Bank Hapoalim Group Financial Statements for the Third Quarter of 2007

New York, New York, UNITED STATES




             Highest Quarterly Net Operating Profit
                  In Bank Hapoalim's history

     Net Operating Profit for the third quarter of 2007 totaled
    NIS 826 million, an increase of 15.4% compared to the previous
      quarter and 43.4% compared to the same quarter last year.

TEL AVIV, Israel, Nov. 21, 2007 (PRIME NEWSWIRE) -- Net Operating Profit for the first nine months of 2007 totaled NIS 2,232 million, compared to NIS 1,859 million in the same period last year, an increase of 20.1%.



 *    Net return on equity from regular activity in the third quarter
      totaled 18.4% in annual terms, compared to 16.1% in the previous
      quarter and 13.9% in the same quarter last year.

      Net return on equity from regular activity for the first nine
      months of 2007 was 16.1% in annual terms, compared to 14.8% in
      the same period last year and 14.4% for the year 2006.

 *    Net Profit for the third quarter of 2007 totaled NIS 823 million,
      compared to NIS 1,002 million in the previous quarter and NIS
      768 million in the same quarter last year, a decrease of 17.9%
      and an increase of 7.2%, respectively.

 *    Net Return on Equity in the third quarter totaled 18.3% in annual
      terms, compared to 23.0% in the previous quarter and 18.8% in the
      same quarter last year.

      Net Return on Equity for the first nine months of 2007 was 17.8%
      in annual terms, compared to 20.9% for the same period in 2006
      and 19.4% for the year 2006.

 *    Net Interest Income in the third quarter totaled NIS 2,477
      million, compared to NIS 2,053 million in the previous quarter
      and NIS 2,013 million in the same quarter last year, an increase
      of 20.7% and 23.1%, respectively.

 *    The Bank declared a dividend of NIS 403 million, representing 32
      agorot per NIS 1 par value share. November 27, 2007 is the date
      of record, November 28, 2007 is the ex-date and December 12, 2007
      is the date of payment


     Profit and                     For the nine months
   Profitability                     ended September 30
 ---------------------        -------------------------------
   In NIS Millions              2007       2006       Change
 ---------------------        -------------------------------
 Profit from Financing
  Activity, before
  provisions                   6,370      5,956         7.0
 Operating and Other
  Income                       3,710      3,744        -0.9
 Total Income before
  provisions                  10,080      9,700         3.9
 Provision for
  Doubtful Debts                 522        811       -35.6
 Operating and Other
  Expenses                     5,849      5,610         4.3
 Operating Profit
  before taxes                 3,709      3,279        13.1
 Net Operating Profit          2,232      1,859        20.1
 Net Profit                    2,460      2,610        -5.7



   Profit and
  Profitability                                           Change %
 ---------------   ---------------------------------------------------
 In NIS Millions   3Q2007    2Q2007    3Q2006        2Q2007      3Q200
 ---------------   ---------------------------------------------------
 Profit from
  Financing
  Activity,
  before
  provisions        2,477     2,053     2,013        20.7        23.1
 Operating and
  Other Income      1,207     1,196     1,162         0.9         3.9
 Total Income
  before
  provisions        3,684     3,249     3,175        13.4        16.0
 Provision for
  Doubtful Debts      139       202       273       -31.2       -49.1
 Operating and
  Other Expenses    2,132     1,868     1,885        14.1        13.1
 Operating Profit
  before taxes      1,413     1,179     1,017        19.9        38.9
 Net Operating
  Profit              826       716       576        15.4        43.4
 Net Profit           823     1,002       768       -17.9         7.2

The Chairman of the Board of Directors, Mr. Dani Dankner, commented:

Bank Hapoalim's net operating profit for the third quarter of 2007 is the highest ever in the history of the Bank. This is a noteworthy achievement, which attests to the Bank's strength and ability to increase profits even in relatively volatile times, such as those we experienced during the last quarter.

Despite the crisis in the U.S. market, the Bank successfully increased profit. We believe that when stability comes back to the market, this will sort itself out over a period of time, markets are still volatile, and since our operations were and are based on a long term strategy, we will be there for the harvesting as well.

