A week after Globes reported on Bank Leumi’s restrictions on deals related to contractor loans to homebuyers, the bank’s third-quarter financial statements released this morning contain clues as to the reasons for the decision. The bank’s mortgage portfolio was 10% larger at the end of September this year than it was the previous year.
Leumi is currently the most aggressive bank in the real estate market, and the mortgage figures reveal the extent. The bank’s total real estate loan portfolio reached NIS 143 billion at the end of September, making it larger than its commercial credit portfolio (NIS 136 billion). While the mortgage portfolio grew 10% year over year, credit to private clients fell 2.6%, credit to small businesses rose 5.1%, and business credit rose 0.2%.
In total, Bank Leumi achieved a 30% increase in its net profits compared to the third quarter of 2023, reaching NIS 2.3 billion. Net interest income rose 15.5% in the quarter to NIS 4.54 billion.
Another factor that boosted profits in this quarter was the decline in credit loss expenses, which were 68% lower than in the corresponding quarter, when the Bank of Israel instructed all banks to establish a general provision for credit losses. However, credit loss expenses in the third quarter were higher than in the second quarter of this year (while the bank recorded net income from this item).
The return on Bank Leumi shares in the third quarter of this year reached 15.5% on an annual basis, compared to 13.6% in the corresponding quarter.
At the end of October, the Superintendent of Banks convened a meeting of the heads of the banks’ business departments and ordered them to conduct an in-depth study of the risks arising from the special offers offered by housing contractors to home buyers, which usually consist of a 20% down payment and 80% payment on delivery. In the coming months, banks are likely to raise their provisions for credit losses, as a result of this examination and also in order to prepare for negative scenarios as the war continues.
Bank Leumi states that credit loss expenses in the third quarter represented 0.28% of the public’s average credit balance. She says the entire expense is a general provision, “reflecting the continued conservative and responsible approach as the war continued. The general expense was partly offset by income from individual loans collected.”
Leumi’s board of directors announced a dividend distribution of 40% of third-quarter profits, amounting to NIS 917 million. The amount of 688 million shekels will be paid in cash and the rest in the form of repurchasing bank shares. Stock buybacks became popular among major banks last year, after the regulator allowed them. Discount Bank Israel announced yesterday that it is joining this trend. So far this year, Bank Leumi’s cumulative profits have reached NIS 2.9 billion, including NIS 2.2 billion in cash and NIS 726 million in share buybacks.
Published by Globes, Israel Business News – en.globes.co.il – on November 19, 2024.
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