The return to routine of Israel’s economy has led to record profits for the banks in the second quarter. Israel Discount Bank (TASE: DSCT) released its quarterly financials this morning, showing a net profit of NIS 860 million, which compares with NIS 174 million in the1 second quarter of 2020, representing growth of 394.3%. For the first half of 2021, the bank’s net profit totaled NIS 1.52 billion, which compares with NIS 453 million in the first half of 2020, representing growth of 236%.
Discount Bank has posted the highest return on equity of the banks that have reported so far: an annualized 18.3% in the second quarter, which compares with 3.7% in the corresponding quarter. For the first half of 2021, return on equity was an annualized 16.1%, which compares with 4.8% in the first half of 2020.
The high return on equity Is partly thanks to a sharp reduction in the credit loss expense in the first half of 2021. In the second quarter, the bank posted net income on this item of NIS 410 million, which compares with a net expense of NIS 532 million in the corresponding quarter. In the first half of 2021, net income on the credit loss item was NIS 557 million, versus a net loss of NIS 1.188 billion in the first half of 2020.
Had credit losses been at the rate that prevailed before the coronavirus pandemic broke out (an average of 0.37% in 2016-2019), Discount Bank’s annualized return on equity, excluding certain items, in the second quarter of this year would have been 10.1%, and in the first half year 10.6%.
Total credit to the public at the end of the second quarter was NIS 199 billion, which compares with NIS 189 billion at the end of 2020, representing growth of 5.4%. Discount Bank says that the growth reflects increased activity in the market segments targeted in its latest strategic plan. In comparison with the end of 2020, credit to medium-size businesses grew 10.2%, and mortgage loans grew 10.5%.
In addition, because people traveled overseas less under the travel restrictions imposed to combat the Covid-19 pandemic, deposits from the public grew, totaling NIS 241 billion at the end of the second quarter, 6.4% more than the NIS 226 billion at the end of 2020.
Net interest income for the second quarter was NIS 1.685 billion, which compares with NIS 1.463 billion in the corresponding quarter, representing a rise of 15%. In the first half year, net interest income rose 9.3% to NIS 3.189 billion.
Discount Bank’s investment subsidiary Discount Capital contributed a net profit of NIS 67.6 million to the group’s quarterly profit; Discount Bank of New York contributed NIS 25 million, with a return on equity of 8.7%, and credit card company Cal, controlled by Discount Bank, released results yesterday showing a net profit for the second quarter of NIS 79 million.
Restored credit losses boost Hapoalim Q2 profit to NIS 1.42b
Shareholders’ equity at the end of the second quarter was NIS 21.35 billion, which compares with NIS 19.73 billion at the end of 2020.
Discount Bank has announced that its board has decided to resume dividend distributions of 20% of the profit available for distribution each quarter, subject to any restrictions that may be imposed by the Supervisor of Banks. Bank Hapoalim has already declared a dividend of NIS 617 million and Bank Leumi a dividend of NIS 630 million on their 2020 profits.
Discount Bank CEO Uri Levin said, “The Discount group has presented record profits in the second quarter of 2021. In this quarter too, the bank demonstrated that it is a main factor in encouraging competition in the banking system, and its commitment to uncompromising implementation of its multi-year strategic plan, with responsible and controlled growth in its credit portfolio, with an emphasis on its strategic focus areas.”
Published by Globes, Israel business news – en.globes.co.il – on August 16, 2021
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