The Bank continues to see business development abroad as a key growth engine in order to increase its overall banking activity. I believe that our efforts in this area will come to fruition in the near future.

ROE reached 16.1% in the first nine months of 2007, well in line with our guidance of 15% which was announced at the beginning of the year.

The Board of Directors decided to continue the policy set some time ago of paying out at least 50% of its net profit as dividends to shareholders each quarter. This policy was established in line with the Bank's strategic goal of maximizing shareholder value. Dividend yield for our shareholders remains high and has reached an annualized rate of approximately 6.3%.

I am pleased to conclude that the third quarter results, along with other data, indicate that we are progressing towards realization of the goals outlined in the Bank's multi-year strategic plan.

The CEO of Bank Hapoalim, Mr. Zvi Ziv, commented:

One of the most notable items in the financial statements for the third quarter of 2007 is the impressive 23.1% growth in financing profit year-on-year. This growth is particularly important in view of our strategy to manage the Bank's financial capital more actively, with the aim of achieving growth in financing profit even under conditions of volatility, when risk is naturally greater. The growth attained indicates significant improvement in the management of the Bank's financial capital and in the Bank's ability to take advantage of market opportunities.

The impressive growth in financing profit was achieved in spite the turmoil in the U.S. mortgage market and the specific effect it had on the quarterly results.

I would like to emphasize that the Bank is very liquid in foreign currency. I believe that this fact, together with the quality of the financial assets held by the Bank in the United States, indicates that the decline in value is mostly of a temporary nature.

During the quarter, the volume of the Bank Group's financial activity increased; the volume of retail and corporate credit grew; and the amount of deposits from the public increased. The net profit of our activity in the corporate sector grew in the third quarter by 32.7% compared with the profit in the same quarter last year.

I would also like to mention, with great satisfaction, that our Corporate Area continues to work towards maintaining and strengthening Bank Hapoalim's leading position among clients in the corporate sector. The provision for doubtful debts decreased by 35.6%, from NIS 811 million in the first three quarters of 2006 to NIS 522 million in January-September 2007, indicating the continued improvement in the quality of our credit portfolio.

A key objective of our long-term strategy is to increase the volume, revenues, and profits from our activity overseas, as a share of our overall banking activity. The financial statements indicate growth in profit both at Bank Pozitif in Turkey and at Hapoalim Switzerland.

The increase in the Bank's salary expenses resulted from the provision made in respect of the wage agreement reached with the Bank's employees. In this context, I would like to emphasize the good working relationship and the atmosphere of trust and cooperation between the management of Bank Hapoalim and its employees.



 The following are the main highlights of the financial statements:

 *    Net Return on Equity for the first nine months of 2007 was 17.8%
      in annual terms, compared to 20.9% for the same period in 2006
      and 19.4% for the year 2006. Net return on equity for third
      quarter of 2007 was 18.3%, in annual terms, compared to 18.8% in
      the same quarter in 2006.

 *    Net Return on Equity from regular activity for the first nine
      months of 2007 was 16.1% in annual terms, compared to 14.8% in
      the same period in 2006 and 14.4% for the year 2006. Net Return
      on Equity from regular activity for the third quarter was 18.4%
      in annual terms compared to 13.9% in the same quarter in 2006.

 *    Net Profit from Extraordinary Transactions, after taxes, for the
      first nine months of 2007 reached NIS 228 million, mainly as a
      result of the sale of the Bank's holdings in provident funds
      (Kovetz) which totaled about NIS 290 million. This profit was
      offset by the recording of a deferred tax expense related to the
      sale of Bank Yahav and Bank Massad, totaling NIS 74 million. In
      the same period last year the profit totaled NIS 751 million
      stemming mainly from the sales of P.K.N. mutual fund management
      rights, Bank Otsar Hahayal and the sale of Industrial Buildings.

 *    Profit from financing activity, after provisions for doubtful
      debts, totaled NIS 5,848 million, in the first nine months of
      2007 compared to NIS 5,145 million in the same period last year,
      an increase of 13.7%.

