fibi first international bank of israel o verview 30.06.14

FIBI

FIRST INTERNATIONAL BANK OF ISRAEL

Overview 30.06.14

FIBI


2

Net Profit and ROE (NIS Millions)

* Assuming equity capital (tier 1) to risk components ratio (9.35%) in the Israeli banking industry average (Other 4 leading Banks) as of 30.06.14, the ROE is 8.9% in H1.2014 and in Q2.2014 10.3%.** The Net profit includes annual amortization of 52 NIS Millions, reflecting an 0.8% reduction on the ROE.

Average capital

equity capital (tier 1) to risk components ratio

6,866

10.00%

6,651 3.9%+

ROE

141 NIS Millions

8.8%

9.7%*9.2%

6,6076,840

7%

2.8%+

FIBI


3

Statements of income H1/2014 – H1/2013 ((NIS Millions

H1/2014H1/2013Gross change

Change in %

Interest income, net1,0841,095(11)(1%)Expenses from credit losses (0.01% provision rate) 344(41)(93%)Net interest income after expenses from credit losses1,0811,051303%Total non-interest income814844(30)(4%)Of which: non-interest financing 89138(49)(36%)Commissions (Without the effect of initial implementation of FAS 91) FAS 91 effect

731(49)

690-

41(49)

6%-

Other Income (Including realization of FIBI London 31 NIS Million against previous year profit from sale of buildings)

431627169%

Total income (after expenses from credit losses)1,8951,895--Total operating and other expenses1,4261,4206-Of which: Salaries and related expenses854862(8)(1%)Maintenance and depreciation of premises and equipment2192181-Amortizations and impairment of intangible assets8487(3)(3%)Other expenses269253166%Profit before taxes469475(6)(1%)Provision for taxes on profit195202(7)(3%)The bank’s share in profit of equity-basis investees, after taxes1622(6)(27%)Net profit280285(5)(2%)ROE8.3%8.8% Equity capital (tier 1) to risk components ratio (end of period)

10.00%(*)

Bank of Israel average interest rate 0.83%1.65%(0.82%)

(*)Equity capital (tier 1) ratio is 10.11% on 31.12.13 .

FIBI


4

Income from Financing Activities (before Tax) (H1/2014 - H1/2013 (NIS Millions

H1/2014H1/2013Gross change

Change (%)

Net interest income1,0841,095(11)(1.0%)

financing income Non-interest89138(49)(36.2%)

Total income from interest and non-interest1,1731,233(60)(4.9%)

Of which: Financing income (expenses) deriving from investments abroad

(2)10(12)

Reconciliations to fair value of derivative instruments(9)37(46)

Total profit from actions of financing (interest and non-interest)1,1841,186(2)(0.2%)

Income from realization of bonds and shares136147(11)(7.5%)

Income from realization and reconciliations to fair value of bonds and Provision for writedown of securities

11710987.35%

Earnings from investments in shares1938(19)(50.0%)

Other financial income of financial intermediation and unoccupied capital

1,0481,03990.9%

FAS 91 effect on financing income(42) -(42)Other financial income of financial intermediation and unoccupied capital

1,0061,039(33)(3.2%)


FIBI


5

Statements of income Q2/2014 – Q2/2013 (NIS Millions)

Q2/2014Q2/2013Gross change

Change in %

Interest income, net547551(4)(1%)Expenses from credit losses (0.01% provision rate) ((712(19)

Net interest income after expenses from credit losses554539153%

Total non-interest income417417--Of which: non-interest financing Of which: Reconciliations to fair value of derivative instruments

48((7

6211

(14)(18)

(23%)

Commissions (Without the effect of initial implementation of FAS 91) FAS 91 effect

360(25)

350-

10(25)

2.9%-

Other Income (Including realization of FIBI London 31 NIS Million against previous year profit from sale of buildings)

34529

Total income (after expenses from credit losses)971956152%Total operating and other expenses705716(11)(2%)Profit before taxes2662402611%Provision for taxes on profit109971212%

The bank’s share in profit of equity-basis investees, after taxes811(3)(27%)

Net profit160149117%ROE9.7%9.3%


FIBI


6

Operating & Other Expenses(NIS Millions)

1-6/2014

1-6/2013

16

*

*Including amortization of 26 NIS Millions in H1/14.

