIS 323.8 billion at the end of June 2021, an increase of 3.6%, thereby completing 11.1% growth in the first nine months of 2021 and 14.5% growth in the last year.
- The growth in the credit portfolio was recorded in all segments of operations, in line with the bank's strategy. Corporate credit and commercial credit each increased by 4.3% in the third quarter, thereby completing 15.1% and 17.2% growth since the beginning of this year, respectively. Amid high demand in the housing market, the housing loans portfolio increased by NIS 4.5 billion in the third quarter, reflecting growth of 4.3% in the quarter, 10.9% since the beginning of this year, and 13.6% in the last twelve months. The consumer and small business segments are showing gradual recovery in the demand for credit. Accordingly, the bank saw 1.1% and 0.7% growth in the quarter in these segments, respectively.
- Total deposits crossed the half trillion shekel threshold, reaching NIS 505 billion, an increase of 21.2% compared to the corresponding quarter. Retail deposits totaled NIS 289 billion, an increase of 5.7% year-on-year.
- Allowance for credit losses totaled NIS 5.8 billion as at September 30, 2021, reflecting an NPL coverage ratio of 206%. NPL balances declined by 12.7% since the beginning of this year, to NIS 2.8 billion, constituting 0.82% of total credit to the public.
Income statement
- Income from regular financing activity totaled NIS 2,598 million in the third quarter of 2021, an increase of 11.2% compared to the corresponding quarter and 2.3% versus the last quarter, driven by consistent growth of the credit portfolio and an increase in the CPI. The financial margin stayed relatively flat in the quarter, at 1.85%. Other financing income amounted to NIS 179 million, mainly including profits from Poalim Equity, the non-financial investment arm of the bank.
- Poalim Equity: The growing investment activity of Poalim Equity generated profit in the amount of NIS 110 million in the quarter and NIS 268 million in the first nine months of the year, compared with NIS 14 million and NIS 23 million in the comparable periods last year.
- Fee income totaled NIS 838 million in the third quarter, compared with NIS 802 million in the previous quarter, an increase of 4.5%, and an 11.0% increase compared to the corresponding quarter. The increase in fees was driven by the rebound in the economy and the increase in the volume of business.
- Operating and other expenses totaled NIS 1,999 million in the third quarter, compared with NIS 1,980 million in the previous quarter and NIS 1,851 million in the same quarter last year. The increase in expenses versus last year was mainly influenced by an increase in salary expenses, due to an increase in the provision for performance-based bonuses, in line with the improvement in profitability, and a provision for a grant in honor of the centennial of the bank. The cost-income ratio for the third quarter of 2021 stood at 54.9%, compared with 56.1% in the corresponding quarter.
- The bank's credit portfolio quality, along with an improvement in macroeconomic parameters, continued to be reflected in a low volume of credit losses. Income from credit losses amounted to NIS 252 million for the quarter compared with income from credit losses of NIS 647 million and an expense of NIS 193 million in the previous and corresponding quarters, respectively. The income from credit losses in the third quarter of 2021 was due to a further reversal of the collective provision (although at a lower level than in previous quarters) and recoveries from individual provisions.
Recent developments
- Green Tier 2 issuance: In view of the continued accelerated growth at the bank, with the aim of diversifying its investor base and optimizing its capital structure, the bank completed an international private offering of CoCo (contingent convertible) bonds at a scope of USD 1 billion. The offering was oversubscribed by more than USD 2.6 billion, drawing participation from institutional investors in the United States, the European Union, the United Kingdom, and Asia. The green CoCo bonds were issued for a maximum period of 10.25 years, at an annual interest rate of 3.255% (the bank has an option for full early redemption beginning five years from the date of issuance); they are compliant with the ESG principles of the International Capital Market Association (ICMA) for instruments of this type. The bank intends to use an amount equivalent to the proceeds of the offering to finance environment-friendly projects in the areas of renewable energies, green transportation, green building, waste recycling, and energy efficiency.
