Israel’s Bank Leumi to pay big dividend as profit soars

JERUSALEM, Nov 16 (Reuters) – Bank Leumi (LUMI.TA), one of Israel’s two largest lenders, reported on Tuesday a doubling of quarterly net profit, boosted by higher revenue and as it freed up more money it had set aside to protect against loan defaults during the COVID-19 pandemic.

Leumi said on Tuesday it earned 1.55 billion shekels ($500 million) in the July-September period, up from 750 million in the third quarter of 2020 and above a profit of 1.2 billion expected in a Reuters poll of analysts.

Against the backdrop of a steep rise in inflation, net interest income rose to 2.67 billion shekels from 2.22 billion shekels a year earlier.

Leumi recorded income for credit losses of 359 million shekels after setting aside provisions for loan losses of 547 million a year earlier. So far in 2021, the bank has unwound 729 million shekels of provisions, which had reached 2.28 billion shekels in the first nine months of 2020.

The lender, whose credit portfolio has risen 14% the last year, noted that about half of the release of its provision was related to COVID while the rest was general collection due to loan write-offs.

“Leumi continues to deliver strong execution, with solid revenue growth alongside a tight cost control,” said Barclays analyst Tavy Rosner in a note, adding that its shares are up 64% so far this year to outperform an average of 53% for other Israeli banks.

“We see the bank as a compelling income play due to the significant high excess capital balance – 8.5 billion shekels pre-dividend – and resumption of share buy-backs and dividend payouts,” he said.

The bank said it would pay a dividend of 1.367 billion shekels, reflecting 30% of net profit from the first nine months of the year. It distributed a 630 million shekel dividend in September.

Even with 2 billion shekels of dividends approved so far this year, Leumi’s total Tier 1 equity to risk assets stood at 11.83% in September, up from 11.71% a year earlier. The bank expects the Tier 1 ratio to rise another half a point in the wake of Valley National Bancorp’s (VLY.O) purchase of Leumi’s U.S. business.

Leumi’s shares were flat in late morning trade in Tel Aviv.

($1 = 3.1009 shekels)Reporting by Steven Scheer Editing by Ari Rabinovitch

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This article was originally published by Reuters.