JERUSALEM, Nov. 15 (Reuters) – Bank Hapoalim (POLI.TA) reported higher-than-expected quarterly earnings gains on Monday and said business activity had largely returned to pre-COVID-19 levels.
Hapoalim, one of Israel’s two largest lenders, has continued to cut provisions to protect against defaults during the pandemic and will make a large dividend payment next month.
“Overall, we see that loan loss rates are very low. In some parameters, they are back to pre-COVID numbers,” said chief financial officer Ram Gev, adding that non-performing loans were back at 2019 levels.” Consumer write-offs are even lower than what we saw before COVID-19.”
Hapoalim earned 1.21 billion shekels ($390 million) in the July-September period, compared to a profit of 816 million shekels in the third quarter of 2020, and a profit of 1.09 billion shekels expected in a Reuters poll of analysts .
Net interest income rose to 2.57 billion shekel from 2.20 billion shekel a year earlier, while it reported loan loss income of 252 million shekel a year earlier after posting loan loss provisions of 193 million.
In the first nine months of 2021, it recovered 1.41 billion shekels from loan loss provisions, compared to 2.13 billion shekels in the same period last year.
“Most of the material portion of the provision taken during COVID was reversed,” Gev told Reuters, citing a rapidly recovering economy that has improved its loan portfolios.
He said the bank could release more loan loss provisions in the next quarter or two, but would still maintain a few “hundreds of millions of shekels” in provisions in case the COVID and economic situation worsens.
Hapoalim said it would pay a dividend of 362 million shekels, or 30% of net profit, in the third quarter in December, as well as a 500 million shekel dividend from the first half of the year.
The ratio between Common Equity Tier 1 capital and risk components fell in September from 11.53% a year earlier to 11.18%. But they were well above the 9.2% minimum demanded by Israel’s banking regulator.
At the start of the COVID-19 crisis, the central bank cut its capital requirements for banks by one percentage point to encourage lending during the pandemic. This directive will expire at the end of 2021.
“After the expiration of the temporary order, if not renewed or updated, the board of directors plans to update its internal target for the Tier 1 capital ratio to 10.5%,” said Hapoalim.
Shares of Hapoalim fell 1% in morning trading in Tel Aviv.
($1 = 3,1035 shekels)
Reporting by Steven Scheer Editing by Ari Rabinovitch, Robert Birsel
Our Standards: The Thomson Reuters Trust Principles.