Israel's Bank Hapoalim moves to fourth quarter profit, sees economic uncertainty

JERUSALEM (Reuters) - Bank Hapoalim, Israel’s largest lender, swung to a profit in the fourth quarter and said on Thursday loan deferments made due to the COVID-19 pandemic have fallen sharply.

FILE PHOTO: A man enters the main branch of Bank Hapoalim, Israel's biggest bank, in Tel Aviv, Israel July 18, 2016. REUTERS/Amir Cohen

The bank said that despite the crisis, it grew its credit portfolio, continued to cut costs, entered the digital wallet sector and forged deals with banks in the United Arab Emirates and Bahrain after Israel normalised relations with those countries.

“While there is much optimism about the recovery of the Israeli economy after the pandemic, uncertainty is still prevalent and many challenges lie ahead,” said CEO Dov Kotler.

Hapoalim said on Thursday it earned 915 million shekels ($267 million) in the October-December period, compared with a 629 million shekel net loss in the fourth quarter of 2019 when it was hit by a provision to settle a U.S. tax evasion probe.

Net interest income dipped to 2.24 billion shekels from 2.29 billion a year earlier, while it had income for credit losses of 187 million shekels after 876 million of provisions for loan losses in the final three months of 2019.

It was the first time in a year the bank had income for credit losses after putting aside 2.1 billion shekels the first nine months of 2020 to protect against loan defaults.

Its shares rose 2.2%.

“Loan demand is strong in areas such as mortgage with deposits up 20% over the past year providing ability to fund any shape of recovery associated with this week’s reopening of the economy,” said Jefferies analyst Joseph Dickerson.

After three lockdowns over the past year, Israel this week began opening its economy, particularly to those who have been vaccinated for COVID-19.

Hapoalim said last year, customers deferred 42.5 billion shekels of loans but as of Jan. 31, that balance has narrowed to 11.2 billion. Israel’s banking regulator had given banks the greenlight to allow loan deferments in the wake of the lockdowns that forced businesses to close temporarily or permanently, leading to a spike in unemployment.

It also said it approved a total of 5.7 billion shekels in business loans as part of the state-backed loan fund for businesses hurt by the crisis and a loan fund for high-risk businesses.

Hapoalim’s Tier 1 equity to risk assets ratio stood at 11.52% at the end of December, versus 11.53% a year earlier, although banks will likely not be able to resume dividends until the fourth quarter of this year.

On Tuesday, rival Leumi reported a 20% rise in fourth-quarter net profit to 890 million shekels.

Reporting by Steven Scheer; editing by Lincoln Feast and Emelia Sithole-Matarise