JERUSALEM, March 19 (Reuters) - Israel Discount Bank reported a drop in quarterly profit due to lower capital gains and a one-time provision but the results beat analysts' expectations.
Discount, Israel's third-largest lender, said on Wednesday it earned 72 million shekels ($20.8 million) in the fourth quarter, compared with 169 million a year earlier and expectations of 66 million shekels in a Reuters poll.
Excluding a 158 million shekel provision for a decline in the value of its holdings in the First International Bank of Israel (FIBI), Discount posted profit of 230 million shekels in the fourth quarter.
Discount holds 26.5 percent of FIBI, Israel's fifth-largest bank, and has said it plans to trim its stake.
Net interest income edged up 0.5 percent to 1.07 billion shekels, while credit loss expenses fell to 123 million shekels from 252 million.
Lilach Asher-Topilsky, who took over as Discount's chief executive this month, said the bank aims to present an updated plan in August.
"For now, I would only mention that we will continue the bank's focus on continued retail growth and further efficiency measures," she said. "It is clear to us and to the market, that the cost side is the key factor that encumbers the bank's performance".
Israel's top two banks will report fourth-quarter results by the end of March. FIBI posted fourth-quarter profit of 141 million shekels, up from 132 million a year earlier.
Discount's core Tier 1 capital to risk-weighted assets rose to 9.3 percent at the end of 2013 from 8.6 percent at the end of 2012. It was 8.9 percent based on Basel III directives.
The bank said it aims for a core capital adequacy ratio of 9.3-9.4 percent by the end of 2014.
Israel's banking regulator has mandated banks to hold core Tier I ratio of at least 9 percent by the start of 2015 as part of a global drive to strengthen the industry and prevent a repeat of the 2008 financial crisis.
($1 = 3.4606 Israeli Shekels) (Reporting by Steven Scheer)