TEL AVIV, Israel, May 26, 2009 (GLOBE NEWSWIRE) -- Bank Hapoalim (TASE:POLI) (LSE:BKHD) (Pink Sheets:BKHYY) reported today its financial results for the first quarter of 2009.
Highlights of the financial statements:
* Net Profit for the first quarter of 2009 totaled NIS 42 million compared with a loss of NIS 363 million in the previous quarter. Profit for the first quarter of 2009 was significantly affected by the continued decline in the CPI-linked interest rate, which resulted in an exceptional accounting expense in the amount of NIS 855 million, gross, stemming from the measurement of profit and loss in derivative instruments that serve mainly as an economic hedge, on a fair-value basis, in contrast to measuring results of balance-sheet financial activity on an accrual basis. * Return on equity for the first quarter of 2009 was 0.9%, on an annualized basis compared with a negative return in the previous quarter. * The Bank's capital adequacy rose to 11.27% at the end of the first quarter of 2009 compared with 10.92% at the end of 2008. Tier 1 Capital rose to 7.55% at the end of the first quarter of 2009 compared with 7.44% at the end of 2008.
Chairman of the Board Dan Dankner commented:
Bank Hapoalim's financial results for the first quarter of 2009 reflect the recessionary pressures felt throughout the Israeli economy. Recent macro-economic data that highlights the depth of this recession is in line with the estimates used as the foundation for the Bank's business plans and is consistent with the economic forecasts of Bank Hapoalim's economists.
The Bank continues to make progress towards its objectives of a 4%-7% return on equity for 2009 and a capital adequacy ratio of 12% by the end of the year.
In addition, Bank Hapoalim is continuing its extensive, wide-ranging community-oriented activities during the recession, through monetary donations and volunteer activities of Bank employees. The financial value of these activities reached NIS 9.8 million in the first quarter of 2009.
The Israeli banking system, with Bank Hapoalim as a key player, has demonstrated stability and resilience. This has enabled the Israeli economy to weather the current global crisis with relatively little damage, compared to most other developed countries. In contrast to the situation in the United States and many European countries, the Israeli government has not needed to provide banks with assistance during this period. This mainly reflects the cautious risk profiles of Israel's banks in recent years. Compared to banks overseas, Israeli banks are conservatively leveraged and, as a result, the global de-leveraging process has had a far lesser impact here than elsewhere. While the American government has needed to inject more than USD 700 billion into U.S. banks to enable them to continue providing credit, the primary source for credit granted by Israeli banks is deposits from the public.
As seen in the recent global macro economic indicators published, it is clear that we have not yet emerged from the global crisis. If it is deeper and more prolonged than expected, there will be negative consequences for the Israeli economy.
I would like to congratulate the Government of Israel, the Prime Minister, the Minister of Finance, the Chairman of the General Federation of Labor and related organizations for their success in reaching an agreement regarding the State budget. We hope that the budget framework will remain intact so that we continue to avoid high inflation rates, as we have in recent years due to budgetary restraint.
CEO Zvi Ziv commented:
The Bank's net profit reached NIS 42 million in the first quarter of 2009. The relatively low profit was negatively impacted by the decrease in the CPI-linked interest rate, which resulted in an exceptional accounting expense in the amount of NIS 855 million, gross, stemming from the measurement of profit and loss in derivative instruments that serve mainly as an economic hedge, on a fair-value basis, in contrast to measuring results of balance-sheet financial activity on an accrual basis.
Despite the ongoing crisis in global markets and the absence of signs of a forthcoming recovery in the Israeli economy, retail banking and corporate banking, the key pillars of the Bank's operations, maintained their customary profitability levels this quarter.
The financial results for the quarter show the impact of the decrease in interest rates; interest rates in Israel (as in other markets) have dropped to an unprecedented low and impacted, inter alia, the Bank's income from deposits.
Financing Profit (before provisions for doubtful debts) reached NIS 972 million for the quarter, compared with a profit of NIS 1.2 billion in the fourth quarter of 2008. The decrease resulted primarily from the sharp declines in interest rates.
