Bank Leumi: Record 2.83 Billion Shekel Profit and Significant Efficiency Gains
With record profits, a 16.3% return on equity, and one of the world's best efficiency ratios, Bank Leumi continues to demonstrate strength despite the special tax imposed on the banking sector. Read on for the details.
Bank Leumi, under the management of Hanan Friedman, has reported strong financial results. Net profit rose by 8.5% to 2.83 billion shekels, a record figure for the bank, up from 2.6 billion shekels in the same quarter last year. Return on equity (ROE) stands at 16.3%, an improvement compared to 16.2% in the same quarter last year.
The bank's performance is particularly notable given the special tax imposed earlier this year on the five largest banks, totaling 3 billion shekels. Excluding the impact of this tax, Bank Leumi's profit would have reached 3.1 billion shekels, with an ROE of 17.9%.
In the first half of the year, ROE stood at 14.9%, meeting the upper threshold of the strategic plan's target range (13.75%–15.25%). The bank will distribute 1.4 billion shekels in dividends—half of its net profit. Of this, 1.1 billion shekels will be paid in cash, with the remainder allocated to a share buyback program.
Net interest income for the half-year totaled 4.57 billion shekels, an increase of 0.7% year-on-year. For the first six months, net interest income reached 8.5 billion shekels, a 1% decrease. Key factors influencing interest income included the relatively sharp decline in the Bank of Israel's interest rate and increased competition in the banking system regarding deposit and loan rates.
Non-performing loans (NPL) stood at 0.45%, a slight increase from 0.43% in the second quarter of last year. Credit loss expenses in the second quarter were 291 million shekels (0.2% of the average credit balance). For the half-year, credit loss expenses totaled 457 million shekels (0.17% of the average credit balance). The bank noted that for the tenth consecutive quarter, all expenses were covered by collective provisions, while specific provisions recorded income. Leumi's stock has climbed 24% over the past year, with a market capitalization of 110 billion shekels.
The bank's efficiency ratio improved dramatically, falling to 24.9% from 29.1% in the previous quarter. This is a very low figure by global standards and arguably the best in the Israeli banking system, which the bank attributes in part to the use of artificial intelligence (AI).
Leumi's credit portfolio has grown by 9% since the beginning of the year, outpacing its main competitor, Hapoalim, which reported 6.6% growth. Net credit to the public currently stands at 566 billion shekels (a 15.8% annual increase). Business lending saw the strongest growth at 14%, while commercial credit grew by 6.5% and mortgages by 4.1%. The bank noted that credit growth is currently exceeding its annual target of 8%–10%.
