First International Bank Profit Falls on Higher Costs

First International Bank of Israel Ltd., the country's fifth-largest lender, said fourth-quarter profit declined 15 percent as higher expenses erased an increase in income from lending and commissions.

Net income dropped to 105 million shekels ($24.9 million), or 0.20 shekels for each par 1 share, from 124 million shekels, or 0.24 shekels, a year earlier, the bank said today in a statement. That beat the median estimate of three analysts surveyed by Bloomberg News for profit to drop to 93 million shekels.

Expenses climbed about 19 percent in the quarter to 560 million shekels. Costs increased after the bank agreed to pay 50 million shekels as a bonus to avert a possible strike in December, as part of new labor agreements, after the bank sold an asset-management unit.

``In the past year we've reached agreements with the unions, which has ended a long period of labor strife,'' Chief Executive Officer David Granot said at a Tel Aviv news conference.

Earnings for the first time included income from Bank Otsar Hahayal Ltd., bought in August from Bank Hapoalim Ltd. FIBI, the first Israeli bank to report its fourth-quarter results, has sought to boost its consumer-loan business, and increase profit by lending to small and medium-sized enterprises that pay higher margins.

The new acquisition is expected ``to add about 1 percent'' to First International's earnings in 2007, Granot said.

Net return on equity was 9.6 percent for the quarter on an annualized basis.

CEO's Succession

Granot, who announced in January he would step down today after six years as First International's CEO, said the transition to his deputy, Smadar Barber-Tzadik, has been ``orderly, planned, the way it should be.'' Granot will remain chairman of Otzar Hahayal.

Shares of First International rose 0.42 shekels, or 0.8 percent, to 52 shekels in Tel Aviv.

FIBI's profit from lending before bad-debt provisions climbed 18 percent to 533 million shekels from 451 million shekels. The bank said it boosted provisions for bad debt to 84 million shekels from 79 million shekels. Operating profit, which includes fees and commissions, rose 31 percent to 330 million shekels from 252 million shekels.

For the year, FIBI boosted net profit 12 percent to 509 million shekels, as lending increased 9.4 percent to 1.83 billion shekels and its debt provision dropped 21 percent to 219 million, the bank said. Income from fees and commissions gained about 13 percent to 1.15 billion shekels.

To contact the reporter on this story: Jonathan Ferziger in Tel Aviv at jferziger@bloomberg.net David Rosenberg in Jerusalem at drosenberg1@bloomberg.net

To contact the editors responsible for this story: Edward Buckle at ebuckle@bloomberg.net;

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