The relative calm in the capital markets in recent months enabled the financial stabilization of some of the Bank's customers, leading to a decrease in the provision for doubtful debts compared to the last quarter. However, as I mentioned earlier, we are not yet seeing signs of recovery and emergence from the recession in the Israeli economy. This is evident in the continued increase in the volume of problematic debts, which increased 8.8% this quarter.
With respect to our previously announced plans to strengthen the Bank's capital base, we raised approximately NIS 830 million during the quarter in Israel and overseas, and have attained a capital adequacy ratio of 11.27%.
Bank Hapoalim continues to operate according to its annual work plans, aiming to achieve the two key objectives we have set for 2009: a capital adequacy ratio of 12%, and return on equity of 4%-7%.
Main developments in the financial statements for the first quarter of 2009:
Net operating profit for the first quarter of 2009 totaled NIS 21 million compared with a loss of NIS 393 million in the previous quarter. Net return of operating profit on equity for the first quarter of 2009 was 0.4%, on an annualized basis, compared with a negative return in the previous quarter.
The increase in net profit results, among others, from the following factors:
Profit from financing activity before provisions for doubtful debts totaled NIS 972 million in the first quarter of 2009, compared with a profit of NIS 1,242 million in the previous quarter. The decrease was mainly due to an exceptional accounting loss, as mentioned above, in the amount of NIS 855 million related to the measurement of derivative instruments that serve mainly as an economic hedge, on a fair-value basis. This was offset by a decrease in losses in respect of investments by the Bank's overseas offices in asset-backed securities, and a decrease in losses in respect of the credit-derivative portfolio.
The provision for doubtful debts was made on a conservative basis, with due regard for assessments of the risks in the credit portfolio. In the first quarter of 2009 the Bank recorded provisions totaling NIS 314 million, compared with NIS 765 million in the previous quarter. The Bank recorded a specific provision in the amount of NIS 270 million, compared with NIS 825 million in the previous quarter. The specific provisions totaled NIS 388 million; however was reduced by NIS 118 million as a result of the collection of debts written off in the past and from reduction of provisions.
The rate of the specific provision to total credit to the public, before the reduction in provisions and the collection of debts written off in the past, reached 0.70%, in the first quarter of 2009, compared with 1.81% in the previous quarter.
Problematic debt for the Bank Group totaled NIS 17.6 billion at the end of March 2009, an increase of 8.8% compared to the previous quarter.
Operating Income -- totaled NIS 1,162 million in the first quarter of 2009 compared with NIS 1,013 million in the previous quarter, an increase of 14.7%. The increase was mainly due to an increase in income from capital market activity and from the transition to profit in investment in shares, following a loss in the previous quarter.
Operating and other expenses totaled NIS 1,940 million in the first quarter of 2009 compared with NIS 2,008 million in the previous quarter, a decrease of 3.4%. The decrease was mainly due to the decrease in other expenses.
Contribution to the community -- The community-service activities of the Bank's employees are varied and extensive, and take the form of community involvement, monetary donations, and wide-ranging volunteer activities. This activity of the Bank Group in the first three months of 2009 had a monetary value of approximately NIS 9.8 million.
Developments in Balance-Sheet Items
The consolidated balance sheet as at March 31, 2009 totaled NIS 305.1 billion, compared with NIS 306.8 billion at the end of 2008.
Credit to the public totaled NIS 220.9 billion, a decrease of 0.6% compared to the end of 2008. The decrease was influenced by a decline in the volume of activity in the Israeli economy and repayment of debt due to the low interest rate on deposits. Appreciation of the shekel against most foreign currencies offset the decrease in credit to the public at a rate of 2.1%.
Deposits from the public totaled NIS 232.4 billion compared with NIS 227.0 billion at the end of 2008, an increase of 2.4%. The increase is a result of the appreciation of the shekel against most foreign currencies and an increase in deposits in overseas offices.
