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Israel Discount Bank Announces Second Quarter Financial Results and a 5-year Strategic Plan

- Q2 Net Income of NIS 192 m, ROE of 6.3%

TEL-AVIV, Israel, Aug. 20, 2014 /PRNewswire/ -- Israel Discount Bank (TASE: DSCT) today announces its financial results for the second quarter of 2014.

Israel Discount Bank Logo

Main Highlights of Q2-14 compared to Q1-14:

  • Capital Adequacy – The group continued to meet its capital milestones and presented a Basel III CT-1 ratio of 9.2%. The group has sufficient capital to support future growth.  
  • Asset Quality – The group continued to improve asset quality, reflected in a substantial decrease in Loan Loss Provisions out of total credit (LLP ratio) to a negative ratio of -0.12%.
  • Retail growth – Consumer credit and SME credit recorded a 4.7% and 1% growth respectively.
  • Expenses – Excluding the change in the provision for severance pay, primarily due to a provision of NIS 306 million for early retirement of ~250 employees, total expenses decreased by 3.8%.
  • Subsidiaries – presented robust performance and continued to contribute substantially to the group's net income.

Key Factors impacting Q2-14 results:

  • Negative provision of NIS 35 million for Loan losses due to several recoveries.
  • Positive CPI (0.5% compared to -0.7% in Q1-14) contributed 58 NIS million to Interest Income.
  • Reduction of 6% in salary expenses, excluding provision for severance pay.
  • Reduction in Net Interest Income, due to lower Interest rate.
  • Non Interest financing income reduced by 8.1% mainly due to TRUPS sale by IDB NY.
  • Other Income decreased by 48% due to weaker performance of the employees severance fund.
  • Provision of NIS 195 million for severance pay.

Strategic Plan:

On August 20, 2014, the Board of Directors approved the Discount Group's strategic plan for the years 2015-2019. The plan encompasses all of Discount Group's spheres of activity, taking a pragmatic view of the group's strengths and challenges. In the opinion of the Bank's management, implementation of the plan will lead to a double digit CAGR in net income, during the 5 year program, placing the Discount Group at the forefront of the banking system in Israel by the end of the plans' period.

The plan has been constructed on three central pillars:

Cost Reduction:

  • Reducing the size of the Discount Group's workforce by more than 1,000 employees, some 700 of whom will leave by the end of 2017. This reduction is based on the natural retirement of approximately 600 employees during the period of the plan, and on an early retirement program, under which some 250 employees will retire from the Bank during the coming year. The financial statements include a provision for the planned retirement program;
  • Reducing the group's real estate holdings in light of the downsizing of the workforce. In addition, a comprehensive examination will be carried out to ensure the most suitable and effective use of the group's real estate assets, as well as to identify savings in procurement costs and other expenses.
  • Adapting the size of the branch network and its character to the new environment in which the Israeli banking sector and the group are facing. In the first stage it has been decided to close 10 branches.
  • Accelerating the process of transferring operational functions from the branches to the back-office.

Growth:

  • Growing the retail segment, placing emphasis on private customers and small businesses, at the Bank and at its subsidiaries – Mercantile and CAL;
  • Strengthening and expanding relationship with existing clients leveraging low share of wallet

Change organizational culture:

  • Creating a change-enabling organization, focused on customer centric strong performance management

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 the strategic plan and be available to answer questions.  

