Bank Leumi, Hapoalim Profits Likely Rose as Loan-Loss Provisions Declined

Israel’s two largest banks may report higher second-quarter profit as an improving economy led lenders to set aside less money for bad loans, analysts said.

Net income at Bank Leumi Le-Israel Ltd., the country’s largest lender, may increase 23 percent to 624 million shekels ($164 million), according to the median estimate of five analysts surveyed by Bloomberg News. Profit at Bank Hapoalim Ltd., the second-largest bank, may rise 14 percent to 434 million shekels, the survey showed. Leumi’s earnings will include a 169 million-shekel gain from the sale of its holding in Paz Oil Co., the bank said in June.

“The present business environment is considerably better than last year and that leads to lower provisions for doubtful debt and better performance of the banks this quarter,” said Meir Slater, an analyst at Tel Aviv-based DS Brokerage Ltd., who has ”outperform” recommendations on both banks.

Israel’s economic growth accelerated to an annualized 4.7 percent in the second quarter, the fastest pace in more than two years, the Central Bureau of Statistics said Aug. 16. Net income at Mizrahi Tefahot Bank Ltd., the country’s fourth-largest lender, jumped 34 percent in the quarter as the improving economy boosted demand for mortgages.

Bank of Israel Governor Stanley Fischer on July 26 increased the benchmark interest rate for the first time in four months, to 1.75 percent, in a bid to cool housing prices which he said could develop into a bubble. He raised the interest rate by 1 percentage point between August and March.

Lower Provisions

“While the slight increase in the Bank of Israel’s interest rate is beginning to take effect, it is still rather immaterial,” Alon Glazer, an analyst at Leader Capital Markets Ltd. in Tel Aviv, wrote in an Aug. 12 report. “The low interest rate is hurting results.” Glazer has a “market perform” recommendation on Hapoalim and Leumi.

Provisions for non-performing loans may decline 15 percent to 289 million shekels at Leumi and 33 percent to 362.5 million shekels at Hapoalim, according to a Bloomberg survey of four analysts.

Hapoalim is scheduled to report earnings Aug. 25 and Leumi Aug. 31.

To contact the reporter on this story: Ronit Goodman in Tel Aviv at rgoodman9@bloomberg.net

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