Bank Hapoalim Announces 2019 Annual Financial Results

TEL AVIV, Israel, March 19, 2020 (GLOBE NEWSWIRE) -- Bank Hapoalim (TASE: POLI) (ADR: BKHYY), today announced its financial results for the fourth quarter and full year ended December 31, 2019.

Key financial highlights: 

  • The bank's credit portfolio continues to grow – Net credit to the public totaled NIS 292.9 billion, compared with NIS 282.5 billion at the end of 2018, an increase of 3.7%.
  • The improvement in quality of the bank's retail credit portfolio continued in 2019 – The provision for credit losses of private customers totaled NIS 220 million in 2019, compared with NIS 455 million in 2018, a decrease of 51.7%.
  • Growth in housing credit – The portfolio of housing credit in Israel totaled NIS 89.3 billion, compared with NIS 81.0 billion at the end of 2018, an increase of 10.2%.
  • Growth in commercial credit – Commercial credit totaled NIS 40.1 billion, compared with NIS 37.5 billion at the end of 2018, an increase of 7.1%.
  • Human capital – The bank signed a wage agreement for 2018-2022 with the employee union during the first quarter of 2020. The bank has continued to implement efficiency measures; the number of employee positions at the bank group decreased by 463 in 2019. In addition, a voluntary-retirement program for over 900 employees for 2020-2022 was approved in January 2020.
  • Dividend distribution during the year – The bank distributed dividends in the amount of NIS 1 billion in 2019.
  • Common equity Tier 1 capital ratio – The common equity Tier 1 capital ratio as at December 31, 2019, was 11.53%.
  • The bank reports significant progress in the negotiations of the tax investigation. In consequence, the bank recorded a provision of NIS 897 million in the fourth quarter of 2019.
  • The direct and indirect effects of the Coronavirus outbreak in the fourth quarter of 2019 are reflected in an addition to the provision for credit losses, which led to an adverse effect on net profit in the amount of NIS 450 million. The events of recent weeks may have a material negative impact on the results of the bank for 2020; however, at this stage it is not possible to estimate the full extent of such effects.  
  • In light of these effects, net profit in 2019 totaled NIS 1,799 million, compared with NIS 2,595 million in 2018, a decrease of 30.7%, which was mainly reflected in the results for the fourth quarter.
  • Adjusted net profit in 2019 totaled NIS 2,778 million, compared with NIS 3,579 million, a decrease of 22.4%. This excludes expenses in respect of the provision in connection with the United States authorities, the effect of the closure of the private-banking activity overseas, net profit from the sale of Isracard, and loss from impairment in respect of the Bank’s investment in Bank Pozitif.
  • The rate of net return on shareholders’ equity was 4.6% in 2019, compared with 7.1% in 2018. The adjusted rate of net return on shareholders’ equity was 7.1% in 2019, compared with 9.7% in 2018. 

Commenting on the results, Mr. Oded Eran, Chairman of the Board of Directors said: “The financial statements of Bank Hapoalim are being released in the midst of significant economic developments resulting from the spread of the Coronavirus. The role of Bank Hapoalim, as the largest financial institution in the Israeli economy, during this emergency is more important than ever. I am proud that despite a complicated year, during which we invested immense effort in advancing the American tax investigation towards conclusion and reaching resolutions with the United States authorities, we succeeded in continuing to move forward with our strategic plans, as reflected, among other matters, in the growth of the credit portfolio, alongside a significant improvement in credit quality; development of new technological products; and solidification of the leadership of Bank Hapoalim in the Israeli banking system.

Bank Hapoalim, under the leadership of our new CEO, Dov Kotler, is resolute and steadfast in facing the evolving crisis, and is navigating its path to the days ahead with determination and good judgment, while granting the highest priority to the needs of the public and of the economy during these times.

The provisions for the investigation of the United States authorities have a substantial impact on the financial results of the bank for the year, but they will enable us to move forward with greater strength and expand our investments in development and in adapting Bank Hapoalim to the banking of the future and to the challenges of tomorrow, and to coping with the new challenges of the present, which are already taking a toll on the business sector in Israel.”

Commenting on the results, Mr. Dov Kotler, President and CEO said: “We are facing the beginning of a period of economic uncertainty, which will affect the global economy and become a significant factor in shaping the future challenges of the financial sector and of the business sector as a whole. I call on the State of Israel to work cooperatively with the financial sector to ensure the robustness of the economy. We at Bank Hapoalim are committed to continuing to stand by our customers during these difficult times, and we will do our best under these circumstances.

In accordance with the focus areas established in our work plans, Bank Hapoalim continued to make progress on its business objectives, primarily the expansion of its portfolio of credit to the public, with an emphasis on housing credit, which grew by 10.2%, and commercial credit, which grew by 7.1%, while significantly improving the quality of the portfolio.

