Bank Hapoalim BM Reports Record Profits and Growth

Bank Hapoalim BM ((BKHYY)) has held its Q3 earnings call. Read on for the main highlights of the call.

Bank Hapoalim BM’s recent earnings call painted a picture of strong financial health, marked by record net profit and substantial credit growth. While the bank’s effective cost management and innovative product offerings were highlighted, concerns about regulatory risks and economic uncertainties were also discussed. Overall, the positive growth and profitability aspects seemed to outweigh the challenges faced by the bank.

Record Net Profit and Return on Equity

The bank reported an impressive 16.1% return on equity for the first nine months, alongside a net profit of ILS 7.3 billion, excluding ILS 380 million from insurance reimbursement. This record-breaking performance underscores the bank’s robust financial standing and strategic management.

Strong Credit Growth

Bank Hapoalim achieved an 8.1% credit growth year-to-date, with an 11.4% increase in the credit portfolio over the last 12 months. This growth reflects the bank’s successful lending strategies and its ability to capitalize on market opportunities.

Impressive Cost Management

The bank’s operating and other expenses were lower compared to all comparable periods, with a cost/income ratio of 30.6% for the quarter. This demonstrates the bank’s effective cost management strategies, contributing to its overall profitability.

Positive Macroeconomic Environment

The macroeconomic environment was favorable, with GDP growing at an annualized rate of 12.4% in the third quarter and inflation decreasing to a year-on-year rate of 2.5%. These factors provided a supportive backdrop for the bank’s operations.

Innovative Product Offering with Bit

The bank’s Bit app saw its active customer base grow to 3.45 million, with a new saving pockets feature offering customers 4% interest. This innovation highlights the bank’s commitment to enhancing customer experience and engagement.

Decrease in Non-Regular Financing Income

Non-regular financing activities saw a decrease due to customer benefits granted in line with the Bank of Israel voluntary program. This reflects the bank’s adherence to regulatory guidelines and customer-centric approach.

Decline in Retail Deposits

Retail deposits decreased over the last year but still represent 54% of total deposits. This decline poses a challenge, yet the bank maintains a strong deposit base.

Regulatory Uncertainties

Potential regulatory risks, including increasing tax rates on banks and a possible tax for mortgage subsidization, were highlighted as concerns. These uncertainties could impact the bank’s future financial performance.

Persistent Economic Uncertainty

Despite a ceasefire, economic uncertainty remains, affecting provisions for credit losses. The bank continues to navigate these challenges with a prudent approach.

Forward-Looking Guidance

In the earnings call, CFO Ram Gev emphasized the bank’s robust financial performance and strategic initiatives. The bank reported a CET1 capital ratio of 12.05% and an LCR of 124%, with a declining NPL ratio of 0.49%. The financial margin increased to 2.77%, and the cost/income ratio stood at 30.6% for the quarter. The bank maintained a 50% profit distribution strategy, with 40% as dividends and 10% for share buybacks. These metrics highlight the bank’s disciplined cost management and prudent approach amid economic uncertainty.

In conclusion, Bank Hapoalim BM’s earnings call showcased a strong financial performance with record profits and credit growth. While challenges such as regulatory risks and economic uncertainties persist, the bank’s effective cost management and innovative strategies position it well for future growth. Investors and stakeholders can take confidence in the bank’s robust financial health and strategic direction.