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- Return on Equity (ROE): 15.5% for Q3 2024; 17.1% for the first nine months of 2024.
- Net Income: ILS2.3 billion for Q3 2024.
- Cost Income Ratio: 31.1% in Q3 2024; 29.6% for the first nine months of 2024.
- Credit Growth: Up 3% from the previous quarter; 6.5% since the start of the year.
- Book Value Per Share: Increased 3.8% quarter-on-quarter; up 16.1% over the last 12 months.
- Net Interest Income: Increased by 16% compared to the parallel quarter last year.
- Non-Performing Loans (NPL): Declined to 0.52% of gross loans.
- Core Tier 1 Equity Ratio: Increased to 12.07%.
- Dividend and Share Buyback: Declared a cash dividend of ILS688 million for Q3; part of a ILS1 billion share buyback plan.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Bank Leumi Le-Israel BM (BLMIF) reported a strong third quarter with a net income of ILS2.3 billion and a return on equity (ROE) of 15.5%.
- The bank's credit position remains robust, with non-performing loans (NPL) declining to 0.52% of gross loans and problematic loans decreasing to 1.44%.
- Core Tier 1 equity increased to 12.07%, providing a significant buffer above the minimum regulatory requirement.
- Net interest income increased by 16% compared to the same quarter last year, driven by an increase in the credit portfolio and higher CPI.
- The bank declared a cash dividend of ILS688 million for the third quarter and initiated a share buyback plan, reflecting a 40% total payout.
- The bank's ROE was negatively impacted by losses from derivatives used to hedge the securities portfolio, with profits reported in other comprehensive income (OCI).
- Inflation remains slightly elevated at 3.5% year-on-year, and the Bank of Israel is not expected to cut rates in the near term.
- The fiscal deficit, although declining, remains a concern, having only recently decreased to below 8%.
- The level of GDP in the third quarter of 2024 is still 1% lower than the corresponding period in 2023, indicating a slow recovery.
- The geopolitical situation, including the ongoing war, continues to impact the bank's operations and economic environment, leading to increased collective provisions.
A: Despite geopolitical challenges, we increased our credit portfolio by 6.5% in the first nine months of 2024. The demand for credit, especially in corporate, real estate, and middle market, has been strong. We expect a rebound in the economy post-war, which should further drive loan demand. As for provisions, the credit loss expense ratio remains reasonable at less than 0.3%, with collective provisions impacted by geopolitical circumstances. We continue to maintain strong credit quality with declining NPLs and troubled debts.
Q: Can you provide more color on your net interest margin (NIM) performance and expectations?
A: Our NIM has been increasing due to asset mix optimization, despite a shift from current accounts to time deposits. We focus on pricing loans and deposits effectively, considering factors like duration and currency. We have managed to improve NIM even in a competitive environment, and we aim to continue this trend.
Q: With a strong capital buffer, what are your plans for capital return, especially considering the geopolitical situation?
A: We have the highest CET1 ratio in the market at 12.07%, allowing us to consider increasing our payout ratio. Current geopolitical circumstances limit our dividend and buyback capabilities, but once these restrictions are lifted, we will evaluate options for higher capital returns.
Q: How are you handling competition in the market, particularly regarding pricing?
A: There is strong competition on both the loan and deposit sides. We offer comprehensive solutions to our customers, which gives us an advantage. We continue to handle competition effectively by providing competitive pricing and maintaining strong customer relationships.
Q: Regarding your investment in Valley National, are there ways to capitalize on the recent market value increase?
A: Valley's market cap is now almost 40% above our book value. We use the equity method for this investment, but we could consider moving to a mark-to-market approach to record profits immediately. We are satisfied with the current economic potential of this investment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.