Bank Leumi Board Reinstates Dividend After Six-Year DroughtBy
Bank Leumi Le-Israel Ltd. will pay a dividend for the first time in six years after shoring up its finances with asset sales and measures to lower costs, including job cuts.
Israel’s second-biggest bank will pay 20 percent of profits starting in the first quarter, according to an emailed statement. The bank’s capital ratio measuring financial strength rose to 11.15 percent at the end of 2016, above regulatory requirements for distributing dividends.
"The high capital adequacy we have reached will enable further expansion," Chief Executive Officer Rakefet Russak-Aminoach said in the statement.
Boosting dividends is a consistent theme for Israeli banks, which for years have lagged their European peers in terms of payouts as a percentage of share price. Combined with high expenses relative to their incomes, the low dividend yield has depressed their shares, with the price-to-book ratio of the Tel Aviv Bank Index trailing that of the MSCI Europe Banks Index, despite trading near a record-high.
Reinstating the dividend caps a year in which Leumi saw profit dip 2 percent to 2.79 billion shekels ($772 million). Fourth-quarter income rose 3 percent to 443 million shekels. The bank recorded a 40 percent increase in a provision for bad loans for the quarter, though at 46 million shekels it was well below its competitors.
Leumi gained 0.6 percent to 16.17 shekels at 11:25 a.m. in Tel Aviv, compared to a decline of 0.4 percent in Israel’s benchmark TA-35 Index.