- Business delegation to the UAE: In October, the bank led a senior business delegation to the United Arab Emirates with the Israel Export Institute, with the aim of creating access to markets and new business opportunities for its clients. The delegation, which consisted of more than 200 business leaders in Israel's tech and finance sectors along with senior executives of the bank, participated in a first-of-its-kind business conference in Abu Dhabi with local government and industry officials. The conference provided an opportunity to strengthen and develop the initial contacts formed during an earlier visit to the UAE, and to contribute to the progress and promotion of business and gain standing in the markets.
- Appointment of directors: At the shareholder meeting of the bank held on October 21, 2021, the following directors were elected: Mr. Ruben Krupik and Mr. Yoel Mintz were elected to serve as external directors of the bank, and Ms. Ronit Schwartz was elected to serve as an other (non-external) director, for a period of three years. The appointments are subject to approval by the Bank of Israel.
- The strategic plan of the bank, adopted in late 2020, aspires to realize the bank's vision – "Committed to growth through innovative and fair banking for our customers". The performance of the bank this quarter reflects consistent, resolute execution of its strategy, key elements of which are:
- Growth in banking activity – The bank will work to grow the volume of its activity with retail, commercial, and corporate banking customers, while continually improving its value proposition for customers.
- Development of new banking – The bank will promote the development of new distribution channels for banking services and products, with an emphasis on new digital distribution channels based on advanced data-analysis capabilities and an outstanding user experience.
- Building a growth-supporting organizational infrastructure – The bank will work to drive processes encouraging a customer-centric, growth-supporting organizational culture, enabling it to improve its delivery and time to market.
Conference-call information
Bank Hapoalim will host a conference call today to discuss the results. The call will take place at 5:00 p.m. Israel time / 3:00 p.m. UK time / 10:00 a.m. US Eastern time. To access the conference call, please dial: +1–888-281-1167 toll-free from the United States, +0-800-917-9141 toll-free from the United Kingdom, or +972–3-918-0610 internationally. No password is required. The call will be accompanied by a slide presentation, which, together with the financial statements, will be available on the Bank Hapoalim website at www.bankhapoalim.com, under Investor Relations > Financial Information. A recording of the conference call will be available on the bank's website at the above address one business day following the completion of the call.
Please note: The conference call does not replace the need to peruse the immediate reports and the financial statements of the bank, including all of the forward-looking information included therein, in accordance with Section 32A of the Israeli Securities Law, 1968.
About Bank Hapoalim
Bank Hapoalim is Israel's leading financial group. In Israel, Bank Hapoalim operates 179 retail branches, regional business centers, and specialized industry relationship managers for major corporate customers. The Bank Hapoalim Group includes holdings in financial companies engaged in investment banking, trust services, and portfolio management. Internationally, commercial banking services are provided in North America by the New York branch. Bank Hapoalim is listed on the Tel Aviv Stock Exchange (TASE: POLI) and holds a Level-1 ADR program. For more information about Bank Hapoalim, please visit us online at www.bankhapoalim.com.
Please note: This press release was prepared for convenience only. In case of any discrepancy, the bank's reported financial statements in Hebrew will prevail.
