Bank Hapoalim B.M. - Annual Report and Accounts

RNS Number:1763R
Bank Hapoalim B.M.
31 March 2008

Head Office

63 Yehuda Halevi St., Bank Hapoalim Bldg., Tel Aviv 65781

Tel: 03-5673800; Fax: 03-5674576

Date: March 31, 2008

Our reference: 802/08

To : The London Stock Exchange

Dear Sir or Madam,

RE: Immediate Report regarding the Approval of the Financial Statements as
at December 31, 2007

1. We wish to inform you that at its meeting held at 16:00 on
March 30, 2008, the Board of Directors of Bank Hapoalim resolved to approve the
Financial Statements as at December 31, 2007.

2. An Immediate Report as required under the Securities
(Periodical and Immediate Reports) Regulations, 5730-1970 and the Securities
(Electronic Signature and Reporting) Regulations, 5763-2003, together with a
copy of the financial statements has been filed with the Israel Securities
Authority and the Tel Aviv Stock Exchange through the Securities Authority's
computer system on March 31, 2008, and has been sent to the Bank of Israel and
the Registrar of Companies in Israel.

3. Enclosed is a summary of the Financial Statements of the
Bank as at December 31, 2007.

The full Financial Statements are available upon request, and can be accessed on
the Bank's internet site: http://www.bankhapoalim.com.

Sincerely yours,

Bank Hapoalim B.M.

Head Office

( - ) ( - )

Barry Ben-Zeev Ofer Levy

Senior Deputy Managing Director Senior Deputy Managing Director

CFO Chief Accountant

31 March 2008

Net Profit for the Bank Group totaled NIS 2,679 million for the year 2007

Bank Hapoalim Group reported today its Financial Results for the year 2007

• Net Profit for the Bank Group totaled NIS 2,679 million in 2007,
excluding exceptional provisions stemming from the US financial crisis and the
voluntary retirement program, profit totaled NIS 3,431 million.

• Net Return on Equity of 14.1% in 2007, excluding exceptional provisions
stemming from the US financial crisis and the voluntary retirement program, ROE
reached 18.1%.

• Net Return on Operating Profit of 12.3% in 2007, excluding exceptional
provisions stemming from the US financial crisis and the voluntary retirement
program, the return reached 16.2%.

• Net Profit from Extraordinary Transactions, after taxes,
of NIS 351 million for 2007.

• Provision for doubtful debts in 2007 totaled NIS 513 million.

• Profit from financing activities before provision for doubtful debts
totaled NIS 6,933 million in 2007, excluding exceptional provisions stemming
from the US financial crisis and the voluntary retirement program, financing
profit totaled NIS 8,109 million.

• During 2007, as a result of the crisis in the US, the Bank recorded
impairments in the amount of NIS 1,176 million with respect to its asset-backed
securities portfolio. In addition, a provision in the amount of NIS 250 million
for the voluntary retirement program was also recorded. The decrease in profit,
due to said provisions, led to a significant decrease in management and employee
bonuses in the amount of NIS 200 million.

• Net profit for the fourth quarter of 2007 totaled NIS 219 million
compared with NIS 749 million in the same quarter last year. Excluding
exceptional provisions the net profit for the fourth quarter of 2007 totaled NIS
895 million.

2007 Neutralizing 2006 Change Change
against
exceptional Reported Neutralizing
Items* Amounts
exceptional
Items
Net Profit 2,679 3,431 3,359 -20.2% 2.1%
Profit from Financing Activity, 6,933 8,109 7,579 -8.5% 7.0%
Before Provisions
Provision for Doubtful Debts 513 513 986 -48.0% -48.0%
Operating and Other Income 5,250 5,250 5,371 -2.3% -2.3%
Operating and Other Expenses 7,940 7,890 7,632 4.0% 3.4%
Net Operating Profit 2,328 3,080 2,496 -6.7% 23.4%
Net Profit from Extraordinary 351 351 863 -59.3% -59.3%
Transactions , after taxes
Net return on equity 14.1% 18.1% 19.4%
Net return on operating profit 12.3% 16.2% 14.4%

*Exceptional items include a provision for impairments in the asset backed
securities portfolio amounting to NIS 1,176 million, a provision for the
voluntary-retirement program in the amount of NIS 250 million and the decrease
in the bonus as a result of these items amounting to NIS 200 million.

The Chairman of the Board of Directors, Mr. Dani Dankner, commented:

"Bank Hapoalim has elected a strategy of global banking, in which its center and
core are in Israel, while its activities span the globe. Therefore, the business
results we present today, which include exceptional write-offs arising from
recent events in international markets, are an element and an outcome of our
chosen path.

