Israel’s Bank Hapoalim Q1 profit jumps on reversal of loan loss provision

A woman uses an automated teller machine (ATM) outside a Bank Hapoalim branch in Tel Aviv, Israel May 30, 2013. REUTERS/Nir Elias

Bank Hapoalim (POLI.TA), Israel’s largest lender, on Thursday posted a bigger-than-expected jump in quarterly profit, boosted by a reversal of provisions to protect against loan defaults.

Hapoalim earned 1.354 billion shekels ($412 million) in the January-March period, compared with a 192 million shekel profit in the first quarter of 2020 and a profit of 898 million shekels forecast in a Reuters poll of analysts.

Net interest income gained to 2.23 billion shekels from 2.19 billion a year earlier, while it had income for credit losses of 508 million shekels after marking provisions for loan losses of 809 million in the first three months of 2020.

“The results were supported by strong underlying business performance, an improvement in economic indicators, which led to a reduction of the collective provision for credit losses and increased activity in the financial markets,” the bank said.

Hapoalim had said customers deferred 42.5 billion shekels of loans last year but that narrowed to 5.1 billion as of March 31, 1.6% of total credit to the public, from 11.2 billion at the end of January.

At the outset of the COVID-19 pandemic, Israel’s banking regulator had given banks the greenlight to allow loan deferments as lockdowns forced businesses to close temporarily or permanently and led to a spike in unemployment.

Hapoalim said it approved a total of 6 billion shekels in business loans as part of the state-backed loan fund for businesses hurt by the crisis and a loan fund for high-risk businesses.

The bank’s Tier 1 equity-to-risk assets ratio stood at 11.67% at the end of March, versus 11.52% at the end of 2020. Banks will likely not be able to resume dividends until the fourth quarter of this year.

($1 = 3.2874 shekels)

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