PR Newswire | Aug 13, 2020 06:21AM EDT

08/13 05:20 CDT

Bank Hapoalim Announces Second Quarter 2020 Financial Results TEL AVIV, Israel, Aug. 13, 2020

TEL AVIV, Israel, Aug. 13, 2020 /PRNewswire/ -- Bank Hapoalim (TASE: POLI) (ADR: BKHYY), today announced its financial results for the second quarter ended June 30, 2020.

Key financial highlights:

* Net profit totaled NIS 133 million in the second quarter of 2020 (ROE of 1.4%), compared with NIS 871 million in the same quarter last year (ROE of 9.3%). Net profit in the quarter was negatively impacted mainly as a result of NIS 1,128 million of provision for credit losses, of which NIS 806 million were added to the bank's collective allowance as an advance measure in confronting the effects of the COVID-19 crisis. * The Bank continued to demonstrate strong capital and liquidity resilience: Common Equity Tier 1 capital (CET1) ratio stood at 11.23% as at June 30, 2020, well above both regulatory and internal targets. Shareholders' Equity totaled NIS 38.0 billion at the end of the second quarter of 2020, compared with year-end balances of NIS 38.2 billion. Liquidity Coverage Ratio (LCR) stood at 131% as at June 30, 2020, compared with 127% in the same quarter last year.Retail deposits increased 12.2% since year-end and totaled NIS 263.4 billion as at the end of the second quarter. * Reflective of the impact of COVID-19 on credit demand, net credit to the public totaled NIS 293.7 billion, compared with NIS 292.9 billion at the end of 2019, an increase of 0.3%. * Total income from regular financing activity, totaled NIS 2,321 million in the second quarter of 2020, compared with NIS 2,572 million in the same quarter last year, mainly as a result of the lower interest rate environment and negative CPI in the quarter. * Operating and other expenses declined by 8.3% compared with the same quarter last year, totaling NIS 1,826 million, compared with NIS 1,992 million in the second quarter of 2019.

Recent mentions:

* Chairman appointment: On June 28, 2020, the Board of Directors of the Bank resolved to elect Reuven Krupik to the position of Chairman of the Board of Directors. Mr. Krupik replaced Oded Eran, who served as Chairman of the Board since 2017 and passed away in June. * Maala index win: Bank Hapoalim earned the Platinum Plus rating on the Maala corporate responsibility index for the third consecutive year. * Acceleration of efficiency plan: The Bank resolved to accelerate the implementation of its 2020-2022 efficiency plan announced in January, which encompasses voluntary retirement of approximately 900 employees. * COVID-19: The Bank continues its commitment to support its employees, customers and the community in which it operates through the COVID-19 crisis. Among its many initiatives: Deferral of loan payments: The bank has continued to expand measures for its customers who are suffering the effects of COVID-19. Among other efforts, the bank is allowing customers to defer loan and mortgage payments, in order to provide cash-flow relief. Participation in government guarantee scheme: The bank continues to offer loans to businesses under the scheme. As of the end of the second quarter, the bank has provided loans to its customers in the amount of approximately NIS 3.8 billion through the scheme. Approximately 78% of which have been granted to small businesses and microbusinesses, an additional 22% to mid-sized and large businesses, and the remainder to private individuals.Assistance to the elderly: The bank has established a call center dedicated to senior citizens delivering quick, personal service with no wait times.Scheduled appointments at the branches of the bank: The bank has accelerated the drive towards scheduled appointments with bankers at its branches, in line with common practice at advanced organizations around the world. Scheduled appointments as a percentage of total meetings rose from approximately 20% at the beginning of this year to approximately 80% at the end of July, allowing improvement of the customer experience and better operational efficiency at the branches. Designated loan fund for self-employed individuals: The bank and the Lahav announced a NIS 0.5 billion loan fund targeted to assist self-employed individuals, with interest rates similar to those offered in government-backed loans.