Despite the effect of the financial crisis, the Bank ended the year with net
income of 2.7 billion Shekels, representing a return on equity of over 14%. Net
return on operating profit totaled 12.3%. Excluding the exceptional items, net
ROE from operating profit would have been 16.3%.

These results are strong, reflecting the Bank's robustness and resilience,
alongside the effects of the turmoil in the international markets.

However, the Bank did not meet the ROE target it set for itself this year, since
it was obliged to record provisions for decline in value of its asset backed
securities portfolio in the US and UK.

Bank Hapoalim is central to the Israeli economy and will continue act through
leadership and responsibility, while significantly contributing to the economy
and its development.

The Bank continues to implement its global strategy of investing in developed
and developing markets worldwide. I have no doubt that this policy and its
supervision by the high quality professional management and employees of the
Bank will continue to prove itself.

In the coming year the Bank will continue to take measures to strengthen the
capital adequacy ratio in order to reach 12% by 2009. The Bank will continue to
focus on the Israeli client by adding value to its services. In this framework,
the Bank will aim to get closer to all its clients- private, corporate and
commercial- and will considerably expand its branch network this year.
Concurrently, it will act to increase its business activity abroad and place
emphasis on additional improvements in its risk management capabilities.

In 2008 we will continue to act to fortify the position of Bank Hapoalim as the
leading, most professional and strongest banking financial institution, which is
on the right path to become a global bank, with branches spread worldwide but
its center and core are in Israel.

Financial Performance

• Profit from financing activities, excluding exceptional provisions rose
by NIS 530 million and totaled NIS 8,109 million. A provision of NIS 1,176
million due to losses arising from investments by the Bank's offices abroad in
asset-backed securities led to a decrease of NIS 646 million in the financing
profit, compared to 2006. Financing profit witnessed an increase in the volume
of the Bank Group's financial activity resulting from the financing profits of
Bank Pozitif, which was consolidated for the first time in 2007, income from
interest on problematic debts not previously recorded, an increase stemming from
fluctuations in interest rates in the unlinked shekel and CPI-linked shekel
segments, and an increase in financing income on financial capital invested in
the various linkage segments, mainly due to the 2.8% increase in the known CPI
in 2007, versus a 0.3% decrease in the previous year.

• The decrease in the provisions for doubtful debts reflects the
continuous improvement in the credit portfolio, which enjoys a "tailwind" from
the strong economy. The specific provision for doubtful debts decreased by
43.2%, compared with 2006, explained by the improvement in economic conditions,
and an improvement in borrowers' repayment capability. The decrease was mainly
apparent in the construction and real estate, financial services and hotel
sectors. However, provisions increased in the industry sector and for private
individuals.

• Operating and other income decreased by 2.3%, mainly resulting from the
cessation of consolidation of Bank Otsar Hahayal as of its sale at the end of
the third quarter of 2006 and from the effect of the sale of management rights
of mutual funds and the majority of provident funds.

• Operating and other expenses increased by 4.0%, compared to 2006,
mainly due to the inclusion of the provision for voluntary-retirement programs,
in the amount of NIS 250 million, under salary expenses. Excluding this expense,
salary expenses decreased by 3.6%compared to the previous year.

Bank Hapoalim CEO Mr. Zvi Ziv said:

In 2007, Bank Hapoalim continued making progress in the achievement of its
business objectives and posting impressive results, especially given the effects
of the crisis in the United States. An examination of the Bank's results
excluding the exceptional provisions highlights the ongoing accelerated growth
in its business activity, in Israel and abroad.

- Net operating profit for 2007, excluding the exceptional provisions
arising from the effects of the crisis in the United States and from the
retirement program, totaled NIS 3,080 million, versus NIS 2,496 million in 2006,
an increase of 23.4%. This profit (which excludes the exceptional provisions)
brought the Bank's rate of return of operating profit on equity to 16.2% in
2007, versus 14.4% in 2006.

- Financing profit in 2007, excluding the exceptional provisions,
totaled NIS 8,109 million, compared with NIS 7,579 million in 2006, an increase
of 7.0%.

- Credit to the public totaled NIS 205 billion, up 9.9% from 2006, and
deposits from the public totaled NIS 231.8 billion, up 6.8% from 2006.

