First International Bank of Israel Presents Fourth Quarter and Full Year 2018 Results

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TEL AVIV, Israel, March 13, 2019 — First International Bank of Israel (TASE: FIBI) one of Israel’s major banking groups, today announced its results for the fourth quarter and twelve month period, ending December 31, 2018.

2018 Financial Highlights

  • Growth of 8.1% in net earnings to NIS 733 million;
  • Return on equity of 9.3%;
  • Growth of 13.9% in earnings from financing operations;
  • The average balance of credit to the public increased by 6.3%;
  • The average balance of customer assets increased by NIS 40 billion amounting to NIS 441 billion;
  • Ratio of Tier I equity to risk asset ratio on December 31, 2018 reached: 10.51%;

Ms. Smadar Barber-Tsadik, CEO of the First International Bank Group, stated, “The results reflect the continuing growth of the Bank, while maintaining an appropriate risk level. 2018 was a year of significant steps, the most prominent of which was the merger with Otzar Hachayal Bank. The costs of these actions are included in the expenses of 2018, while the fruit of these steps will be reflected in the coming years.” 

Summary of the Results

Profitability

Net earnings of the First International Bank Group in 2018 increased by 8.1%, amounting to NIS 733 million. Return on equity reached 9.3% in comparison with a return of 9.1% in 2017. Net earnings after elimination of certain components in 2018 amounted to NIS 675 million, a growth of 10.8% and return on equity, after the above-mentioned elimination, reached 8.6%, compared with 8.2% in 2017. 

In the fourth quarter of the year, net earnings increased by 4.4% in comparison to the corresponding quarter last year, amounting to NIS 165 million. The return on equity in the fourth quarter reached 8.4%, similarly to that of the corresponding quarter last year. Earnings in the fourth quarter include a number of exceptional expenses for the quarter, primarily due to unusual payroll related expenses due to an agreement reached with employees of subsidiary companies, from employees’ bonuses and from expenses due to a retirement plan.

Growth

Financing income in 2018 increased by 13.9% in comparison to 2017, amounting to NIS 2,717 million. Financing income from current operations increased by 11.1%, the growth was primarily due to an increase in the volume of operations. Commission income increased by 1.5%.The growth of the Group is also apparent in the balance sheet data, both on the credit side and on the deposit side. The Bank’s average customer assets portfolio grew by 10% (which is approximately NIS 40.4 billion) reaching NIS 441 billion. The average balance of credit to the public grew by 6.3% in 2018.The growth in credit is characterized by the continuing ersification of the credit portfolio, and is noted in the private customer segment, which grew by 7.6%, in the small and middle market business segment, which grew by 7.2%, and in the corporate segment, which grew by 1.3%. Net credit to the public as of December 31, 2018 totaled NIS 84,292 million, in comparison to NIS 80,378 million at the end of 2017, representing growth of 4.9%.The growth in the credit portfolio was achieved while maintaining an appropriate risk level: the ratio of credit loss expenses to total credit to the public in 2018 amounted to 0.20%.

Efficiency

The First International Bank continued to improve efficiency in accordance with its strategic outline, and the efficiency ratio improved to 68.4% in 2018, from 69.5% in 2017. The efficiency trend is noted both in terms of the decrease in the number of positions, which declined in 2018 by 3.7% (which represents approximately 160 positions), as well as in a decrease in office space in use by the Group by 7%. It is noted that the decrease in the number of positions as of the end of 2018, is a result of the efficiency measures and the early retirement plans introduced by the Group, most of which were offered to employees towards the end of 2018 , such that most of the retirement will take place in 2019.  

Operating and other expenses in 2018 amounted to NIS 2,819 million, an increase of 8.1% in comparison to 2017. The growth in expenses is mainly due to the growth in Payroll and related expenses, which amounted to NIS 1,696 million representing an increase of 7.4%. This increase was mainly due to payments to employees for early retirement plans, other awards and the updating of payroll amounts due to agreements with employees of subsidiary companies. When excluding the expense in respect of awards to employees, payroll and other expenses saw a decline of 1.1%.

The increase in expenses was also due to a 9.2% increase in operating and other expenses primarily due to expenses in respect of the merger of Otzar Hachayal Bank with and into the Bank, and to the increase in additional expenses for efficiency measures taken within the Group. The increase in these expenses during 2018, is expected to result in future expense savings .