Contact
Tamar Koblenz
Head of Investor Relations
T: +972 3 567 3440
E: [email protected]
Table 1-1: Condensed financial information and principal performance indicators over time | |||||||||||||||
For the three months ended September 30 | For the nine months ended September 30 | For the year ended | |||||||||||||
2021 | 2020 | 2021 | 2020 | 2020 | |||||||||||
Main performance indicators | |||||||||||||||
Return of net profit on equity attributed to shareholders of the Bank(1) | 11.8% | 8.8% | 13.1% | 4.0% | 5.3% | ||||||||||
Return of net profit on equity attributed to shareholders of the Bank excluding extraordinary items(1)(2) | 11.8% | 8.8% | 13.1% | 4.5% | 5.7% | ||||||||||
Return of net profit from continued operations on equity attributed to shareholders of the Bank(1) | 11.8% | 8.8% | 13.1% | 4.4% | 5.6% | ||||||||||
Return of net profit from continued operations on equity attributed to shareholders of the Bank excluding extraordinary items(1)(3) | 11.8% | 8.8% | 13.1% | 4.5% | 5.7% | ||||||||||
Return on average assets(1) | 0.82% | 0.64% | 0.93% | 0.31% | 0.41% | ||||||||||
Ratio of income(4) to average assets(1) | 2.47% | 2.60% | 2.53% | 2.68% | 2.65% | ||||||||||
Ratio of fees to average assets(1) | 0.57% | 0.59% | 0.58% | 0.64% | 0.63% | ||||||||||
Efficiency ratio – cost-income ratio from continued operations | 54.9% | 56.1% | 54.8% | 56.8% | 56.9% | ||||||||||
Efficiency ratio – cost-income ratio excluding extraordinary items from continued operations(3) | 54.9% | 56.1% | 54.8% | 56.6% | 56.7% | ||||||||||
Financing margin from regular activity(1)(5) | 1.85% | 1.93% | 1.83% | 2.04% | 1.98% | ||||||||||
Liquidity coverage ratio(6) | 127% | 132% | 127% | 132% | 140% | ||||||||||
As at September 30 | December 31 | ||||||||||||||
2021 | 2020 | 2020 | |||||||||||||
Ratio of common equity Tier 1 capital to risk components(7) | 11.18% | 11.53% | 11.52% | ||||||||||||
Ratio of total capital to risk components(7) | 13.69% | 14.74% | 14.60% | ||||||||||||
Leverage ratio(7) | 6.32% | 6.92% | 6.78% | ||||||||||||
(1) Calculated on an annualized basis. | |||||||||||||||
(2) Does not include expenses in respect of the update of the provision in connection with the investigation of the Bank Group's business with American customers and FIFA, the effect of the closure of the private-banking activity overseas, loss from the separation from Isracard, and loss from impairment in respect of the Bank's investment in Bank Pozitif. | |||||||||||||||
(3) Does not include expenses in respect of the update of the provision in connection with the investigation of the Bank Group's business with American customers and FIFA, the effect of the closure of the private-banking activity overseas, and loss from impairment in respect of the Bank's investment in Bank Pozitif. | |||||||||||||||
(4) Total income – net interest income and non-interest income. | |||||||||||||||
(5) Financing profit from regular activity (see the Report of the Board of Directors and Board of Management, in the section "Material developments in income, expenses, and comprehensive income") divided by total financial assets after allowance for credit losses, net of non-interest bearing balances of debtors in respect of credit-card activity. | |||||||||||||||
(6) For additional information, see the section "Liquidity and refinancing risk," in the Report of the Board of Directors and Board of Management. | |||||||||||||||
(7) For additional information, see the section "Capital, capital adequacy, and leverage," in the Report of the Board of Directors and Board of Management. | |||||||||||||||
Condensed financial information and principal performance indicators over time (continued) | |||||||||||
For the three months ended September 30 | For the nine months ended September 30 | For the year ended Dec-31 | |||||||||
2021 | 2020 | 2021 | 2020 | 2020 | |||||||
Main credit quality indicators | |||||||||||
Allowance for credit losses as a percentage of credit to the public | 1.48% | 2.07% | 1.48% | 2.07% | 2.00% | ||||||
