In the third quarter of this year, Bank Leumi (TASE: LUMI) continued to prepare for a worsening of its credit portfolio, but made lower provisions than in previous quarters. Its cushion against future credit losses was increased to NIS 550 million.
Bank Leumi posted a profit NIS 750 million for the third quarter of 2020, 3% less than in the corresponding quarter of 2019. This is despite credit loss provisions 200% higher than in the corresponding quarter. The bank’s interest income gew 6% and non-interest income grew 11%.
For the first nine months of 2020, Bank Leumi’s net profit was down 56% in comparison with the corresponding period of 2019. Credit loss provisions in the period totaled NIS 2.28 billion, five times as much as in the corresponding period, in order to absorb possible losses arising from customer insolvencies and financial difficulties because of the coronavirus pandemic.
The bank’s credit portfolio grew by just 0.7% in the third quarter, to NIS 286.4 billion. As a proportion of deposits from the public, the credit portfolio fell to 67% at the end of the third quarter from 75.6% at the end of 2019, as deposits grew by 14.3%.
The bank reported that a return on equity in the third quarter of 8.4%, which compares with 8.7% in the corresponding quarter of 2019. For the first nine months of 2020, return on equity was 4.5%, which compares with 10.4% in the corresponding period of 2019, or 9.6% excluding the sale of credit card company Leumi Card last year.
The bank’s specific provisions for credit losses totaled NIS 274 million for the first nine months of 2020, while its general provision shot up from NIS 434 million in the first nine months of 2019 to NIS 2 billion for the first nine months of 2020.
In the third quarter, the bank reduced its specific provisions by NIS 5 million, but raised its general provision by 38% (NIS 552 million) in comparison with the second quarter.
The credit loss expense for the first nine months of 2020 represents 1.05% of the average balance of credit to the public, which compares with 0.21% in the corresponding period of 2019.
The bank did however reduce its operating costs, chiefly salary costs, by 10% in the first nine months of 2020.
Published by Globes, Israel business news – en.globes.co.il – on November 17, 2020
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