Key developments in the financial statements for the second quarter of 2020:

* Income from regular financing activity, totaled NIS 2,321 million in the second quarter of 2020, compared with NIS 2,572 million in the same quarter last year. The decline mainly reflects the negative impact of lower FED and local interest rates on deposit margins and the negative CPI in the quarter. * Fees and other income, totaled NIS 795 million in the second quarter of 2020, compared with NIS 833 million in the same quarter last year, a decrease of 4.6%, mainly as a result of decline in income from credit cards and account-management fees. * Net provision for credit losses totaled NIS 1,128 million in the second quarter of 2020, or 1.49% of the average total credit to the public (annualized), compared with a net provision for credit losses in the amount of NIS 319 million in the same quarter last year, or 0.44% of the average total credit to the public (annualized). Net provision for the reported quarter includes NIS 806 million which were added to the bank's collective allowance as an advance measure in confronting the effects of the crisis. * Operating and other expenses, totaled NIS 1,826 million in the second quarter of 2020, compared with NIS 1,992 million in the same quarter last year, a decrease of 8.3%. * Salary expenses, totaled NIS 931 million in the second quarter of 2020, compared with NIS 909 million in the same quarter last year, an increase of 2.4%. * Cost income ratio was 57.9% in the second quarter of 2020, compared with 57.5% in the same quarter last year.

Key developments in balance sheet items:

* Consolidated balance sheet, totaled NIS 499.3 billion as at June 30, 2020, compared with NIS 463.7 billion at the end of 2019, an increase of 7.7%. * Net credit to the public, totaled NIS 293.7 billion, compared with NIS 292.9 billion at the end of 2019, an increase of 0.3%. * Consumer credit in Israel, totaled NIS 38.4 billion, compared with NIS 41.5 billion at the end of 2019, a decrease of 7.3%. * Housing loans in Israel, totaled NIS 93.9 billion, compared with NIS 89.3 billion at the end of 2019, an increase of 5.1%. * Credit to small businesses in Israel, totaled NIS 31.1 billion, compared with NIS 31.0 billion at the end of 2019, an increase of 0.2%. * Credit to the commercial segment in Israel, totaled NIS 40.9 billion, compared with NIS 40.1 billion at the end of 2019, an increase of 1.9%. * Credit to the corporate segment in Israel, totaled NIS 73.9 billion, compared with NIS 75.7 billion at the end of 2019, a decrease of 2.4%. * Deposits from the public, totaled NIS 400.8 billion, compared with NIS 361.6 billion at the end of 2019, an increase of 10.8%. * Deposits from consumers in Israel, totaled NIS 210.6 billion, compared with NIS 188.8 billion at the end of 2019, an increase of 11.5%. * Deposits from small businesses in Israel, totaled NIS 52.9 billion, compared with NIS 46.0 billion at the end of 2019, an increase of 15.0%. * Shareholders' equity, totaled NIS 38.0 billion, compared with NIS 38.2 billion at the end of 2019. * The bank continues to maintaining a very high liquidity and stability indices - Liquidity coverage ratio stood at 131% in the second quarter of 2020 compared with 127% in the same quarter last year. * Common Equity Tier 1 capital ratio as at June 30, 2020, stood at 11.23%, well above both regulatory and internal targets. * Total capital ratio, as at June 30, 2020 stood at 14.23%, above the capital thresholds required by the Bank of Israel.

Conference Call Information:

Bank Hapoalim will host a conference call today to discuss its second quarter 2020 financial results at 5:00 p.m. (Israel); 3:00 p.m. (UK); 10:00 a.m. (ET). To access the conference call, please dial: 1-888-281-1167 toll free from the United States; 0-800-051-8913 toll free from the United Kingdom; or 972-3-9180685 internationally. No password is required.

The call will be accompanied by a slide presentation, which, together with the financial statements, will be available on the Bank's website at www.bankhapoalim.com, under Investor Relations, Financial Information.

