November 28, 2017 / 6:17 AM / 17 days ago

Israel's Hapoalim third quarter profit down on US tax probe provision

TEL AVIV (Reuters) - Bank Hapoalim (POLI.TA), Israel’s largest lender, reported lower quarterly net profit, weighed down by provisions for a U.S. tax investigation and the ending of its activities in Switzerland.

Hapoalim said on Tuesday it earned 469 million shekels ($134 million) in the third quarter, down from 699 million shekels a year earlier. Excluding the provisions, net profit would have been 861 million shekels compared with 819 million forecast in a Reuters poll of analysts.

Last week the bank said it would set aside an additional $80 million in the third quarter to cover a possible future settlement in a U.S. tax evasion investigation, bringing the total amount provisioned for the case to $268.5 million.

At this stage, Hapoalim said, it cannot reliably estimate the extent of its exposure in connection with the U.S. investigation. “The eventual outcome may be different, such that the amounts paid within resolutions with the American authorities, if attained, may be significantly higher than the amount of the provision,” it said.

Hapoalim wrote off 110 million shekels for ending its Swiss activities.

Net financing income rose 5.4 percent to 2.32 billion shekels in the quarter while net credit loss expenses amounted to 25 million shekels compared with income of 118 million a year earlier.

Its core Tier 1 capital ratio to risk-weighted assets, a key measure of financial strength, rose to 11.26 percent from 11.01 percent at the end of 2016.

The bank said non-performing loans as a percentage of total credit was at an all-time low of 0.79 percent in the quarter.

    Barclays analyst Tavy Rosner said underlying results were good.

    “While we continue to view the (U.S.) Department of Justice investigation as a headline risk for Hapoalim, we see the bank as capable of weathering a potential sizable fine and we recommend to look beyond the DoJ provisions and focus on the bank’s strong underlying metrics,” said Rosner, who rates the stock “equal weight”.

    The bank declared a quarterly dividend of 188 million shekels for a payout of 40 percent of net profit, bringing its distribution in the first nine months to 820 million.

    Hapoalim’s top rival Leumi (LUMI.TA) last week reported quarterly profit fell to 820 million shekels from 919 million.

    ($1 = 3.5016 shekels)

    Additional reporting by Steven Scheer, editing by Louise Heavens

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