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CEO Statement

Dear Investors,

The results of the First International Bank Group for the first half of the year reflect a continued growth in income due to ongoing growth in our credit portfolio and in our deposits, among other things. In line with our plans, we also continue to see a long-term downward trend in operating expenses which has led to a consistent and continuous improvement in our efficiency ratio. Our Bank has maintained a solid level of financial stability, reflected by an improvement in the capital adequacy, the liquidity ratio, and in the leverage ratio, which, among other factors has led to the recent upgrade in the Banks credit rating outlook to positive.

 

 And to the results

  

Growth of 12.7% in net earnings year-over-year for the second quarter of 2017 to NIS 151 million; return on equity of 8.3%;

 

Growth of 12.8% in net earnings year-over-year for the first half of 2017 to NIS 317 million; return on equity of 8.7%;

 

Growth of 8% in net interest income as compared to the corresponding half of last year;

 

Reduction of 3.8% in operating and other expenses as compared to the corresponding half of last year and an improvement to 69.2% in the efficiency ratio;

 

Growth of 2.3% in credit to the public in the first half of 2017 and 4% in the twelve months ended June 30, 2017;

 

Ratio of Tier I equity to risk weighted assets at 10.25%;

 

The Board of Directors declared a dividend distribution of NIS 70 million for the second quarter of 2017;

 

Profitability and Growth

 

Net profit in the second quarter of 2017 increased by 12.7% amounting to NIS 151 million, compared with the corresponding quarter last year. Return on equity reached 8.3%. Net profit for the first half of 2017 increased by 12.8%, amounting to NIS 317 million, as compared to the corresponding half of last year, and the return on equity reached 8.7%.

 

The growth in the Groups financial was demonstrated both on the credit side and on the deposit side. The credit to the public portfolio grew by 4% in the twelve months ended June 30, 2017, by 2.3% in the first half of 2017 and by 1.4% in the second quarter of 2017. The growth in the credit portfolio is marked by the continuing

Diversification of credit, focusing both on the private customer segment, which grew by 3.8% in the first half, and on the small and middle-market business segment, which grew by 2.6%.

 

Net interest income increased by 8% in the first half of the year, due to the growth in operations, primarily due to increases in the credit portfolio.

 

Expenses in respect of credit losses amounted to NIS 84 million in the first half of the year (0.22% out of the total credit to the public). Most of the expense was due to a collective allowance for credit losses. The total amount of bad debts decreased by 1.4% as compared with the level as of the end of 2016.  

 

Efficiency

 

The Bank continued to improve its efficiency measures in accordance with its strategy, and a reduction was evident across all expense items: Payroll and related expenses decreased by 2.1%, maintenance and depreciation of buildings and equipment decreased by 6%, amortization and reduction in value of intangible assets decreased by 27% and other expenses decreased by 2%.

 

Overall operating and other expenses recorded a reduction of 3.8%, which amounted to NIS 52 million, totaling NIS 1,304 million.

 

The gradual and consistent improvement in the efficiency ratio continued, improving to 69.2% in the first half of the year, and to 69.6% in the second quarter of the year, as compared to 73.5% in 2016.

 

Financial Stability

 

The capital attributed to the shareholders of the Bank continued in its upward trend, growing by 3%, as compared to the end of corresponding period last year, and amounted to NIS 7,563 million.

 

Tier I equity ratio to risk weighted assets increased to 10.25%, as compared to 10.09% as at December 31, 2016, and total equity ratio to risk weighted assets increased to 13.8%. The financial stability is also reflected in the ratio of deposits to credit reaching 136%, and in the liquidity coverage ratio, which reached 125%.

 

The Board of Directors of the Bank decided to distribute a dividend of NIS 70 million for the second quarter, in addition to dividends which amounted to NIS 140 million which were distributed since the beginning of 2017.

 

In the third quarter of 2017, the Bank is expected to recognize income from taxes in respect of prior years, in the amount of NIS 32 million, following final tax assessments for those years which were issued to the Bank in July 2017.

 

 

Smadar Barber-Tsadik, CEO

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