Financial Stability and Dividend

The upward trend of the equity attributed to the shareholders of the Bank continued, and grew by 4.3% (NIS 337 million) to NIS 8,093 million. Tier I equity capital ratio increased to 10.51% from 10.38% as at December 31, 2017, and the comprehensive capital ratio amounted to 13.94% at year-end 2018.

In 2018, the Bank distributed idends totaling NIS 355 million, comprising of approximately 50% of net earnings, in accordance with the policy of the Bank for a idend distribution of up to 50% of net earnings. The return on idend amounted to 4.5%.

The Board of Directors of the Bank resolved an additional idend distribution to shareholders of NIS 105 million.

Management Comment

Ms. Smadar Barber-Tsadik CEO of the First International Bank Group stated: The results of 2018 reflect the continued growth of the Group while maintaining an appropriate risk level, a growth which is reflected in income, in the credit portfolio and in the public assets portfolio.

“2018 was a year of significant strategic steps, the most prominent of which was the move made at the end of the year – merging Otzar Hachayal Bank, while maintaining its old established and leading brand name with the security forces personnel in Israel. This merger, coming after the successful mergers in the past of other banks in the Group, contributed to our efficiency measures and enables the First International Bank to be a bank that enjoys both a size advantage, and the strength of its leading brand names, each in its own field. The costs of the merger, as well as the cost of the other steps we have taken, such as early retirement plans in the Group, are included in the expenses of 2018, while the fruit of these actions will be reflected in the coming years.”

“In the past year, we continued and also accelerated the development of tools and new services in the digital field, improving the user experience, and introducing advanced tools in the capital markets segment. We have upgraded the communication channels of the Bank with its customers, so that the combination of the professional service with the digital field contributes to the level of service, professionalism and value offered by the Bank to its customers,” concluded Ms. Barber Tsatik.

CONDENSED PRINCIPAL FINANCIAL INFORMATION AND PRINCIPAL EXECUTION INDICES

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Principal financial ratios


2018


2017


2016


2015


2014











percent

Execution indices











Return on equity attributed to shareholders of the Bank

9.3%

9.1%

7.2%

6.5%

6.8%

Return on average assets

0.5%

0.5%

0.4%

0.4%

0.4%

Ratio of tier 1 equity to Risk Assets

10.51%

10.38%

10.09%

9.81%

9.69%

Leverage ratio(1)

5.76%

5.50%

5.52%

5.43%


Liquidity coverage ratio(1)

122%

123%

123%

104%


Ratio of total income to average assets

3.1%

2.9%

2.9%

2.9%

3.3%

Efficiency ratio

68.4%

69.5%

73.5%

77.6%

77.3%







Credit quality indices






Ratio of provision for credit losses to credit to the public

1.02%

1.03%

1.08%

1.12%

1.25%

Ratio of impaired debts or in arrears of 90 days or more to credit to the public

0.83%

0.92%

1.02%

1.36%

1.50%

Ratio of provision for credit losses to total impaired credit to the public

186%

155%

147%

108%

110%

Ratio of net write-offs to average total credit to the public

0.16%

0.18%

0.09%

0.15%

0.05%












Principal data from the statement of income


2018


2017


2016


2015


2014











NIS million

Net profit attributed to shareholders of the Bank


733


678


521


446


455

Interest Income, net

2,486

2,302

2,169

1,953

2,101

Expenses from credit losses

166

121

80

18

89

Total non-interest income

1,637

1,450

1,480

1,541

1,667

  Of which: Fees

1,325

1,305

1,300

1,378

1,375

Total operating and other expenses

2,819

2,607

2,683

2,710

2,912

  Of which: Salaries and related expenses

1,696

1,579

1,581

1,589

1,759

Primary net profit per share of NIS 0.05 par value (NIS)

