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FIBI FIRST INTERNATIONAL BANK OF ISRAEL Overview 30.09.13 FIBI FIRST INTERNATIONAL BANK OF ISRAEL Net Earnings and ROE NIS Millions ROE 144 NIS Millions Average capital 6,206 6,651 6,648 5,995 6,624 Core capital adequacy ratio 9.33% 9.82% 10.04% 9.33% 10.04% * Assuming core capital ratio of (9.30%), (the Israeli banking industry average core capital ratio in 1-9/2013) the ROE is 9.4% in 1-9/2013 and 9.7% in Q3 2013. 2 FIBI FIRST INTERNATIONAL BANK OF ISRAEL Statements of income 1-9/2013 - 1-9/2012 NIS Millions Gross Change change in % 1-9/2013 1-9/2012 Interest income, net Expenses from credit losses (0.13% provision rate) (*) 1,653 65 1,693 85 (40) (20) (2.4%) (23.5%) Net interest income after expenses from credit losses 1,588 1,608 (20) (1.2%) Total non-interest income 1,234 1,151 83 7.2% 140 114 26 22.8% 1,050 1,015 35 3.4% 44 22 22 100.0% 2,106 2,078 28 1.3% Profit before taxes Provision for taxes on profit 716 295 681 250 35 45 5.1% 18.0% The bank’s share in profit of equity-basis investees, after taxes 23 30 (7) (23.3%) Net profit ROE Core capital ratio (end of period) 429 8.7% 10.04% 445 10.0% 9.33% (16) (3.6%) Bank of Israel average interest rate 1.52% 2.44% Of which: non-interest financing income Commissions income Other Income (divestment of buildings + pay back of insurance) Total operating and other expenses * Excluding provision for mortgages the provision rate is 0.08% (0.92%) 3 FIBI FIRST INTERNATIONAL BANK OF ISRAEL Income from Financing Activities (before Tax) 1-9/2013 - 1-9/2012 NIS Millions 1-9/2013 1-9/2012 Gross change Change (%) Interest income 2,612 3,006 (394) Interest expense (959) (1,313) 354 Net interest income 1,653 1,693 (40) (2.4%) 140 114 26 22.8% 1,793 1,807 (14) (0.8%) 6 (13) 19 29 35 (6) (17.1%) 1,771 1,794 (23) (1.3%) Income from divestment of bonds and shares 187 171 16 9.4% Divestment of bonds and income from trading portfolio 131 130 1 0.8% Income from divestment of shares 59 70 (11) (15.7%) Provisions for writedown of bonds and shares (3) (29) 26 Other financial income of financial intermediation and unoccupied capital 1,584 1,623 (39) Bank of Israel average interest rate 1.52% 2.44% Non-interest financing income Total income from interest and non-interest Of which: Hedging of tax provision Fair Value of derivatives Total profit from actions of financing (interest and non-interest) (2.4%) (0.92%) 4 FIBI FIRST INTERNATIONAL BANK OF ISRAEL Total Income to Total Weighted Risk Assets Ratio 5 FIBI FIRST INTERNATIONAL BANK OF ISRAEL Operating & Other Expenses NIS Millions 1-9/2012 1-9/2013 * * Including amortization of 39 NIS Millions 6 FIBI FIRST INTERNATIONAL BANK OF ISRAEL Improved Operational Efficiency Ratio (Consolidated) Total Operating Expenses to Total Income Total Operating Expenses / Total Income (After Expenses from credit losses) Total Operating Expenses / Total Income (Before Expenses from credit losses) % % Total Operating Expenses Total Income 75.3% 7 FIBI FIRST INTERNATIONAL BANK OF ISRAEL FIBI Strategic Assets & Liabilities Structure NIS Billions 30.09.2013 FIBI Strategic Assets & Liabilities composite* Capital Adequacy Basel II Core Capital Adequacy Basel II 30.09.12 30.09.13 14.19% 15.27% 9.33% 10.04% 30.09.2013 (NIS Billions) Credit to the Public Public Deposits 66.9 85.3 Estimate Core Capital Adequacy Basel III 9.88% State of Israel Bonds 8.6 Deposits to Credit Ratio Liquid Assets to Deposits Ratio 126.5% 127.6% Gov. & Bank Bonds 2.0 34.3% 37.8% Bank of Israel Deposits 19.5 Sovereigns Bonds 1.2 Deposits in Banks 3.1 Banks Bonds 1.7 Capital Notes 5.8 NIS, Corporate Bonds 0.8 Capital Available for Investment 4.9 * Illustration – not to scale Structures, Hedge funds &Stocks 0.7 Market risk in VAR(0.07) 8 FIBI FIRST INTERNATIONAL BANK OF ISRAEL Total balance Equity Total Assets, Deposits & Credit to the public NIS Millions Credit to the Public Shareholders` equity to total balance ratio Public Deposits 5.7% 5.7% 6.2% 6.3% 9 FIBI FIRST INTERNATIONAL BANK OF ISRAEL Credit to the Public by segments 30.09.2013 NIS Millions Change in % Average Balance Compared to 1-9/2012 30.9.13 30.9.12 Change in % Compared to 30.9.12 Private + Retail (Households) 16,056 15,091 6.6% 6.1% Mortgage 17,208 15,989 7.5% 13.9% Total private clients 33,264 31,080 7.0% 10.0% Commercial * + Small Business 13,128 13,335 (1.5%) (1.5%) Corporate 20,503 21,784 (6.0%) (3.5%) Total Credit to the Public 66,895 66,199 1.1% 3.0% Total Private + Retail 50% * Of which, 167 NIS Millions decrease, in comparison to 30.09.12, due to the closure of FIBI London. 