A recording of the conference call will be available on the Bank's website at the above address one business day following the completion of the call.

Please note: The conference call does not replace the need to peruse the immediate reports and the Financial Statements of the Bank, including all the forward-looking information included therein in accordance with Section 32A of the Israeli Securities Law, 1968.

About Bank Hapoalim:

Bank Hapoalim is Israel's leading financial group. In Israel, the Bank Hapoalim operates 205 full-service retail branches, regional business centers and specialized industry relationship managers for major corporate customers. The Bank Hapoalim Group includes holdings in financial companies involved in investment banking, trust services and portfolio management. Internationally, commercial banking services are provided in North America by the New York branch. Bank Hapoalim is listed on the Tel Aviv Stock Exchange (TASE: POLI) and holds a Level-1 ADR program. For more information about Bank Hapoalim, please visit us online at www.bankhapoalim.com

Please note: This press release was prepared for convenience only. In case of any discrepancy, the Bank's reported financial statements in Hebrew will prevail.

Contact:Karen Mazor, SVPHead of Investor Relations Bank Hapoalim T: +972 3 5673440 E: Karen.mazor@poalim.co.il

Condensed financial information and principal performance indicators over time

For the three For the six For the months months year ended ended June 30 ended June 30 December 31

2020 2019 2020 2019 2019

Main performance indicators

Return of net profit onequity attributed to 1.41% 9.26% 1.72% 9.01% 4.62%shareholders of the Bank^(1)

Return of net profit onequity attributed toshareholders of the Bank 1.71% 8.48% 2.51% 8.63% 7.13%excluding extraordinary items^(1)(2)

Return of net profit fromcontinued operations on 1.41% 7.61% 2.30% 7.70% 3.86%equity attributed toshareholders of the Bank^(1)

Return of net profit fromcontinued operations onequity attributed to 1.71% 8.33% 2.51% 8.06% 6.72%shareholders of the Bankexcluding extraordinary items^(1)(3)

Return on average assets^(1) 0.11% 0.77% 0.14% 0.74% 0.39%

Ratio of income to average 0.48% 0.58% 1.01% 1.09% 2.17%assets

Efficiency ratio -cost-income ratio from 57.89% 57.49% 57.24% 58.32% 66.44%continued operations

Efficiency ratio -cost-income ratio excluding 57.39% 55.46% 56.80% 57.26% 58.13%extraordinary items fromcontinued operations^(3)

Financing margin from regular 1.96% 2.39% 2.11% 2.31% 2.26%activity^(1)(4)

Liquidity coverage ratio^(5) 131% 127% 131% 127% 121%

As at June 30 December 31

2020 2019 2019

Ratio of common equity Tier 1capital to risk components^ 11.23% 11.97% 11.53%(6)

Ratio of total capital to 14.23% 15.27% 14.64%risk components^(6)

Leverage ratio^(6) 6.97% 7.94% 7.61%

(1) Calculated on an annualized basis.

(2) Does not include expenses in respect of the update of the provision inconnection with the investigation of the Bank Group's business with Americancustomers and FIFA, the effect of the closure of the private-banking activityoverseas, net profit or loss from the separation from Isracard, and loss fromimpairment in respect of the Bank's investment in Bank Pozitif.

(3) Does not include expenses in respect of the update of the provision inconnection with the investigation of the Bank Group's business with Americancustomers and FIFA, the effect of the closure of the private-banking activityoverseas, and loss from impairment in respect of the Bank's investment in BankPozitif.

(4) Financing profit from regular activity (see the Report of the Board ofDirectors and Board of Management, in the section "Material developments inincome, expenses, and other comprehensive income") divided by total financialassets after allowance for credit losses, net of non-interest bearing balancesin respect of credit cards.

(5) For additional information, see the section "Liquidity and refinancingrisk," in the financial statements.

(6) For additional information, see the section "Capital, capital adequacy,and leverage," in the financial statements.

