Israel's Bank Leumi Q2 profit boosted by financing income jump

Pedestrians are reflected in the windows of a Bank Leumi branch in Tel Aviv May 30, 2013. REUTERS/Nir Elias/File Photo

JERUSALEM, Aug 16 (Reuters) - Bank Leumi (LUMI.TA), one of Israel's two largest lenders, reported higher quarterly net profit that beat estimates, helped by a large gain in financing income due to an increase in its loan portfolio, inflation and interest rates.

Leumi said on Tuesday it earned a net 1.99 billion shekels ($610 million) in the second quarter, up from 1.67 billion a year earlier and above expectations of 1.87 billion in a Reuters poll of analysts.

Net interest income rose to 3.13 billion from 2.77 billion, while it had loan-loss expenses of 126 million shekels versus income from the provision of 158 million a year earlier as Israeli banks unwound provisions made during the COVID pandemic to protect against defaults.

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Leumi's credit portfolio grew 12.3% over the first half of the year, it said.

Shares of Leumi rose 3.4% compared with modest gains in the broader Tel Aviv bourse.

"We continue to see Leumi's loan portfolio as very high quality," said Barclays analyst Tavy Rosner, who sees a 36% upside in the bank's shares.

Inflation has risen significantly this year, reaching a 14-year high of 5.2% in July. To combat price pressures, the central bank in April began to raise its benchmark interest rate, bringing it to 1.25% in July from 0.1% in April. More hikes are expected in 2022.

Leumi noted that in the wake of the merger between its U.S. unit and Valley National Bank, it recorded a gain of 451 million shekels in the second quarter. It will also post a pretax gain of 524 million shekels in 2023 from the sale of its Tel Aviv headquarters.

The bank said it would pay a dividend of 399 million shekels, representing 20% of second-quarter net profit.

On Monday, rival Hapoalim (POLI.TA) reported a net profit of 1.34 billion shekels for the April-June quarter, down from 1.42 billion a year earlier. read more

($1 = 3.2605 shekels)

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Reporting by Steven Scheer; Editing by Ari Rabinovitch and David Holmes

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