Bank Leumi Le Israel BM : Financial Statements Q2 2017

The Bank will distribute a dividend of NIS 175 million ($50 million) based on second quarter earnings

15.08.2017

• Net income in the first half of 2017 totaled NIS 1,498 million ($429 million), while net income in the second quarter of 2017 totaled NIS 876 million ($251 million). The increase in profitability is reflected in most core business activities.

• Net income in the first half of 2017 reflects a return on equity of 9.6%. Net income in the corresponding period last year included one-time profits mainly from the sale of Visa Europe. When excluding these profits, the return on equity in the corresponding period last year reached 8.4%.

• A significant improvement in the efficiency ratio - 62.2% in the first half of 2017, compared with 69.4% in the corresponding period last year. The efficiency ratio in the second quarter of 2017 was 59.7%, compared with 65.9% in the corresponding period last year.

• Leumi continues to maintain the highest quality loan portfolio in the banking system - credit loss expenses in the first half of 2017 reflected 0.11% of the bank's portfolio, while credit loss expenses in the second quarter of 2017 reflected 0.06% of the portfolio.

• Common equity tier I capital ratio in the first half of 2017reached 11.21%, while the total capital ratio reached 14.99%.

• The Bank will distribute a dividend of NIS 175 million ($50 million) based on second quarter earnings. From the beginning of 2017 dividend payments totaled NIS 300 million ($86 million).

• Net interest income in the first half of 2017 increased by 9.5% compared with the corresponding period last year. Net interest income in the second quarter of 2017 increased by 6.4% compared with the corresponding period last year.

• Noninterest financing income in the first half of 2017 totaled NIS 452 million ($129 million), compared with NIS 558 million ($160 million) in the corresponding period last year. Income in the corresponding period last year included NIS 378 million ($108 million) from the sale of Visa Europe. When excluding this one-time profit, the noninterest financing income increased by NIS 272 million ($78 million) compared with the corresponding period last year.

• Total operating expenses in the first half of 2017 decreased by 6.3% compared with the corresponding period last year. Total operating expenses in the second quarter of 2017 decreased by 14.2% compared with the corresponding period last year. The decrease is mainly in salary expenses.

In accordance with the Bank's Strategy:

• Leumi continues to lead the digital banking field in Israel. During the second quarter of 2017 'Pepper' was officially launched to the general public.

• Continued implementation of efficiency - during the second quarter of 2017 the Bank initiated an additional voluntary early retirement plan for some 500 employees. This plan follows a reduction of some 2,200 employees in the Group's workforce in the past 4 years.

• The Bank continues to selectively grow its loan portfolio, while maintaining a balanced risk management policy. Net loans to the public in the first half of 2017 increased by NIS 2.6 billion ($744 million) compared with the corresponding period last year. Excluding the effect of the shekel appreciation, the increase in loans was approximately NIS 5.5 billion ($1,573 million).

Balance Sheet Parameters:

• The Group's total shareholders' equity as of June 30, 2017 amounted to NIS 32.5 billion ($9.3 billion), compared with NIS 31.3 billion ($9.0 billion) as of December 31, 2016 (an increase of 3.7%).

• The leverage ratio as of June 30, 2017 reached 6.93%, compared to the Bank of Israel minimal threshold of 6%.

• Net loans to the public as of June 30, 2017 amounted to NIS 264.5 billion ($75.7 billion), compared with NIS 261.9 billion ($74.9 billion) as of December 31, 2016.

• Deposits from the public as of June 30, 2017 amounted to NIS 342.8 billion ($98.1 billion), compared with NIS 346.8 billion ($99.2 billion) as of December 31, 2016. The decrease is mainly due to the appreciation of the shekel compared to foreign currencies.