7.31

6.76

5.19

4.45

4.54












Principal data from the balance sheet


2018


2017


2016


2015


2014











NIS million

Total assets


134,120


135,717


127,907


125,476


117,807

of which:    Cash and deposits with banks

31,303

39,186

29,150

30,727

29,182

             Securities

12,595

10,238

15,776

16,439

12,554

             Credit to the public, net

84,292

80,378

77,328

72,555

68,931

Total liabilities

125,707

127,333

119,973

117,813

110,764

of which:    Deposits from  the public

111,697

113,511

105,817

103,262

95,155

             Deposits from  banks

1,150

1,133

755

1,565

1,469

             Bonds and subordinated capital notes

4,989

5,249

5,801

5,862

4,903

Capital attributed to the shareholders of the Bank

8,093

7,756


7,321

7,073

6,797












Additional data


2018


2017


2016


2015


2014

Share price (0.01 NIS)


7,860


7,202


5,650


4,594


4,990

Dividend per share (0.01 NIS)

355

310

199

130

284

Average number of positions(2)

4,361

4,512

4,738

5,035

5,166

Ratio of interest income, net to average assets

1.9%

1.8%

1.7%

1.6%

1.8%

Ratio of fees to average assets

1.0%

1.0%

1.0%

1.1%

1.2%



(1)    According to instructions of the Bank of Israel the Leverage ratio and the Liquidity coverage ratio were calculated since 2015. Therefor no comparative data is stated.
(2)    The number of positions includes conversion of overtime in terms of positions.

STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31
(NIS million)

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Consolidated


The Bank


2018


2017


2016

2018


2017


2016

Interest Income

3,001

2,704

2,526

2,312

2,060

1,873

Interest Expenses

515

402

357

511

397

342

Interest Income, net

2,486

2,302

2,169

1,801

1,663

1,531

Expenses from credit losses

166

121

80

117

47

45

Net Interest Income after expenses from credit losses

2,320

2,181

2,089

1,684

1,616

1,486

Non Interest Income







Non Interest Financing income

231

83

115

203

94

99

Fees

1,325

1,305

1,300

995

973

954

Other income

81

62

65

151

176

188

Total non Interest income

1,637

1,450

1,480

1,349

1,243

1,241

Operating and other expenses







Salaries and related expenses

1,696

*1,579

*1,581

1,303

*1,179

*1,169

Maintenance and depreciation of premises and equipment

376

380

409

282

278

299

Amortizations and impairment of intangible assets

91

94

116

86

83

82

Other expenses

656

*554

*577

508

*486

*485

Total operating and other expenses

2,819

2,607

2,683

2,179

2,026

2,035

Profit before taxes

1,138

1,024

886

854

833

692

Provision for taxes on profit

408

358

398

319

284

301

Profit after taxes

730

666

488

535

549

391

The bank’s share in profit of equity-basis investee, after taxes

37

54

72

198

129

130

Net profit:







Before attribution to non-controlling interests

767

720

560

733

678

521

Attributed to non-controlling interests

(34)

(42)

(39)

Attributed to shareholders of the Bank

733

678

521

733

678

521




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Consolidated and The Bank


2018


2017


2016

Primary profit per share attributed to the shareholders of the Bank

NIS

Net profit per share of NIS 0.05 par value

7.31


6.76


5.19



*     Restated in view of the application of amendment No. 2017-07 of the Codification, regarding improvement of the presentation of pension and other post-retirement benefits.

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31
(NIS million)

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Consolidated



2018


2017


2016

Net profit before attribution to non-controlling interests

767

720

560

Net profit attributed to non-controlling interests

(34)

(42)

(39)

Net profit attributed to the shareholders of the Bank

733

678

521

Other comprehensive income (loss) before taxes:




Adjustments of available for sale securities to fair value, net

(102)

90

14

Adjustments from translation of financial statements(1) net after the effect of hedges(2)

4

(2)

Adjustments of liabilities in respect of employee benefits(3)

37

1

(131)

Other comprehensive income (loss) before taxes

(65)

95

(119)

Related tax effect

22

(35)

37

Other comprehensive income (loss) before attribution to non-controlling interests, after taxes

(43)

60

(82)

Less other comprehensive income (loss) attributed to non-controlling interests

(4)

3

(10)

Other comprehensive income (loss) attributed to the shareholders of the Bank, after taxes

(39)

57

(72)

Comprehensive income before attribution to non-controlling interests

724

780

478

Comprehensive income attributed to non-controlling interests

(30)

(45)

(29)

Comprehensive income attributed to the shareholders of the Bank

694

735

449



(1)    Adjustments from translation of financial statements of foreign operations which their currency of operations is different from the currency of operation of the Bank.
(2)    Hedges-gains (losses) regarding the hedging of investment in foreign currency.
(3)    Mostly reflects adjustments in respect of actuarial assessments as of the end of the period regarding defined benefits pension plans, of amounts recorded in the past in other comprehensive profit.