During the year, the Bank continued to develop its international operations. We
completed the acquisition of the bank DKB in Kazakhstan, signed an agreement to
acquire Ukrinbank in Ukraine, opened a branch in Singapore, and further expanded
our global private banking activity, applying our accumulated knowledge,
experience, and capabilities.

In the Israeli market, the Bank continued to emphasize the expansion of its
service and product offering to customers. The Bank has developed an innovative
philosophy of comprehensive lifetime financial advisory services that combine
financial and pension advice and address the full range of customers' needs. In
the corporate sector, our emphasis is on providing solutions for all of our
clients' activity with the Bank, focusing on business initiatives with clients,
services tailored to client needs, and top experts from all units of the Bank
working collaboratively with clients.

In 2008, Bank Hapoalim will continue to focus on the implementation of its
multi-year strategy. The Bank is resolutely confronting the growing competition
in the Israeli banking market through an emphasis on renewed domestic growth. As
part of this effort, we will open dozens of new retail branches, enhance our
sales and service capabilities in corporate banking, open designated branches
for corporate clients, and continue to the lead the revolution in service for
Israeli consumers.

This year, we will also accelerate the growth rate of our international
operations, while maximizing the great potential of the banks we have acquired
and of future acquisitions. Concurrently, we will continue to work to promote
streamlining and operational excellence, while improving customer service and
increasing employee efficiency.

In 2008, the Bank will also devote resources to the appropriate management of
its exposure to the U.S. crisis. The American capital market is likely to
continue to suffer extensive instability this year as well, with volatility in
the prices of the various securities expected to persist. We recently witnessed
an example of these developments in the Bank's report of an additional decline
in value of its asset portfolio in the United States. However, the Bank believes
that this decline does not reflect the economic value of the portfolio, and that
based on the credit analysis recently performed by an external company, the Bank
is not expected to incur substantial losses if it holds its portfolio over a
long period.

I am confident that the Bank is on the right track to fulfill all its plans and
thanks to our excellent and dedicating employees and management - we will
continue to lead the Bank to reaching its professional goals.

The following is the main data from the 2007 financial statements:

• Return on Equity totaled 14.1%, excluding exceptional provisions
stemming from the US financial crisis and the voluntary retirement program, ROE
reached 18.1% compared with 19.4% in 2006.

• Return on Operating Profit totaled 12.3% in 2007, excluding exceptional
provisions stemming from the US financial crisis and the voluntary retirement
program, the return reached 16.2% compared with 14.4% in 2006.

• Net Profit from Extraordinary Transactions, after taxes, totaled
NIS 351 million especially due to profits from the sale of provident funds.

• Profit from financing activities before provision for doubtful debts
totaled NIS 6,933 million in 2007 compared with NIS 7,759 million in 2006, a
decrease of 8.5%. Excluding exceptional provisions stemming from the US
financial crisis and the voluntary retirement program, financing profit totaled
NIS 8,109 million.

• Provision for doubtful debts decreased by 48.0% in 2007 and totaled
NIS 513 million compared to NIS 986 million in 2006. The ratio of specific
provision for doubtful debts, relative to the overall (balance-sheet) balance of
credit to the public at the Group's risk, reached 0.27% in 2007, compared with
0.53% in 2006. The ratio of the overall balance of credit to the public
(balance-sheet and off-balance sheet) at the Group's risk, reached 0.15% in
2007, compared with 0.30% in the whole of 2006.

• Operating and other income totaled NIS 5,250 million in 2007, compared
with NIS 5,371 million in 2006, a decrease of 2.3%

• Income from credit cards - The contribution of the credit card
companies to the Bank Group's net operating profit totaled NIS 1,252 million,
compared with NIS 1,141 million in 2006, an increase of 9.7%.

• Operating and other expenses totaled NIS 7,940 million in 2007,
compared to NIS 7,632 million in 2006, an increase of 4.0%.

• Contribution to the community - the Bank conducts a varied and
extensive range of community-oriented activities that take the form of social
involvement, monetary donations, and large-scale volunteer activities in which
both members of management and employees participate. The Group's involvement in
the community in 2007 was expressed in a financial contribution of approximately
NIS 44.6 million.

• Dividend- In view of the Bank's decision to gradually raise the ratio
of capital to risk assets to 12% by the end of 2009, and given the uncertainty
regarding developments in global financial markets, the Bank has decided not to
declare a dividend at the date of approval of its financial statements for 2007.
However, the Bank will continue to maintain its policy of distributing 50% of
its net operating profits as dividends, and it intends to add the dividend on
the profits of the last quarter of 2007 to its next dividend payment.