 *    Provisions for doubtful debts decreased by 35.6% and totaled NIS
      522 million in the first nine months of 2007, compared to NIS 811
      million in the same period last year.

 *    The ratio of specific provision for doubtful debts, relative to
      the overall (balance-sheet) balance of credit to the public at
      the Group's risk was 0.29% in annual terms, in the first nine
      months of 2007, compared with 0.53% in the first nine months of
      2006 and for the year 2006.

 *    The ratio of the overall balance of credit to the public
      (balance-sheet and off-balance sheet) at the Group's risk was
      0.16% in the first nine months of 2007, compared with 0.31% in
      the same period last year and 0.30% in the year 2006.

 *    Operating and other expenses totaled NIS 5,849 million, in the
      first nine months of 2007 compared to NIS 5,610 million in the
      same period in 2006, an increase of 4.3%.

 Main developments in the first nine months of 2007 compared to the
 same period last year:

 *    Profit from financing activity before provision for doubtful
      debts increased. The growth resulted mainly from the measurement
      of profit and loss in derivative instruments on a fair-value
      basis, in contrast to measuring results of balance-sheet
      financial activity on an accrual basis and especially from the
      volatility in the CPI-linked interest rates during the period. In
      addition, financing income from financial capital invested in the
      various linkage segments increased, an increase in the financing
      profits of Bank Pozitif, which was consolidated for the first
      time in the reporting period and growth in the volume of the Bank
      Group's finance activity. All these were offset by the cessation
      of consolidation of Bank Otsar Hahayal in the same period last
      year.

 *    A decrease in the provision for doubtful debts that reflects the
      continued improvement of the Bank's loan portfolio. The decrease
      occurred mainly in the construction and real estate, financial
      services and hotels sectors, as a result of an improvement in the
      repayment capability of borrowers. Conversely, provisions
      increased in the industry and private individuals sectors.

 *    A decrease in the overall credit risk due to problematic
      borrowers, in most economic sectors, as a result of the
      improvement in the domestic economic indicators, including an
      increase in the business sector GDP, which led to improved
      conditions for borrowers.

 *    A decrease in Operating and other income mainly due to a decrease
      in mutual fund and provident fund management fees. The decrease
      was offset by continued growth in commissions from securities
      activity and an increase in the contribution of credit card
      companies, due to increased volumes of activity in both areas.

 *    Operating and other expenses increased, as a result of the
      implication of the signing of a wage agreement, which led to an
      expense in the amount of NIS 145 million, for ranking and
      seniority costs within salaries and promotion of employees, the
      effect of the first time consolidation of results of the
      acquisition of Bank Pozitif, and also an increase in costs
      related to marketing, advertising and professional services.

 Development of Balance Sheet Items

 -    The consolidated balance sheet totaled NIS 301.9 billion on
      September 30, 2007, compared to NIS 282.9 billion on December 31,
      2006, an increase of 6.7%.

 -    Shareholder's equity totaled NIS 19.2 billion on September 30,
      2007, compared to NIS 18.2 billion at the end of 2006, an
      increase of 5.1%.

 -    Credit to the Public totaled NIS 198.9 billion an increase of
      6.7% compared to the end of 2006.

 -    Deposits from the Public totaled NIS 231.9 billion an increase of
      6.9% compared to the end of 2006.

 -    The ratio of capital to risk assets was 10.33%, compared with
      10.53% at the end of 2006. The ratio of tier-1 capital to risk
      assets was 7.42%, versus 7.41% at the end of 2006.

Segments of activity

The Group operates in Israel and abroad, providing a broad range of banking and financial services to its customers, and engages in investments, primarily in Israel, in the areas of insurance and real estate, by means of equity-based investee companies.

The Group's activity is managed through six sectors of activity.

