Israeli Banks Boost Second-Quarter Profit as Provisions Fall

Israel’s two largest lenders, Bank Hapoalim Ltd. (POLI) and Bank Leumi Le-Israel (LUMI) Ltd., posted higher second-quarter profit as provisions for bad loans declined.

Bank Leumi net rose 69 percent to 474 million shekels ($131 million) as provisions to cover bad loans dropped 75 percent to 84 million shekels, the country’s second-biggest lender said in an e-mailed statement. Net income at the largest competitor Hapoalim increased eight percent to 655 million shekels as provisions fell 13 percent to 301 million shekels, the bank said in an e-mailed statement.

“Credit quality is improving because corporates are deleveraging,” Terence Klingman, head of research at Psagot Investment House Ltd., said today by phone from Tel Aviv. Leumi profit fell short of Psagot’s forecast of 556 million shekels while Hapoalim surpassed the 617-million shekel estimate.

Restructurings at holding companies such as IDB Holding Corp. (IDBH) and tougher capital adequacy directives from the Bank of Israel are forcing banks to pare lending to corporations. Lending to households is increasing as the nation’s economic growth jumped to 5.1 percent in the second quarter, compared with a 3 percent median estimate of eight economists surveyed by Bloomberg.

Leumi benefited from a 25 percent rise in non-interest income to 1.25 billion shekels, it said. Israel Discount Bank Ltd. (DSCT), the nation’s third-largest, said yesterday second-quarter profit rose 59 percent to 263 million shekels as non-interest income rose to 236 million shekels from 37 million shekels in the same period a year earlier.

Hapoalim said return on equity was 9.9 percent while Leumi reported a 7.6 percent return. Leumi shares rose 1.5 percent to 11.77 shekels as of 10:57 a.m. in Tel Aviv while Hapoalim gained 2 percent to 16.58 shekels.

To contact the reporters on this story: David Wainer in Tel Aviv at dwainer3@bloomberg.net; 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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