VAT increase resulted in an increase in expenses of about 11 NIS million VAT increase resulted in an increase in expenses of about 11 NIS million

8-

6

0.4%

Without the increase in commissions paid in

relation to capital market operations Expenses rate

increases only by 0.1%

1

3

FIBI


73.1%

72.6%72.6%

74.0%

74.9%74.9% 75.1%75.1%

75.3%75.3%

73.2%73.2%

74.9%74.9%

Consolidated Operational Efficiency Ratio Total Operating Expenses to Total Income

Total Income

Total Operating Expenses

%%Total Operating Expenses / Total Income (Before Expenses for credit losses)

Total Operating Expenses / Total Income (After Expenses for credit losses) %%

7

FIBI


30.06.1430.06.14 31.12.1331.12.13

Capital Notes 5.6

Capital Available for Investment 5.1

Public Deposits

90.7

Gov. & Bank Bonds2.0

Credit to the Public67.8

State of Israel Bonds 8.0

Bank of Israel Deposits 23.3

Corporate Bonds (foreign & Israel currency) 0.9

Structures, Hedge funds &Stocks 0.6

Market risk in VAR(0.03)

(*) illustration – not to scale8

FIBI Strategic Assets & Liabilities compositeFIBI Strategic Assets & Liabilities composite(*) (*) 3300..0606.1.144 (NIS Billion(NIS Billions)s)

FIBI Strategic Assets & Liabilities Structure )NIS Billions(

capital to risk assets Total ratio


Deposits to Deposits to Credit RatioCredit Ratio

Liquid Assets Liquid Assets to Deposits to Deposits

RatioRatio

14.78% 14.78%

10.00% 10.11%

133.7% 129.7%

39.2% 38.4%

capital available for Investments to investment capital Ratio

30.9% 28.2%

FIBI


9

Statement Of Changes in Equity H1/2014((NIS Millions

Balance At 31/12/13 Total Shareholders Equity(non-controling interests (Including

7,120

Net Earnings280

Dividend(230(

Net profit Attributed to non-controlling interests10

Balance At 30/6/14 Total Shareholders Equity(non-controling interests (Including

7,180

Equity capital (tier 1) ratio (Basel III, 30/6/14) is 10.00%, compared to -10.11% (31.12.13) following dividend distribution.

The Highest dividend yield in the Israeli banking system Dividend yield of 3.5% in 2013, and 4% in 2014.

FIBI


10

Credit to the Public by segments (NIS Millions)

30.6.1430.6.13

Gross Change

Compared to

30.6.13

Average balances

growth rates compared to the average

H1/2013

Private + Retail (Households)

16,38015,6324.8%5.0%

Mortgage 17,80916,8265.8%6.4%

Total private clients34,18932,4585.3%5.7%

Corporate 20,88121,973((5.0%(1.8%)

Commercial + Small Business

12,76513,030(2.0%)(3.1%)

Total Credit to the Public

67,83567,4610.6%1.5%

– ()30.6.13

)23%(

)19%(

)33%()25%(

FIBI


11

Provisions for Credit losses 2007-H1/2014

*In Q1/2013 the Bank has implemented a one time regulatory provision on its mortgage portfolio in order to set the expenses for credit losses ratio to 0.35% of the mortgage credit balance (24 NIS million). Excluding this one time provision, the group’s ratio in 2013 was 0.11%.

Expenses for Credit Losses to Credit to the Public Ratio

*

FIBI


12

Deposits from the Public breakdown by segments ((NIS Millions

30.6.1430.6.13

Gross Change

Compared to

30.6.13

Average balances

growth rates compared to the average

H1/2013

Total private clients

47,91249,291(2.8%)(2.4%)

Corporate30,80022,03739.8%37.5%

Commercial + Small Business

11,97411,2056.9%4.6%

Total 90,68682,5339.9%9.0%

– ()30.6.13

)13%(

)60%()27%(

FIBI


13

14%

9%

15%

325

286 39

31

8

Continued growth in client assets portfolio (deposits and securities) - average balances (NIS Billions)

FIBI


13.42%

*

14.30%14.57%

13.42%

*

*

*

**

* **-1.3* **-1.3-0.65 -0.47 0.66-

Minimal Regulatory Requirement For

HAPOALIM & LEUMI

Minimal

Regulatory

requirement

Ga

p

Equity capital (tier 1) ratio

14

%%%

FIBI


.*In annual terms **Calculated only on the balance sheet credit.