The following is a summary of the development of net profit, by segments of activity:



 
 Net Operating Profit      For the nine months    For the three months
 In NIS Millions            ended September 30     ended September 30
                           ---------------------   -------------------
                           2007    2006   Change   2007   2006  Change
                           ---------------------   -------------------
 Households Segment         207     273   -24.2     48     95    -49.5
 Private Banking Segment    324     353    -8.2     85     83      2.4
 Small Business Segment     160     150     6.7     46     50     -8.0
 Commercial Segment          90      54    66.7     31     17     82.4
 Corporate Segment          795     600    32.5    211    159     32.7
 Financial Mgmt. Segment    598     386    54.9    392    154    154.5
 Others and Adjustments      58      43    34.9     13     18    -27.8
 Total                    2,232   1,859    20.1    826    576     43.4


                  Principal Data of the Bank Hapoalim Group

                                        For the 3 months
 Profit and profitability                   ending on
 ------------------------                 September 30
                                        -----------------
                                         2007       2006      Change
                                        ------     ------     ------
 Profit from financing activities
  before provision for doubtful debts    2,477      2,013      23.1%
 Provision for doubtful debts              139        273     (49.1%)
 Operating and other income              1,207      1,162       3.9%
 Operating and other expenses            2,132      1,885      13.1%
 Operating profit before taxes           1,413      1,017      38.9%
 Provision for taxes on operating
  profit                                   561        457      22.8%
 Operating profit after taxes              852        560      52.1%
 Operating profit                          826        576      43.4%
 Net profit from extraordinary
  transaction, after taxes                  (3)       192        --
 Net Profit                                823        768       7.2%


                                         For the 9 months
                                             ending on
                                           September 30
                                        -----------------
                                         2007       2006      Change
                                        ------     ------     ------
 Profit from financing activities
  before provision for doubtful debts    6,370      5,956       7.0%
 Provision for doubtful debts              522        811    (35.6%)
 Operating and other income              3,710      3,744     (0.9%)
 Operating and other expenses            5,849      5,610       4.3%
 Operating profit before taxes           3,709      3,279      13.1%
 Provision for taxes on operating
  profit                                 1,489      1,452       2.6%
 Operating profit after taxes            2,220      1,827      21.5%
 Operating profit                        2,232      1,859      20.1%
 Net profit from extraordinary
  transaction, after taxes                 228        751    (69.6%)
 Net Profit                              2,460      2,610     (5.7%)



 Balance Sheet - Principal Items
 -------------------------------
                                              Change compared with
                                              --------------------
               30.9.2007 30.9.2006 31.12.2006 30.9.2006 31.12.2006
               --------- --------- ---------- --------- ----------
 Total balance
  sheet          301,899   281,215    282,864      7.4%       6.7%
 Credit to the
  public         198,925   188,769    186,463      5.4%       6.7%
 Securities       49,026    43,348     44,456     13.1%      10.3%
 Deposits from
  the public     231,922   216,872    217,004      6.9%       6.9%
 Debentures and
  subordinated
  notes           18,402    19,226     18,384     (4.3%)      0.1%
 Shareholders'
  equity          19,157    17,742     18,233      8.0%       5.1%


 Principal financial ratios
 --------------------------
                                        30.9.2007  30.9.2006  31.12.2006
                                        ---------  ---------  ----------
  Shareholders' equity to total assets       6.3%       6.3%       6.4%
  Tier I capital to total assets             7.4%       7.1%       7.4%
  Capital to risk assets                   10.33%     10.27%     10.53%
  Credit to the public to total assets      65.9%      67.1%      65.9%
  Deposits to the public to total
   assets                                   76.8%      77.1%      76.7%
  Operating income to operating
   expenses                                 63.4%      66.7%      67.6%
  Operating expenses to total income        58.0%      57.8%      58.9%
  Provision for doubtful debts to
   credit to the public
   (balance sheet and off-balance
   sheet)(a)                                 0.3%       0.4%       0.3%
  Rate of provision for taxes               40.1%      44.3%      43.8%
  Return of operating profit after          16.1%      14.8%      14.4%
   taxes on equity, net(a)
  Return of net profit on equity(a)         17.8%      20.9%      19.4%
  Return of net profit on total              
   assets(a)                                 1.2%       1.3%       1.2%

 (a) Annualized.


        

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