On a personal note, I am completing my first six months in office as CEO of Bank Hapoalim. During this period, we achieved progress on several highly significant initiatives, including restructuring our management team, signing a new multi-year wage agreement with the employee union, formulating an efficiency program encompassing more than 900 employees over the coming three years, completing the sale of Isracard, and advancing with the investigations of the United States authorities, while continuing our overall business growth and the expansion and improvement of quality of our credit portfolio.

We know that it is the nature of a pandemic, like an economic crisis, to eventually end. I am confident that together, we will resolutely withstand this crisis and emerge strengthened. I would like to take this opportunity to thank our wonderful employees, who have persisted in their work, coming in every day to provide service to our customers, with deep commitment and responsibility."

Key developments in the 2019 annual financial statements:

  • Total income from regular financing activity, totaled NIS 9,756 million in 2019, compared with NIS 9,575 million in 2018, an increase of 1.9%. 
  • Fees and other income from activity in Israel totaled NIS 3,330 million in 2019, compared with NIS 3,423 million in 2018, a decrease of 2.7%.
  • Net provision for credit losses, totaled NIS 1,276 million in 2019, 0.44% of average total credit to the public, compared with a net provision for credit losses in the amount of NIS 613 million in 2018, or 0.22% of the average total credit to the public.
    Gross provision for credit losses, before the reduction of the individual allowance and debt recovery, was 0.76% in 2019, compared with 0.58% in 2018.
  • Operating and other expenses, totaled NIS 8,776 million in 2019, compared with NIS 8,960 million in 2018, a decrease of 2.1%. 

Key developments in balance sheet items:

  • Consolidated balance sheet, totaled NIS 463.7 billion as at December 31, 2019, compared with NIS 460.9 billion at the end of 2018, an increase of 0.6%. 
  • Net credit to the public, totaled NIS 292.9 billion, compared with NIS 282.5 billion at the end of 2018, an increase of 3.7%.
  • Consumer credit in Israel, totaled NIS 41.5 billion, compared with NIS 44.1 billion at the end of 2018, a decrease of 6.0%.
  • Housing loans in Israel, totaled NIS 89.3 billion as at December 31, 2019, compared with NIS 81.0 billion at the end of 2018, an increase of 10.2%.
  • Credit to small businesses in Israel, totaled NIS 31.0 billion, compared with NIS 32.6 billion at the end of 2018, a decrease of 4.7%.  
  • Credit to the commercial segment in Israel, totaled NIS 40.1 billion, compared with NIS 37.5 billion at the end of 2018, an increase of 7.1%. 
  • Credit to the corporate segment in Israel, totaled NIS 75.7 billion, compared with NIS 71.9 billion at the end of 2018, an increase of 5.2%. Due to the discontinuation of the consolidation of Isracard, the credit balance includes loans granted to the Isracard Group, which were included for the first time in the second quarter of 2019, in the amount of approximately NIS 3.6 billion.
  • Deposits from the public, totaled NIS 361.6 billion, compared with NIS 352.3 billion at the end of 2018, an increase of 2.7%.
  • Deposits from consumers in Israel, totaled NIS 188.8 billion, compared with NIS 187.1 billion at the end of 2018, an increase of 0.9%.
  • Deposits from small businesses in Israel, totaled NIS 46.0 billion, compared with NIS 42.4 billion at the end of 2018, an increase of 8.4%. 
  • Shareholders' equity, totaled NIS 38.1 billion, compared with NIS 37.5 billion at the end of 2018, an increase of 1.7%.
  • Total capital ratio, as at December 31, 2019 was 14.64%, compared with 14.39% as at December 31, 2018.

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.

Conference Call Information:

Bank Hapoalim will host a conference call today to discuss its Full Year 2019 financial results at 5:00 p.m. (Israel); 3:00 p.m. (UK); 11:00 a.m. (ET). To access the conference call, please dial: 1-888-281-1167 toll free from the United States; 0-800-051-8913 toll free from the United Kingdom; or 972-3-9180685 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's website at www.bankhapoalim.com, under Investor Relations, Financial Information. A recording of the call will be made available on the Bank's website at the above address 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 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, the Bank Hapoalim operates 215 full-service retail branches, 12 regional business centers and specialized industry relationship managers for major corporate customers. The Bank Hapoalim Group includes holdings in financial companies involved 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

Contact:

Karen Mazor, SVP
Head of Investor Relations
Bank Hapoalim
T: +972 3 5673440
E:  Karen.mazor@poalim.co.il


Condensed financial information and principal performance indicators over time

 For the year ended December 31 
 2019 2018  2017  2016  2015  
Main performance indicators         
Return of net profit on equity attributed to shareholders of the Bank4.62%7.06% 7.50% 7.72% 9.61% 
Return of net profit on equity attributed to shareholders of the Bank excluding extraordinary items(1)7.13%9.74% 9.44% 10.04% 9.61% 
Return of net profit from continued operations on equity attributed to shareholders of the Bank(5)3.86%6.07% 6.61% 6.92% 8.74% 
Return of net profit from continued operations on equity attributed to shareholders of the Bank excluding extraordinary items(2)(5)6.72%8.75% 8.55% 9.23% 8.74% 
Return on average assets0.39%0.57% 0.59% 0.60% 0.73% 
Ratio of income to average assets2.17%2.29% 1.99% 2.07% 2.13% 
Efficiency ratio – cost-income ratio from continued operations66.44%65.05% 64.57% 63.24% 59.63% 
Efficiency ratio – cost-income ratio excluding extraordinary items from continued operations(2)58.13%57.82% 59.10% 59.22% 59.63% 
Financing margin from regular activity(3)2.26%2.31% 2.13% 2.05% 2.05% 
Liquidity coverage ratio(4)121%120% 122% 124% 99.00% 
          
