Israel Discount Bank Q2 profit hit by rise in credit loss provision

JERUSALEM, Aug 11 (Reuters) - Israel Discount Bank (DSCT.TA) on Thursday reported a 21% drop in second-quarter profit, with higher provisions for loan defaults overshadowing a jump in financing income that followed interest rate increases.

Discount, Israel's fourth-largest bank by assets, said it earned a net 680 million shekels ($209 million) in the April-July period, versus 860 million shekels a year earlier and in line with 678 million forecast in a Reuters poll of analysts.

Net interest income rose 23% to 2.07 billion shekels, while credit loss expenses were 131 million shekels. This was a sharp reversal the same period last year when the bank took back loan default provisions of 410 million shekels.

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It highlighted higher credit growth but also an uncertain economic outlook. Credit growth was led by a 29% rise in mortgages and 22% to medium-sized businesses.

The Bank of Israel has raised its benchmark interest rate to 1.25% from 0.1% in April on rising inflation. Further rate hikes are expected.

Discount, the first of Israel's largest banks to issue quarterly earnings, said it would pay a quarterly dividend of 136 million shekels, reflecting a payout of 20% of second-quarter profit.

Its Tier 1 capital ratio, a key measure of financial strength, stood at 10.16%, down from 10.28% a year earlier.

Discount said it was focusing on executing a strategy of reaching net profit of 3.5 billion shekels by 2025. It earned 2.77 billion shekels in 2021 and 1.7 billion in the first half of 2022.

($1 = 3.2566 shekels)

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Reporting by Steven Scheer. Editing by Jane Merriman

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