Impaired debts and debts in arrears of 90 days or more as a percentage of credit to the public | 1.24% | 1.65% | 1.24% | 1.65% | 1.52% | ||||||
Net charge-offs as a percentage of average credit to the public(1) | (0.21%) | (0.03%) | (0.10%) | 0.18% | 0.09% | ||||||
Provision (income) for credit losses as a percentage of average credit to the public(1) | (0.30%) | 0.26% | (0.58%) | 0.95% | 0.64% | ||||||
Main profit and loss data | |||||||||||
NIS millions | |||||||||||
Net profit attributed to shareholders of the Bank | 1,207 | 816 | 3,980 | 1,141 | 2,056 | ||||||
Net profit attributed to shareholders of the Bank excluding extraordinary items(2) | 1,207 | 816 | 3,980 | 1,290 | 2,205 | ||||||
Net profit from continued operations attributed to shareholders of the Bank | 1,207 | 816 | 3,980 | 1,250 | 2,165 | ||||||
Net profit from continued operations attributed to shareholders of the Bank excluding extraordinary items(3) | 1,207 | 816 | 3,980 | 1,290 | 2,205 | ||||||
Net interest income | 2,565 | 2,201 | 7,306 | 6,559 | 8,797 | ||||||
Provision (income) for credit losses | (252) | 193 | (1,407) | 2,130 | 1,943 | ||||||
Net financing profit* | 2,777 | 2,536 | 8,168 | 7,393 | 9,885 | ||||||
Non-interest income | 1,079 | 1,101 | 3,452 | 3,280 | 4,379 | ||||||
Of which: fees | 838 | 755 | 2,457 | 2,364 | 3,155 | ||||||
Operating and other expenses | 1,999 | 1,851 | 5,898 | 5,593 | 7,501 | ||||||
Of which: salaries and related expenses | 1,153 | 988 | 3,414 | 2,913 | 3,836 | ||||||
Total income | 3,644 | 3,302 | 10,758 | 9,839 | 13,176 | ||||||
Additional data | |||||||||||
Net profit per share attributed to shareholders of the Bank | 0.9 | ||||||||||
(in NIS) | 0.61 | 2.98 | 0.86 | 1.62 | |||||||
Total dividend per share (in agorot)(4) | 46.15 | - | 46.15 | 53.94(5) | 53.94(5) | ||||||
* Net financing profit includes net interest income and non-interest financing income (expenses). | |||||||||||
(1) Calculated on an annualized basis. | |||||||||||
(2) Does not include expenses in respect of the update of the provision in connection with the investigation of the Bank Group's business with American customers and FIFA, the effect of the closure of the private-banking activity overseas, loss from the separation from Isracard, and loss from impairment in respect of the Bank's investment in Bank Pozitif. | |||||||||||
(3) Does not include expenses in respect of the update of the provision in connection with the investigation of the Bank Group's business with American customers and FIFA, the effect of the closure of the private-banking activity overseas, and loss from impairment in respect of the Bank's investment in Bank Pozitif. | |||||||||||
(4) According to the date of declaration. | |||||||||||
(5) Paid as a dividend in kind, in shares; calculated based on the Isracard share price on March 8, 2020 (NIS 10.91). | |||||||||||
Condensed financial information and principal performance indicators over time (continued) | |||||||||
September 30 | December 31 | ||||||||
2021 | 2020 | 2020 | |||||||
NIS millions | |||||||||
Main balance sheet data | |||||||||
Total assets | 604,324 | 513,686 | 539,602 | ||||||
Of which: Cash and deposits with banks | 175,765 | 128,421 | 138,711 | ||||||
Securities | 70,383 | 67,835 | 71,885 | ||||||
Net credit to the public | 335,297 | 292,845 | 301,828 | ||||||
Net problematic credit risk | 8,464 | 9,252 | 9,754 | ||||||
Net impaired balance sheet debts | 2,219 | 2,643 | 2,517 | ||||||
Credit to the public not accruing interest income (NPL) | 2,799 | 3,482 | 3,208 | ||||||
Total liabilities | 561,589 | 474,688 | 499,703 | ||||||
Of which: Deposits from the public | 505,483 | 417,005 | 435,217 | ||||||
Deposits from banks | 10,448 | 3,280 | 6,591 | ||||||
Bonds and subordinated notes | 18,761 | 24,724 | 23,490 | ||||||
Shareholders' equity | 42,717 | 38,971 | 39,873 | ||||||
Additional data | |||||||||
Share price at end of period (in NIS) | 28.5 | 18.3 | 22.0 | ||||||
SOURCE Bank Hapoalim
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