Development in Balance Sheet Items

• The consolidated balance sheet totaled NIS 303.0 billion on December
31, 2007, compared to NIS 282.9 billion on December 31, 2006, an increase of
7.1%.

• Credit to the public was NIS 205.0 billion, an increase of 9.9% from
the balance on December 31, 2006.

• Deposits from the public were 231.8 billion, an increase of 6.8% from
the balance at the end of 2006.

• The ratio of capital to risk assets was 10.26%, compared to 10.53% on
December 31, 2006. The ratio of tier-1 capital to risk assets was 7.50%, and
Tier 2 reached 2.77%.

Business Segment Performance

The Group's activity is managed through six segments.

Net Operating Profit
(NIS Millions) For the year
ending December 31
Segment 2007 2006 Change Change %

Households 258 355 -97 -27.3
Private Banking in Israel 357 370 -13 -3.5
Private Banking abroad (GPB) 68 74 -6 -8.1
Small Business 222 209 13 6.2
Commercial 169 82 87 106.1
Corporate in Israel 1,129 740 389 52.6
Corporate abroad -584 118 -702 -594.9
Financial Management 634 496 138 27.8
Others and Adjustments 75 52 23 44.2
Total 2,328 2,496 -168 -6.7

Forward Looking Statements

Forward looking statements for the company's business, financial condition and
results of operations, are subject to risks and uncertainties that could cause
actual results to differ materially from those contemplated. Such forward
looking statements, include but are not limited to, product demand, pricing,
market acceptance, changing economic conditions, risks in product and technology
development and the effect of the company's accounting policies. As well as
certain other risk factors which are detailed from time to time in the company's
filings with the securities authorities.

For further information please contact the Bank's Spokesperson:

Tel: +972-3-567-3635; Fax: +972-3-567-3500

spokesperson@bnhp.co.il

Principal Data of the Bank Hapoalim Group
(in millions of NIS)

For the year ending on
December 31
Change
2007 2006 2005 2006 2005
Profit and Profitability
Profit from financing activities
before provision for doubtful debts 6,933 7,579 7,394 (8.5%) (6.2%)
Provision for doubtful debts 513 986 1,268 (48.0%) (59.5%)
Operating and other income 5,250 5,371 4,815 (2.3%) 9.0%
Operating and other expenses 7,940 7,632 7,025 4.0% 13.0%
Operating profit before taxes 3,730 4,332 3,916 (13.9%) (4.7%)
Provision for taxes on operating profit 1,458 1,897 1,645 (23.1%) (11.4%)
Operating profit after taxes 2,272 2,435 2,271 (6.7%) 0.0%
Net Operating profit 2,328 2,496 2,298 (6.7%) 1.3%
Net Profit from extraordinary transactions, 351 863 590 (59.3%) (40.5%)
after taxes
Net profit 2,679 3,359 2,888 (20.2%) (7.2%)

change compared with
31.12.2007 31.12.2006 31.12.2005 31.12.2006 31.12.2005
Balance Sheet - Principal Items
Total balance sheet 302,991 282,864 280,894 7.1% 7.9%
Credit to the public 205,016 186,463 193,024 9.9% 6.2%
Securities 50,431 44,456 33,813 13.4% 49.1%
Deposits from the public 231,750 217,004 213,892 6.8% 8.3%
Debentures and subordinated notes 18,812 18,384 21,361 2.3% (11.9%)
Shareholders' equity 18,778 18,233 16,237 3.0% 15.6%

31.12.2007 31.12.2006 31.12.2005
Principal financial ratios
Shareholders' equity to total assets 6.2% 6.4% 5.8%
Tier 1 capital to total assets 7.5% 7.4% 6.9%
Capital to risk assets 10.26% 10.53% 10.47%
Credit to the public to total assets 67.7% 65.9% 68.7%
Deposits from the public to total assets 76.5% 76.7% 76.1%
Operating income to operating expenses 66.1% 70.4% 68.5%
Operating expenses to total income 65.2% 58.9% 57.5%
Provision for doubtful debts to credit
to the public (balance sheet and off-balance sheet)) 0.1% 0.3% 0.4%
Rate of provision for taxes 39.1% 43.8% 42.0%
Return of operating profit on equity, net 12.3% 14.4% 14.6%
Return of net profit on equity 14.1% 19.4% 18.3%
Return of net profit on total assets 0.9% 1.2% 1.1%

This information is provided by RNS
The company news service from the London Stock Exchange
END

FR ILFVVVDILVIT