BALANCE SHEET AS AT DECEMBER 31
(NIS million)

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Consolidated


The Bank


2018


2017

2018


2017

Assets





Cash and deposits with banks

31,303

39,186

30,905

33,551

Securities

12,595

10,238

10,620

8,685

Securities which were borrowed

863

813

863

813

Credit to the public

85,160

81,216

66,846

63,523

Provision for Credit losses

(868)

(838)

(654)

(607)

Credit to the public, net

84,292

80,378

66,192

62,916

Credit to the government

700

675

7

Investment in equity-basis investees

606

565

2,878

2,657

Premises and equipment

1,023

1,095

960

991

Intangible assets

239

235

226

222

Assets in respect of derivative instruments

1,399

1,342

1,416

1,363

Other assets(2)

1,100

1,186

929

1,030

Assets held for sale

4

2

Total assets

134,120

135,717

114,996

112,230

Liabilities, temporary equity and Shareholders’ Equity





Deposits from the public

111,697

113,511

87,038

91,035

Deposits from banks

1,150

1,133

10,852

4,168

Deposits from the Government

982

960

777

817

Bonds and subordinated capital notes

4,989

5,249

3,455

3,637

Liabilities in respect of derivative instruments

1,294

1,318

1,298

1,322

Other liabilities(1)(3)

5,595

5,162

3,483

3,157

Total liabilities

125,707

127,333

106,903

104,136

Temporary equity – non-controlling interests

338

338

Capital attributed to the shareholders of the Bank

8,093

7,756

8,093

7,756

Non-controlling interests

320

290

Total equity

8,413

8,046

8,093

7,756

Total liabilities, temporary equity and shareholders’ equity

134,120

135,717

114,996

112,230



(1)   Of which: provisions for credit losses in respect of off-balance sheet credit instruments in the amount of NIS 64 million and NIS 61 million (consolidated) and NIS 57 million and NIS 54 million (the Bank) as of December 31, 2018 and 2017, respectively.
(2)   Of which: other assets measured at fair value in the amount of NIS 426 million consolidated and the Bank (31.12.17 – NIS 423 million consolidated and the Bank).
(3)   Of which: other liabilities measured at fair value in the amount of NIS 586 million consolidated and the Bank (31.12.17 – NIS 521 million consolidated and the Bank).

STATEMENT OF CHANGES IN EQUITY
(NIS million)

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Share capital and premium (1)


Accumulated other comprehensive income (loss)


Retained earnings (2)


Total share-holders’ equity


Non- controlling interests


Total equity

Balance as at January 1, 2016

927

(105)

6,251

7,073

264

7,337

Changes during 2016







Net profit for the year

521

521

21

542

Dividend

(200)

(200)

(200)

Other comprehensive loss, after tax effect

(72)

(72)

(2)

(74)

Temporary equity – non-controlling interest

(1)

(1)

(1)

Balance as at December 31, 2016

927

(177)

6,571

7,321

283

7,604

Changes during 2017







Net profit for the year

678

678

26

704

Dividend

(310)

(310)

(20)

(330)

Other comprehensive loss, after tax effect

57

57

1

58

Temporary equity – non-controlling interest

10

10

10

Balance as at December 31, 2017

927

(120)

6,949

7,756

290

8,046

Changes during 2018







Net profit for the year

733

733

34

767

Dividend

(355)

(355)

(355)

Other comprehensive income, after tax effect

(39)

(39)

(4)

(43)

Temporary equity – non-controlling interest

(2)

(2)

(2)

Balance as at December 31, 2018

927

(159)

7,325

8,093

320

8,413



(1)   Including share premium of NIS 313 million (as from 1992 onwards).
(2)   Including an amount of NIS 2,391 million which cannot be distributed as idend.

Contact:

Dafna Zucker

First International Bank of Israel

e-mail: zucker.d@fibi.co.il  

Tel: +972-3-519-6224

Ehud Helft
GK Investor & Public Relations

e-mail: fibi@gkir.com  

Tel: +1-646-201-9246

SOURCE First International Bank of Israel

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