Israel Discount Bank Announces 4th Quarter and Annual Financial Results of 2013

Excluding provision for MTM of FIBI shares:

Q4 Net Income was NIS 230 m, Q4 ROE was 7.7%

2013 Net Income was NIS 1,032 m, 2013 ROE was 8.6%

Basel 3 Capital Adequacy Ratio was 8.9%

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Mar 19, 2014, 03:23 ET

TEL-AVIV, Israel, March 19, 2014 /PRNewswire/ -- Israel Discount Bank (TASE: DSCT), today announces its financial results for Q4 and 2013.

Main highlights of Q4 and 2013 results:

Met capital adequacy milestones ahead of plan. Presenting CT-1 ratio of 8.9% Basel 3.
Continued improvement in asset quality, reflected in substantial decrease in Loan Loss Provisions (LLP) to 0.49% (0.41% in Q4).
Dynamic management of investment portfolio, led to capital gains of NIS 527 m.
Margins remain under pressure due to lower interest rates in 2013 (avg. of 1.39%) compared to 2012 (avg. of 2.35%).
Salary expenses increased by 5% mostly due to bonuses payment and provision for future wage agreement. Excluding bonuses, salary expenses increased by only 0.6%. Excluding bonuses and increases in Social Security rate and payroll taxes, salary expenses decreased.
A non-recurring provision for MTM of FIBI holdings in the amount of NIS 158 m.
CPI increase contributed to higher revenues (CPI linked assets) compared to 2012, but was negative in Q4.

Lilach Asher Topilsky, CEO of Discount Bank commented: "I am honored to be the CEO of Discount bank, one of the leading banks in Israel that I intend to strengthen, improve and grow over the coming years. In my first few weeks here, I have met a highly dedicated and professional workforce and a motivated and committed management team, who is both eager and willing to make important improvements. I believe there is much potential that can be realized in the coming years.

I am fully aware of the market's expectations regarding the publishing of our updated Strategic Plan and I can assure you that we are currently working on this and aim to present it by August. For now, I would only mention that we will continue the bank's focus on continued Retail Growth and further Efficiency Measures. It is clear to us and to the market, that the cost side is the key factor that encumbers the bank's performance".

Main metrics from the financial statements:

Net interest income for 2013 decreased by 5% over 2012 to NIS 4,250 m, mainly due to lower interest rates. This was partially offset by the higher CPI and capital gains. Net interest income in Q4 was higher in both Retail (+9%) and Corporate (+5%) versus Q3.
CPI impact: While Q4 CPI was negative, the 2013 CPI increase contributed to higher revenues (CPI linked assets) as compared to 2012.
Non-interest income for 2013 increased by 8% to NIS 3,519 m, mainly due to capital gains from the dynamic management of the Bank's portfolio. The Bank's subsidiary, Discount Capital Markets, recorded gains from a number of successful private equity transactions.
Non-interest income for Q4 increased by 3% over Q3, to NIS 861 m, due to an increase in non-interest financing income resulting from loan sales and derivatives activity.
Total operating expenses in 2013 were NIS 6,018 m, an increase of 3% over 2012.
Total operating expenses in Q4 amounted to NIS 1,557 m, an increase of 5% versus Q3. The annual and quarterly increases were mainly due to an increase in salary expenses coupled with an increase in Social Security rate and payroll taxes.
The increase in salaries was due to a bonus provision and a provision for future wage agreement. This was partially mitigated by a decline in the amount of positions at the Discount group in 2013 (a reduction of 182). Total salary expenses, excluding bonuses (amounting to NIS 3,393 m), were only 0.6% higher than in 2012. When excluding the increase in the social security rate and payroll taxes, the salary expenses would have decreased.
Loan loss provisions (LLP) declined substantially to 0.49% compared to 0.61% in 2012. Most of this continuing improvement occurred in the second half of 2013, and specifically in Q4 where the LLP was 0.41%.
Non-recurring items in Q4 were a tax benefit and a non-recurring provision for MTM of FIBI holdings in the amount of NIS 158 m.