 December 31 
 2019 2018  2017  2016  2015  
Ratio of common equity Tier 1 capital to risk components(5)11.53%11.16% 11.26% 11.01% 9.63% 
Ratio of total capital to risk components(5)14.64%14.39% 14.64% 15.11% 14.36% 
Leverage ratio(5)7.61%7.51% 7.37% 7.25% 7.10% 
          
 For the year ended December 31 
 2019 2018  2017  2016  2015  
Main credit quality indicators         
Allowance for credit losses as a percentage of credit to the public1.58%1.31% 1.36% 1.50% 1.58% 
Impaired debts and debts in arrears of 90 days or more as a percentage of credit to the public1.80%1.23% 1.31% 1.83% 2.27% 
Net charge-offs as a percentage of average credit to the public0.12%0.20% 0.21% 0.18% 0.08% 
Provision for credit losses as a percentage of average credit to the public0.44%0.22% 0.08% 0.07% 0.17% 
          
Main profit and loss data         
 NIS millions 
Net profit attributed to shareholders of the Bank1,799 2,595  2,660  2,628  3,082  
Net profit attributed to shareholders of the Bank excluding extraordinary items(1)2,778 3,579  3,348  3,417  3,082  
Net profit from continued operations attributed to shareholders of the Bank1,503 2,231  2,346  2,354  2,802  
Net profit from continued operations attributed to shareholders of the Bank excluding extraordinary items(2)2,619 3,215  3,034  3,143  2,802  
Net interest income9,319 8,906  8,424  7,958  7,710  
Provision (income) for credit losses1,276 613  202  179  437  
Net financing profit*9,878 10,351  9,076  9,121  8,744  
Non-interest income3,889 4,868  4,153  4,917  4,996  
Of which: fees3,240 3,318  3,338  3,617  3,838  
Operating and other expenses8,776 8,960  8,121  8,142  7,577  
Of which: salaries and related expenses4,018 4,097  4,209  4,239  4,467  
Total income13,208 13,774  12,577  12,875  12,706  
          
Net earnings per ordinary share (in NIS)         
Basic net earnings per share in NIS attributed to shareholders of the Bank from continued operations1.13 1.68  1.76  1.77  2.11  
               


Condensed financial information and principal performance indicators over time (continued)

 December 31 
 2019 2018  2017  2016  2015  
 NIS millions 
Main balance sheet data         
Total assets463,688 460,926  454,424  448,105  431,638  
Of which: Cash and deposits with banks88,122 84,459  86,093  80,367  64,964  
Securities59,486 56,116  65,416  71,429  62,865  
Net credit to the public292,940 282,507  265,853  259,878  267,480  
Net problematic credit risk8,787 6,944  6,822  7,358  9,171  
Net impaired balance sheet debts3,034 2,158  2,121  3,094  4,257  
Total liabilities425,467 423,270  418,420  413,880  398,419  
Of which: Deposits from the public361,645 352,260  347,344  338,494  321,718  
Deposits from banks3,520 4,528  3,649  4,077  4,542  
Bonds and subordinated notes26,853 30,024  29,058  33,560  34,475  
Shareholders’ equity38,181 37,544  35,863  34,047  33,032  
Credit to the public not accruing interest income (NPL)3,867 2,178  2,073  3,480  4,928  
Additional data         
Share price at end of year (in NIS)28.7 23.7  25.6  22.9  20.1  
          
 For the year ended December 31 
 2019 2018  2017  2016  2015  
Total dividend per share (in agorot)**74.90 37.17  64.53  51.44  42.87  
Average number of employee positions9,297 9,723  10,228  10,556  11,025  
Ratio of net interest income to average assets2.05%1.97% 1.87% 1.80% 1.88% 
Ratio of fees to average assets0.71%0.73% 0.74% 0.82% 1.26% 
          
* Net financing profit includes net interest income and non-interest financing income (expenses).
** According to the date of declaration.
(1)  Does not include expenses in respect 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, net profit from the sale of Isracard, and loss from impairment in respect of the Bank’s investment in Bank Pozitif.
(2)  Does not include expenses in respect 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. 
(3) 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 other comprehensive income”) divided by total financial assets after allowance for credit losses, net of non-interest bearing balances in respect of credit cards.
(4) For additional information, see the section "Liquidity and refinancing risk" in the financial statements.
(5) For additional information, see the section "Capital, capital adequacy, and leverage" in the financial statements.
 
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