***Including dividend paid on the last 12 months.

10.00%

9.53%

9.34%

9.20%

9.00%


133.7%

106.7%

114.5%

126.2%

103.3%

Deposits from the public to credit to

the public

73.1%

62.2%

79.7%

86.9%

59.0%

Total operating expenses /

Revenue (before credit losses

expenses)

90.6%

53.2%

67.4%

62.9%

66.7%

NPL-Provision for credit losses to total impaired credit (without

mortgages)

Other 4 leading Banks Average 9.35% 111.5% 72.0% 60.4%

15

FIBI is demonstrating relative strength in main financial ratios Q2/2014

***4.0%

1.56%

-

-

0.87%

Dividend yield (according to

14.8.14)*

-

(0.04%)

(0.00%)

(0.03%)

(0.12%)

0.06%

Expenses for credit losses to

credit to the public*

((0.02%

1

2

3

4

5

1

2

3

4

5 1

2

3

4

5

1

1

2

3

4

5

5

2

4

3

FIBI


16

Subsidiaries net profit

Specialization

Net profit 1-

6/2014

Nis Millions

ROE


Growth centers

Retail customers

Commercial/ Corporate

Defense forces personnel

Factoring

39.37.2%9.83%

• Extension of the agreement with Hever

• Renewal of activities with Small Business Fund

Capital Markets, Trust & Custody services

Private & affluent banking

22.810.9%16.30%

• Expansion activities with private and institutional clients

• Developing wealthy clients branches

Retail customers

Teachers sector

Israeli-Arab sector

20.99.1%14.86%

• Winning in the teachers loans tender

• Growth at the Israeli-Arab sector

Ultra orthodox sector17.710.0%12.70%

• Increasing network coverage in the ultra orthodox sector including new branches opening

FIBI


17

Highlights for the first half of 2014

Q2/2014

H1/2014

Net profitNet profit

Net profit of 280 NIS million and ROE of 8.3% (Assuming adjustment of equity capital (tier 1) to risk components ratio to the Israeli banking industry average, the ROE is 8.7%)

Net profit of 160 NIS million and ROE of 9.7% (Assuming adjustment of equity capital (tier 1) to risk components ratio to the the Israeli banking industry average, the ROE is 10.1%)

Income from interest & inflation

Substantial Substantial Macro & Macro &

AccountingAccountingeffectseffects

The Interest income was influenced by a decline in the bank of Israel interest rate in the period (0.82%) and an effect of the negative CPI on the CPI-linked positions

Expense for Fair Value of derivatives for the H1/2014 compared with H1/2013 (timing differences) resulted a decrease in financial income of approximately 46 NIS Million.

FAS 91 FAS 91 led to a decrease in profit of about 5 NIS million, due to an increase in

financial income by approximately 42 NIS Million corresponding with a reduction of approximately 49 NIS million in income from commissions.

Fair Value of derivatives

FIBI


18


Continued growth in customer’s

capital markets activity

Continued growth in client assets portfolio (deposits and securities) of 39 NIS Billion (14%)

Growth in operating income

An increase of 5.9% in income from commission (adjusted to FAS 91), mainly due to an increase in clients activity in capital markets

Implementation of customer centric

approach by consolidating all dealing rooms

Aimed at providing response and an overall view of all clients needs in the field of investment and passive

Continued Continued growth in growth in activityactivity

Subsidiaries Continued development of corporate clients through the Small Business Fund Focus in growth segments (Ultra-Orthodox, teachers, security forces, Arab sector)

Operating expenses growth rate of only 0.4% in comparison to H1/13 Mainly resulted by an increase in VAT and in expenses related to capital markets

Moderate Moderate increase in increase in operating operating expensesexpenses consistent

budgetary restraint

Moderate increase in operating expenses

Continued expenses restraint trend – no growth as of H1/2011 (3 years) Divestment of FIBI London in Order to focus on core banking activities in Israel

which increased net profits by 26 NIS Millions Organizational changes in the management of the Bank and its subsidiaries

(reducing the number of divisions and management members) Merging of branches and reducing the branches size Merging of the portfolio management company of FIBI and UBANK

FIBI


19


Dividend of 230 NIS million in the H1/2014. Dividend yield of 3.5% in 2013, 4% in 2014

The Highest dividend yield in the The Highest dividend yield in the Israeli banking system Israeli banking system

credit portfolio credit portfolio quality and quality and

diversificationdiversification

A collection of written off debts brought the expenses from credit losses to decrease - H1/2014 provision rate amounts to 0.01% while H1/2013 provision rate amounted to 0.13%.

At Q2/2014 Collection of debts written off brought to income from credit losses.

Ratio of credit loss allowance to total impaired credit is the highest in the system – 90.6% (excluding mortgages), 108.6% including mortgages.

Decrease in provisions for credit losses

NPL (excluding mortgages)

High financial High financial stabilitystability

equity capital )tier 1(

The highest in the Israeli banking system (under Basel III) - 10.0% higher then Bank of Israel target

Deposits to credit ratio

Deposits to credit ratio – 133.7%

fibi first international bank of israel o verview 30.06.14

Documents

total income

financing income expenses

net profit

2i13889 financing income

total profit

profit of equity

roe nis millions

bank of israel average