Main metrics from the Balance Sheet:

Total Credit to the public decreased by 1.5% to 115.8 NIS billion. However, in line with management's strategy to focus on retail growth, there was a 5% growth in the retail sector. Corporate credit on the other hand, continued to decline, and this trend can be expected to continue in 2014.
The Basel 3 capital adequacy ratio at the end of 2013, was 8.9% (9.3% in terms of Basel 2).The Bank's plan is to achieve a target of 9.3%-9.4% CT-1 by the end of 2014, in order to maintain a cushion for unexpected events while at the same time allowing for growth in the Bank's target business segments.

Conference call Information - The Bank will be hosting a conference call today at 16:00 (Israel); 14:00 (UK); 09:00 (EDT), during which management will review the results and be available to answer questions:

Israel & Other International Dial-in Number                      +972 3 918 0688
United Kingdom Dial-in Number                                       +0 800 4048 418
United States Dial-in Number                                            +1 866 652 8972

Presentation material will be available on our IR website prior to the call, accessible at www.discountbank.co.il/IR

DEVELOPMENTS IN INCOME AND EXPENSES IN NIS MILLIONS

	for the year ended December 31
	2013	2012	Change in %
Interest income	6,822	7,847	(13.1)
Interest expenses	2,572	3,388	(24.1)
Interest income, net	4,250	4,459	(4.7)
Credit loss expenses	580	726	(20.1)
Net interest income after credit loss expenses	3,670	3,733	(1.7)
Non-interest Income
Non-interest financing income	632	352	79.5
Commissions	2,704	2,685	0.7
Other income	183	220	(16.8)
Total non-interest income	3,519	3,257	8.0
Operating and other Expenses
Salaries and related expenses	3,619	3,444	5.1
Maintenance and depreciation of buildings and equipment	1,247	1,248	(0.1)
Amortization of intangible assets	-	10	-
Other expenses	1,152	1,124	2.5
Total operating and other expenses	6,018	5,826	3.3
Income before taxes	1,171	1,164	0.6
Provision for taxes on income	305	407	(25.1)
Income after taxes	866	757	14.4
Bank's share in income of affiliated companies, net of tax effect	45	104	(56.7)
Net income attributed to the non-controlling rights holders in consolidated companies	(37)	(59)	(37.3)
Net income attributed to Bank's shareholders	874	802	9.0
Return on equity attributed to the Bank's shareholders, in %	7.3	7.1
Net income attributed to Bank's shareholders - disregarding the provision for impairment in value of the investment in FIBI's shares	1,032	875	17.9
Net return on equity attributed to the Bank's shareholders, in % - disregarding the provision for impairment in value of the investment in FIBI's shares	8.6	7.8

BALANCE SHEET IN NIS MILLIONS

	2013	2012	Change in %
Total assets	200,507	201,012	(0.3)
Credit to the public, net	115,859	117,611	(1.5)
Securities	41,325	46,001	(10.2)
Deposits from the public	148,928	151,935	(2.0)
Equity attributed to the Bank's shareholders	12,233	11,838	3.3
Total equity	12,538	12,134	3.3

COMPOSITION OF CREDIT TO THE PUBLIC BY SEGMENTS OF OPERATIONS

The following is a review of developments in the balance of net credit to the public, by segments of operations:

		December 31, 2013		December 31, 2012
In NIS millions			% of total credit to the public	In NIS millions	% of total credit to the public	Rate of change in-%
Retail - household segment	39,956		34.5	38,199	32.5	4.6
Of which - housing loans	19,753		17.0	19,440	16.5	1.6
Retail - small business segment	13,108		11.3	12,100	10.3	8.3
Corporate banking segment	40,807		35.2	45,363	38.6	(10.0)
Middle market banking segment	18,612		16.1	18,327	15.6	1.6
Private banking segment	3,376		2.9	3,622	3.0	(6.8)
Total	115,859		100.0	117,611	100.0	(1.5)