  • Israel : 1 809 216057                    
  • International: +44 1452 555566
  • USA: 1 866 966 9439
  • U.K: 0 800 694 0257

The conference call will be accompanied by a WEBEX presentation, which can be accessed through our IR website- www.discountbank.co.il/IR

DEVELOPMENTS IN CERTAIN INCOME STATEMENT ITEMS IN THE SECOND QUARTER OF 2014

In NIS millions

2014

2013

Change in % compared to


Q2

Q1

Q2

Q1-14

Q2-13

Interest income(4)

1,581

1,324

1,758

19.4

(10.1)

Interest expenses

481

306

717

57.2

(32.9)

Interest income, net

1,100

1,018

1,041

8.1

5.7

Credit loss expenses

(35)

75

141

-

-

Net interest income after credit loss expenses

1,135

943

900

20.4

26.1

Non-interest Income






Non-interest financing income

114

124

236

(8.1)

(51.7)

Commissions(4)

637

631

668

1.0

(4.6)

Other income

27

52

20

(48.1)

35.0

Total non-interest income

778

807

924

(3.6)

(15.8)

Operating and other Expenses






Salaries and related expenses

1,072

936

933

14.5

14.9

Maintenance and depreciation of buildings and equipment

299

298

303

0.3

(1.3)

Other expenses

261

260

268

0.4

(2.6)

Total operating and other expenses

1,632

1,494

1,504

9.2

8.5

Income before taxes

281

256

320

9.8

(12.2)

Provision for taxes on income

83

97

89

(14.4)

(6.7)

Income after taxes

198

159

231

24.5

(14.3)

Bank's share in income (loss) of affiliated companies,  net of tax effect

5

(1)(2)15

42

(66.7)

(88.1)

Net income attributed to the non-controlling rights holders in consolidated companies

(11)

(9)

(10)

22.2

10.0

Net income attributed to Bank's shareholders

192

165

263

16.4

(27.0)

Net return on equity attributed to the Bank's shareholders in %(3)

6.3

5.4

9.0



Net income attributed to Bank's shareholders – disregarding the provision for impairment in value of the investment in the FIBI

313

(1)191

263

63.9

19.0

Net return on equity attributed to the Bank's shareholders in % - disregarding the provision for impairment in value of the investment in the FIBI(3)

10.3

(1)6.3

9.0




Footnotes:

(1)  For details regarding the provision for impairment in value of the investment in FIBI, see Note 14 C and D to the condensed financial statements.

(2)  For details as to the elimination of the Bank's share in the reserves of FIBI, previously recognized in other comprehensive income, and its classification to the statement of income, see Note 14E to the condensed financial statements.

(3)  On an annual basis.

(4)  For details regarding the effect of the implementation of the instruction regarding the measurement of interest income (classification of certain commissions), see Note 1E(1) to the condensed financial statements.

(5)  For details regarding changes in the provision for severance pay, net, mostly the retirement plan, see Note 21 to the condensed financial statements.

 

COMPOSITION OF CREDIT TO THE PUBLIC BY SEGMENTS OF OPERATION


June 30, 2014

December 31, 2013


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

40,361

35.0

(1) 40,056

34.6

0.8

Of which - housing loans

19,835

17.2

19,753

17.0

0.4

Retail - small business segment

13,234

11.5

(1) 13,000

11.2

1.8

Corporate banking segment

38,047

33.0

40,807

35.2

(6.8)

Middle market banking segment

19,934

17.4

18,612

16.1

7.1

Private banking segment

3,585

3.1

(1) 3,384

2.9

5.9

Total

115,161

100.0

115,859

100.0

(0.6)

(1) Reclassified, see note 12 b (2) to condensed financial statement

 

BALANCE SHEET


 June 30, 2014

June 30, 2013

December 31, 2013

Change in %
compared to

In NIS millions

March 31, 2013

December 31, 2013

Total assets

196,040

197,207

200,507

(0.6)

(2.2)

Credit to the public, net

115,161

115,121

115,859

-

(0.6)

Securities

39,191

48,832

41,325

(19.7)

(5.2)

Deposits from the public

145,350

149,502

148,928

(2.8)

(2.4)

Equity attributed to the Bank's shareholders

12,716

11,991

12,233

6.0

3.9

Total equity

13,030

12,291

12,538

6.0

3.9

Company Contact
Tamar Koblenz
Head of Investor Relations
Tel: +972 3 5146593
[email protected]

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SOURCE Israel Discount Bank

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