First International Bank of Israel (TASE: FIBI) one of Israel's major banking groups today announced its results for the second quarter and first half of 2020

First Half 2020 Highlights

• Net earnings of NIS 168 million and return on equity of 80% for the second quarter of 2020;
• Net earnings of NIS 339 million and return on equity of 81%;
• Earnings from current financing operations increased by 18% to NIS 1409 million;
• Efficiency ratio reached 605%;
• Ratio of Tier I equity capital: 1071%;
• Ratio of comprehensive capital: 1401%;

Profitability

First International Bank Group's Net earnings amounted to NIS 168 million in the second quarter of the year in comparison to NIS 224 million in the corresponding period last year Return on equity reached 80% In the first half of the year net earnings amounted to NIS 339 million and return on equity reached 81%

Earnings in the first half of the year were impacted by the Corona pandemic crisis mostly due to the steep increase in credit loss expenses primarily because of the crisis

Impact of the Corona Crisis on the Financial Statements of the Bank

Expenses due to credit losses amounted to NIS 165 million in the second quarter of the year compared to NIS 23 million in the corresponding period last year a growth of NIS 142 million The rate of the provision for credit losses in the second quarter amounted to 074% as compared with 011% in the corresponding period last year

Credit loss expenses in the first half of the year amounted to NIS 322 million compared to NIS 59 million in the first half of last year a growth of NIS 263 million The rate of the provision for credit losses in the first half of the year amounted to 072% as compared to 014% in the corresponding period last year

The growth in credit loss expenses was primarily due to the impact of the changes in the macro-economic environment as a result of the Corona pandemic and the uncertainty affecting the condition of borrowers Due to this uncertainty in the current environment the Bank decided to increase the collective provision which amounted to NIS 265 million in the first half of the year with the majority of it amounting to NIS 234 million in respect of the crisis

In the first half of the year due to the economic situation the Bank recorded losses on investment in shares of NIS 44 million most of it in unrealized losses due to a decline in the fair value of shares due to the Corona crisis Likewise a provision of NIS 17 million was recorded in respect of an impairment of bonds Most of the losses and the decline in values were recorded in the first quarter of the year while price increases in the capital markets were recorded in the second quarter

Following the growth in customer activity in the financial markets it is noted that there was an increase in income from capital market and foreign currency operations 

Growth

Financing profit from current operations increased in the first half of the year by 18% in comparison with the corresponding period last year and amounted to NIS 1409 million

The profit from financing operations was negatively affected by a reduction in income from differences in the CPI linkage totaling NIS 43 million in comparison to the corresponding period last year

Total commission income increased by 88% (approximately NIS 56 million) to NIS 691 million Most of the growth was due to the increase in activity on the capital and foreign currency markets areas in which the Bank specializes However the growth was partly offset by the reduction in income from ledger fees and credit cards which was due to the decline in the volume of activity as a result of the crisis

The growth in the activity of the Group is noted also in the balance sheet data both on the credit side and on the deposit side Deposits from the public increased by 76% in the first half of the year amounting to NIS 129160 million; of which household and private banking deposits increased by 268% amounting to NIS 69261 million The average balance of credit to the public amounted to NIS 89465 million in the first half of the year a growth of 17% in comparison with that of the end of 2019 and a growth of 52% in comparison with the end of the corresponding period last year 

Efficiency

The Bank continues to improve efficiency in accordance with its strategic outline with the efficiency ratio improving in the first half of the year to 605% as compared with 644% in the corresponding period last year Operating and other expenses amounted to NIS 1254 million 72% lower when compared with the corresponding period last year This also represents a reduction of 19% when excluding employee bonuses employee severance and efficiency measures taken last year The reduction in expenses is noted in most of the expense items including payroll and related expenses which declined by 36% after elimination of the employee bonuses and maintenance and depreciation of buildings and equipment expenses which decreased by 44%

Financial stability

The capital attributed to the shareholders of the Bank reached NIS 8712 million The Tier I equity capital ratio reached 1071% (24 percentage points over the regulatory requirement) in comparison to 1081% at December 31 2019 and the comprehensive capital ratio reached 1401%

During the crisis period the local credit rating companies recently ratified the rating of the First International Bank at AAA the highest rating in the banking system similar to that of the other major banks

Management Comment

Ms Smadar Berber-Tsadik CEO of the First International Bank stated that: Our financial stability our measured and conservative risk management policy our quick response as well as our advanced digital channels have enabled the First International Bank to stand against the ongoing crisis brought about by the global pandemic while continuing its growth and providing optimal service to its customers

Since the beginning of the crisis the Bank has adopted a series of measures intended to be responsive to customer needs helping them confront the new reality This includes extending loans in large volume while providing a quick and professional response within the framework of State funds deferral of loan and mortgage repayments and increasing accessibility for customers through digital and telephonic means Our focus toward technological innovation is reflected in a series of new initiatives: the opening of accounts online obtaining investment consulting services by digital means advanced digital consultation and a range of digital innovations that will be introduced in the near future

In addition the Bank continues its efficiency strategy with the efficiency ratio of the Bank improving significantly to a level of 60%

Recently the Bank achieved leadership in a competitive survey conducted among bank customers in Israel reaching first place in a series of categories in which customers rated the First International Bank in first place with regard to satisfaction from service The Ministry of Finance also rated the First International Bank in first place among banks in Israel based on loan sizes granted to small businesses within the framework of the State secured fund guarantee 

The implications of the current crisis are reflected primarily in the increase in the collective provision creating a reserve cushion and in the reduction in the shekel and dollar interest rates Despite these implications the Bank succeeds in offsetting a part of these implications on profitability by means of the continuing reduction in expenses and improvement in the efficiency ratio which has reached 60% presenting a return of 8%

The First International Bank continues its preparedness given the ongoing crisis while strictly maintaining high financial stability efficiency quality of assets and high capital and liquidity ratios

Dafna Zucker
First International Bank of Israel
e-mail: [email protected]
Tel: +972-3-519-6224

Ehud Helft
GK Investor & Public Relations
e-mail: [email protected]
Tel: +1-646-201-924