Condensed financial information and principal performance indicators over time (continued)

For the three For the six For the year months months ended December ended June 30 ended June 30 31

2020 2019 2020 2019 2019

Main credit qualityindicators

Allowance for credit lossesas a percentage of credit to 2.00% 1.37% 2.00% 1.37% 1.58%the public

Impaired debts and debts inarrears of 90 days or more 1.70% 1.30% 1.70% 1.30% 1.80%as a percentage of credit tothe public

Net charge-offs as apercentage of average credit 0.32% 0.13% 0.29% 0.15% 0.12%to the public^(1)

Provision for credit lossesas a percentage of average 1.49% 0.44% 1.30% 0.30% 0.44%credit to the public^(1)

Main profit and loss data

NIS millions

Net profit attributed to 133 871 325 1,692 1,799shareholders of the Bank

Net profit attributed toshareholders of the Bank 161 800 474 1,621 2,778excluding extraordinaryitems^(2)

Net profit from continuedoperations attributed to 133 720 434 1,450 1,503shareholders of the Bank

Net profit from continuedoperations attributed toshareholders of the Bank 161 786 474 1,516 2,619excluding extraordinaryitems^(3)

Net interest income 2,166 2,466 4,358 4,743 9,319

Provision for credit losses 1,128 319 1,937 440 1,276

Net financing profit* 2,359 2,632 4,857 4,998 9,878

Non-interest income 988 999 2,179 1,891 3,889

Of which: fees 746 804 1,609 1,589 3,240

Operating and other expenses 1,826 1,992 3,742 3,869 8,776

Of which: salaries and 963 1,035** 1,925 2,086** 4,108**related expenses

Total income 3,154 3,465 6,537 6,634 13,208

Net earnings per ordinaryshare (in NIS)

Net profit attributed to 0.10 0.65 0.24 1.27 1.13shareholders of the Bank

* Net financing profit includes net interest income and non-interest financingincome (expenses).

** Reclassified.

(1) Calculated on an annualized basis.

(2) Does not include expenses in respect of the update of the provision inconnection with the investigation of the Bank Group's business with Americancustomers and FIFA, the effect of the closure of the private-banking activityoverseas, net profit or loss from the separation from Isracard, and loss fromimpairment in respect of the Bank's investment in Bank Pozitif.

(3) Does not include expenses in respect of the update of the provision inconnection with the investigation of the Bank Group's business with Americancustomers and FIFA, the effect of the closure of the private-banking activityoverseas, and loss from impairment in respect of the Bank's investment in BankPozitif.

Condensed financial information and principal performance indicators over time (continued)

June 30 December 31

2020 2019 2019

NIS millions

Main balance sheet data

Total assets 499,280 454,247 463,688

Of which: Cash and deposits with 113,033 72,913 88,122banks

Securities 66,513 71,116 59,486

Net credit to the 293,700 288,623 292,940public

Net problematic credit 8,513 7,549 8,787risk

Net impaired balance 2,691 2,205 3,034sheet debts

Credit to the public not accruing 3,570 2,376 3,867interest income (NPL)

Total liabilities 461,226 414,698 425,467

Of which: Deposits from the 400,816 352,112 361,645public

Deposits from banks 3,418 3,034 3,520

Bonds and subordinated 25,196 30,080 26,853notes

Shareholders' equity 38,024 39,503 38,181

Additional data

Share price at end of period (in 20.6 26.4 28.7NIS)

For the For the three months For the six months year ended June ended June 30 ended 30 December 31

2020 2019 2020 2019 2019

Total dividend per share (in - - 53.94** - 74.90agorot)*

Ratio of fees to average assets 0.15% 0.18% 0.34% 0.35% 0.71%

* According to the date of declaration.

** Paid as a dividend in kind, in shares; calculated based on the value ofIsracard shares on March 8, 2020 (NIS 10.91).

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SOURCE Bank Hapoalim