August 20, 2014 / 9:16 AM / in 3 years

CORRECTED-Israel Discount Bank Q2 profit drops, to cut 10 pct of jobs

(Corrects comparative figure in paragraph 6 to 263 million instead of 165 million)

JERUSALEM, Aug 20 (Reuters) - Israel Discount Bank , the country’s third-largest, reported a 27 percent drop in profit in the second quarter and said it would cut more than 10 percent of its workforce in the coming five years to strengthen its bottom line.

As part of a new strategy, Discount said it would eliminate more than 1,000 jobs, including 700 by the end of 2017, most of them via an early retirement scheme. The bank currently has 9,800 employees.

In a effort to cut costs and streamline its operations, Discount said it would reduce its real estate holdings, cut expenses and close a number of the 225 branches it has in Israel. In the first stage, it plans to shut 10 outlets.

“Implementation of the plan will lead to a double digit CAGR (compound annual growth rate) during the five year programme,” Discount said on Wednesday.

Another part of the new strategy will involve expanding lending to consumers and small businesses, the bank said.

In its results, the bank said it earned 192 million shekels ($54.4 million) in the April-June period, down from 263 million in the year-earlier period and below an average forecast in a Reuters poll of 224 million.

The results included a 195 million shekel provision for severance pay. Excluding the charge, Discount said it made a quarterly profit of 313 million shekels.

Net interest income rose 5.7 percent to 1.1 billion shekels, while salary expenses gained 14.9 percent.

The bank recovered 35 million shekels in the quarter after credit loss charges of 75 million shekels a year ago.

Its core Tier 1 ratio, which measures equity capital as a proportion of total risk-weighted assets, rose to 9.2 percent from 8.9 percent at the end of 2013, slightly above the Bank of Israel’s requirement of 9 percent by the start of 2015.

1 US dollar = 3.5286 Israeli shekel Reporting by Steven Scheer; by Luke Baker

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