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%
- Excluding the provision for severance pay of NIS 195 million: Net income would have totaled NIS 313 million with an ROE of 10.3%
- Basel III Capital Adequacy Ratio reached 9.2%
TEL-AVIV, Israel, Aug. 20, 2014 /PRNewswire/ -- Israel Discount Bank (TASE: DSCT) today announces its financial results for the second quarter of 2014.
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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 |
In NIS millions |
% of total |
Rate of |
|
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 % |
||
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
Tamar.koblenz@idbank.co.il
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