About Bank Hapoalim
Bank Hapoalim is Israel's leading financial group. In Israel, the Bank Hapoalim Group includes financial companies involved in investment banking, credit cards, trust services and portfolio management. The Group also has holdings in non-banking sectors.
Internationally, Bank Hapoalim operates through 40 branches, subsidiaries and representative offices, in North and Latin America, Europe, the Far East, Turkey and Australia. In these markets, the Bank is engaged in trade, corporate finance, private banking and retail banking.
Bank Hapoalim is the only Israeli Bank listed on both the Tel Aviv and London Stock Exchange. In addition, a Level-1 ADR is traded "over-the -counter" in New York.
Principal Data of the Bank Hapoalim Group
-------------------------------------------------------------------
For the three months ended on
Profit and
profitability
-------------------------------------------------------------------
3/31/2009 12/31/2008 9/30/2008 6/30/2008 3/31/2008
-------------------------------------------------------------------
Profit (loss)
from financing
activities before 972 1,242 2,083 1,943 (2,012)
provision for
doubtful debts
-------------------------------------------------------------------
Operating and
other income 1,162 1,013 1,153 1,205 1,284
-------------------------------------------------------------------
Total income
(loss) 2,134 2,255 3,236 3,148 (728)
-------------------------------------------------------------------
Provision for
doubtful debts 314 765 471 252 32
-------------------------------------------------------------------
Operating and
other expenses 1,940 2,008 1,960 1,911 2,268
-------------------------------------------------------------------
Operating profit
(loss) 21 (393) 384 545 (2,005)
-------------------------------------------------------------------
Net profit from
extraordinary
transactions,
after taxes 21 30 57 49 438
-------------------------------------------------------------------
Net profit
(loss) 42 (363) 441 594 (1,567)
-------------------------------------------------------------------
-------------------------------------------------------------------
Balance Sheet
- Principal
Items
-------------------------------------------------------------------
3/31/2009 12/31/2008 9/30/2008 6/30/2008 3/31/2008
-------------------------------------------------------------------
Total balance
sheet 305,156 306,847 297,854 300,909 308,916
-------------------------------------------------------------------
Credit to the
public 220,859 222,100 214,296 211,193 210,496
-------------------------------------------------------------------
Deposits from
the public 232,442 226,953 214,802 226,955 231,520
-------------------------------------------------------------------
Debentures and
subordinated
notes 18,967 20,818 20,676 19,111 18,627
-------------------------------------------------------------------
Shareholders'
equity 18,986 18,795 19,030 18,758 17,322
-------------------------------------------------------------------
Overall Credit
risk -
Problematic
Debts 17,558 16,142 15,208 12,416 13,609
-------------------------------------------------------------------
Of which:
Non-income
bearing debt 4,145 4,140 3,870 3,366 3,454
-------------------------------------------------------------------
-------------------------------------------------------------------
Principal
financial
ratios
-------------------------------------------------------------------
3/31/2009 12/31/2008 9/30/2008 6/30/2008 3/31/2008
-------------------------------------------------------------------
Shareholders'
equity to total
assets 6.2% 6.1% 6.4% 6.2% 5.6%
-------------------------------------------------------------------
Tier I capital
to risk assets 7.55% 7.44% 7.74% 7.49% 6.73%
-------------------------------------------------------------------
Total capital
to risk assets 11.27% 10.92% 11.29% 10.77% 9.54%
-------------------------------------------------------------------
Ratio of specific
provision to
total credit
to the public(a) 0.70% 1.81% 1.34% 0.71% 0.66%
-------------------------------------------------------------------
Ratio of specific
provision to
total credit
to the public
attributed to
the statement
of profit and
loss(a) 0.49% 1.49% 0.76% 0.44% 0.14%
-------------------------------------------------------------------
Return of
operating
profit (loss)
on equity, net(a) 0.4% (7.9%) 8.3% 12.6% (36.8%)
-------------------------------------------------------------------
Return of net
profit (loss)
on equity(a) 0.9% (7.3%) 9.6% 13.8% (29.8%)
-------------------------------------------------------------------
(a) Quarterly figures on an annualized basis