JERUSALEM, Nov 28 (Reuters) - Israeli lender Mizrahi-Tefahot said on Tuesday its third-quarter profit fell 7% as provisions to guard against loan defaults jumped, while it cut its dividend due to economic uncertainty from Israel's war with Hamas militants.
The bank said on Tuesday it earned 1.1 billion shekels ($297 million) in the quarter against 1.2 billion a year earlier, for a return on equity of 16.8%.
Mizrahi, Israel's third-largest bank and market leader in mortgage loans with a 36% share, said it would pay a quarterly dividend of 165 million shekels, or 15% of its profit, versus a 35% distribution in the second quarter.
CEO Moshe Lari said the reduction was due to "consideration to uncertainty in the economic environment", and to ensure capacity for further growth.
Rivals Hapoalim and Israel Discount also trimmed dividends. The banking regulator has asked banks to be conservative when issuing dividends, and to provide credit while the country was at war and the economy was set to slow.
Although the war did not break out until the start of the fourth quarter, Lari said it had still had an impact on its results as Israel's central bank had told lenders to bring forward higher loan loss provisions into the third quarter.
Expenses with respect to credit losses rose to 694 million shekels from 155 million a year earlier, it said.
Financing revenue rose 12% to 2.9 billion shekels, as Israeli banks have been helped by aggressive Bank of Israel interest rate hikes to fight inflation.
Mizrahi's Tier 1 ratio of capital to risk components, a key measure of financial strength, stood at 10.12% at the end of September, up from 9.92% a year earlier.
The bank said that since the war broke out on Oct. 7, it had offered 450 million shekels in benefits to customers impacted in the form of full mortgage repayment waivers for several months and freezing loan payments.
($1 = 3.7093 shekels) (Reporting by Steven Scheer; Editing by Jan Harvey)
