Israel’s Bank Hapoalim returns to pre-COVID-19 levels in Q3

JERUSALEM, Nov 15 (Reuters) – Bank Hapoalim (POLI.TA) reported a higher-than-expected gain in quarterly profit on Monday and said business activity had largely returned to pre-COVID-19 levels.

Hapoalim, one of Israel’s two largest lenders, continued to unwind provisions to protect against loan defaults during the pandemic and is set for a large dividend distribution next month.

“Overall, we see the number of credit losses is 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 to 2019 levels. “Write-offs by consumers are even lower than what we saw before COVID-19.”

Hapoalim earned 1.21 billion shekels ($390 million) in the July-September period, compared with an 816 million shekel profit 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 shekels from 2.20 billion shekels a year earlier, while reporting income for credit losses of 252 million shekels after posting provisions for loan losses of 193 million a year earlier.

Over the first nine months of 2021, it recovered 1.41 billion shekels from credit loss provisions, compared with provisions of 2.13 billion made in the same period last year.

“Most of the material part of the provision made during COVID was reversed,” Gev told Reuters, citing a rapidly recovering economy that has improved its loan books.

He said the bank could release more of the loan loss provisions in the next quarter or two but it would still maintain a few “hundreds of millions of shekels” of provisions in case the COVID and economic situations deteriorated.

Hapoalim said it would distribute in December a third quarter dividend of 362 million shekels, or 30% of net profit, as well as pay out a 500 million shekel dividend from the first half of the year.

Its ratio of common equity Tier 1 capital to risk components slipped to 11.18% in September from 11.53% a year earlier. But they were well above a 9.2% minimum demanded by Israel’s banking regulator.

At the outset of the COVID-19 crisis, the central bank lowered its capital requirements for banks by one percentage point to encourage loans during the pandemic. This directive is set to end at the end of 2021.

“Upon the expiration of the temporary order, if it is not extended or updated, the board of directors intends to update its internal target for the Tier 1 capital ratio to 10.5%,” Hapoalim said.

Hapoalim’s shares were down 1% in morning trade in Tel Aviv.

($1 = 3.1035 shekels)Reporting by Steven Scheer Editing by Ari Rabinovitch, Robert Birsel

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This article was originally published by Reuters.