10 FIBI FIRST INTERNATIONAL BANK OF ISRAEL Expenses for Credit Losses to Credit to the Public Ratio FIBI maintained low provisions for credit losses even during the recent credit crisis Provisions for Credit losses 2007-9/2013 FIBI 0.76% Other 4 Leading Banks Change of measurement according to Impaired Debts Directive 0.76% 0.43% 0.33% 0.39% 0.42% 0.44% 0.44% 0.32% 0.20% 0.28% 0.14% * 0.13% 0.18% 0 2007 2008 2009 2010 2011 2012 *1-9/2013 *In Q1 the Bank has implemented a one time regulatory provision on mortgage portfolio in order to set the expenses for credit losses ratio to 0.35% of the mortgage credit balance (24 NIS million). Excluding this one time provision, the ratio of FIBI is about 0.05% in 1-9/2013 and the ratio of the group is 0.08%. 11 FIBI FIRST INTERNATIONAL BANK OF ISRAEL Deposits from the Public breakdown by segments NIS Millions Change in % 30.09.13 30.09.12 Total Private + Retail 58% Change in % Average Balance Compared Compared to to 30.9.12 Q3/2012 Total Private & Retail 49,802 51,546 (3.3%) (0.6%) Commercial + Small Business 10,892 10,770 0.9% (1.8%) Corporate 24,686 21,458 14.9% 3.9% Total 85,380 83,774 1.9% 0.4% The customers` securities portfolio grew in 18 NIS Billions compared to 30.9.12 (about 10% growth). In private and retail segment the securities portfolio grew in 6 NIS Billions (about 13% growth). 25% of the growth due to increase in the market value . 12 FIBI FIRST INTERNATIONAL BANK OF ISRAEL Core Capital Ratio – 30.09.13 FIBI is the only bank in Israel that has already met the new regulatory requirement for Core Capital ratio (in 31/12/14) according to Basel II Basel III 8.82%*-9.03% 8.89% 8.60% ** 8.54% 9.88% Minimal Regulatory * Requirement For HAPOALIM&LEUMI 14.30% 14.57% Minimal Regulatory Basel II** 13.42% requirement * Gap -0.76 -0.68 * -1.3-0.72 -0.70 ** -0.16 * Core capital in FIBI is 6.8 NIS Billions up to 30.09.13, increase of 7% compared with 30.09.12. 13 FIBI FIRST INTERNATIONAL BANK OF ISRAEL FIBI is demonstrating relative strength in main financial ratios Core capital ratio and principal financial ratios 30.09.2013 Other 4 leading Banks Average Ratio of core capital to risk assets Deposits from the public to credit to the public Total operating expenses / Revenue (before credit losses expenses Expenses for credit losses to credit to the public* Dividend yield 10.04% 127.6% 72.9% 0.13% 3.52% 9.32% 108.1.% 62.8% 0.49% 0.81% 9.28% 116.2% 69.3% 0.06% - 9.30% 130.6% 76.4% 0.52% - 8.84% 99.5% 57.7% 0.28% 0.87% 9.24% 112.7% 67.0% 0.32% (As 18.11.13) 14 FIBI Changes in Net Profit Subsidiaries NIS Millions FIRST INTERNATIONAL BANK OF ISRAEL Net profit 1-9/2013 Gross change ROE Core Capital Ratio 82.0 0.6 10.45% 9.5% 29.7 (7.8) 8.9% 15.9% 29.9 (2.6) 9.2% 14.5% 24.7 (10.3) 9.7% 12.9% 15 FIBI FIRST INTERNATIONAL BANK OF ISRAEL 1-9/2013 Highlights Net profit - 429 NIS Million. The Profit before taxes increased – 5.1%. The highest Core capital ratio in the banking system – 10.04%, despite a dividend paid in June 2013. Estimated Core Capital Adequacy under Basel III – 9.88%. ROE in 1-9/2013 -8.7% (9.0% in Q3). Assuming the banking industry core capital average ratio (9.30%) the ROE is 9.4% in 1-9/2013 and 9.7% in Q3. Increase in revenue from commissions – in spite of the regulatory reforms inflicting reductions in commissions, an increase in clients' activity in capital markets resulted in 7.7% increase in capital markets commissions and a slight increase in other commissions. Moreover, the 3rd quarter, due to the timing of the Jewish holidays, included less business days, which mainly reduced capital markets activity revenues in comparison to previous years. Provisions for credit losses in 1-9/2013 - 0.13% (0.08%- excluding regulatory provision on mortgages). Moderate growth in operating expenses - 1.3% - mainly explained by the increase in VAT. Operational Efficiency Ratio Improvement (before Expenses from credit losses)- 72.9% in 1-9/2013 compared to 73.1% in 1-9/2012. 16