March 19, 2020 / 7:31 AM / 15 days ago

UPDATE 2-Israel's Bank Hapoalim swings to loss on tax case, virus provision

* Q4 net loss 629 mln shekels vs 97 mln profit a year ago

* One of first banks to make provision for coronavirus

* Shares up 4% as moves to settle U.S. tax case (Adds analyst comment, share reaction)

By Tova Cohen

TEL AVIV, March 19 (Reuters) - Bank Hapoalim, Israel’s largest lender, swung to a fourth-quarter loss due to the cost of settling a U.S. tax evasion probe and provisions for credit losses related to the coronavirus pandemic, it said on Thursday.

The bank set aside 450 million shekels ($120 million) to cover losses related to the virus outbreak, making it one of the first lenders to make provisions for the crisis.

It included the provision in its October-December results even though the virus did not spread globally until this year.

Hapoalim, which reported a quarterly net loss of 629 million shekels compared with a profit of 97 million a year earlier, said the virus outbreak clouded the 2020 outlook.

“The events of recent weeks could have a significant negative impact on the bank’s results in 2020 but at this stage it is not possible to estimate the amount,” it said.

Hapoalim also made a provision of 897 million shekels due to “significant progress” in negotiations with U.S. regulators, including the Department of Justice (DOJ), to settle a tax investigation.

The bank said on Wednesday it expected to pay $870 million to settle the investigation. The fourth quarter provision is in addition to $611 million already set aside.

Net interest income in the quarter was steady at 2.29 billion shekels versus a year earlier.

Credit loss expenses surged to 876 million shekels, including the provision for the coronavirus outbreak, which has hammered the global economy, particularly the energy, airline and tourism industries.

Reductions in short-term interest rates by various central banks were also expected to hit Hapoalim’s interest income.

However, the bank’s Tier 1 capital ratio increased to 11.53% in 2019 from 11.16% in 2018.

“Hapoalim enters the 2020 coronavirus uncertainty from a position of capital strength ... as well as settling DOJ matters, subject to approvals, that removes major uncertainty,” Jefferies analyst Joseph Dickerson said.

The bank’s shares were up 4.3% in morning trade, outpacing gains of 2.9% in the main Tel Aviv market indices.

$1 = 3.7705 shekels Additional reporting by Steven Scheer; Editing by Edmund Blair and Mark Potter

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