Israel’s Banks Report Lower Profit on Provisions, Slower Growth

Israel’s three biggest lenders, Bank Leumi Le-Israel Ltd. (LUMI), Bank Hapoalim Ltd. (POLI) and Israel Discount Bank Ltd. (DSCT), reported a decline in third-quarter profit as the economy slowed and they set aside more money for bad loans.

Net income at Bank Leumi fell 74 percent to 155 million shekels ($40.8 million) from a year earlier, missing the average 208 million-shekel estimate of four analysts surveyed by Bloomberg. Profit at Hapoalim dropped 9.1 percent to 471 million shekels, the Tel Aviv-based bank said today in a statement, matching analyst estimates.

The Bank of Israel on Nov. 28 cut its benchmark interest rate for the second time in three months to cushion the economy from the impact of a European debt crisis that it said is “becoming more severe.” All three Tel Aviv-based lenders boosted bad-loan provisions during the third quarter.

“We see a decline in profitability which reflects a slowdown in economic activity,” said Adi Scop, a financial- services analyst at IBI-Israel Brokerage and Investments Ltd. in Tel Aviv. While the position of the country’s banks is “sound,” a base scenario would see the economy slipping into a recession, Scop wrote in a note released on Nov. 27.

Provisions at Bank Leumi rose more than eightfold to 378 million shekels, while those at Hapoalim climbed 72 percent to 498 million shekels in the quarter. Israel Discount said net income fell by more than half to 121 million shekels in the third quarter as the bank increased provisions by a third to 226 million shekels.

First International Bank of Israel Ltd. (FTIN), which also reported earnings today, said third-quarter profit slumped 84 percent to 21 million shekels from a year earlier.

To contact the reporter on this story: Shoshanna Solomon in Tel Aviv at ssolomon22@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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