FIBI

FIRST INTERNATIONAL BANK OF ISRAEL

Overview 31.03.14

FIBI

FIRST INTERNATIONAL BANK OF ISRAEL

2

Net Profit and ROE NIS Millions

* Assuming core capital ratio of (9.17%), the Israeli banking industry average core capital ratio (Other 4 leading Banks) as of 31.03.14, the ROE is 7.6% in Q1.2014.** The Net profit includes amortization of 13 NIS Millions, inflicting a 0.8% reduction in the ROE.

Average capital

Core capital adequacy ratio

Basel III

6,858

9.73%

6,6033.9%+

ROE

141 NIS Millions

FIBI

FIRST INTERNATIONAL BANK OF ISRAEL

3

Statements of income Q1/2014 – Q1/2013 NIS Millions

 1-3/20141-3/2013Gross change

Change in %

Interest income, net537544(7)(1.3%)Expenses from credit losses (0.06% provision rate) 1032(22)(68.8%)

Net interest income after expenses from credit losses52751215(2.9%)

Total non-interest income397427(30)7.0%

Of which: non-interest financing 4176(35)(46.1%)

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

372(25)

340-

32(25)

9.4%-

Other Income 911(2)(18.2%)

Total income (after expenses from credit losses)924939(15)(1.6%)

Total operating and other expenses721704172.4%

Profit before taxes203235(32)(13.6%)Provision for taxes on profit86105(19)(18.1%)The bank’s share in profit of equity-basis investees, after taxes

811(3)(27.3%)

Net profit120136(16)(11.8%)ROE7.2%8.5% Core capital ratio (end of period)9.73%- 

Bank of Israel average interest rate 0.92%1.75%(0.83%)

FIBI

FIRST INTERNATIONAL BANK OF ISRAEL

4

Income from Financing Activities (before Tax) Q1/2014 - Q1/2013 NIS Millions

 1-3/20141-3/2013Gross

changeChange

(%)

Net interest income537544(7)(1.3%)

financing income Non-interest4176(35)(46.1%)

Total income from interest and non-interest578620(42)(6.8%)

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

(1)10(11) 

Reconciliations to fair value of derivative instruments(2)19(21) 

Total profit from actions of financing (interest and non-interest)581591(10)(1.7%)

Income from realization of bonds and shares6874(6)(8.1%)

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

636035.0%

Earnings from investments in shares514(9)(64.3%)

Other financial income of financial intermediation and unoccupied capital

513517(4)(0.8%)

Bank of Israel average interest rate 0.92%1.75%(0.83%)

FIBI

FIRST INTERNATIONAL BANK OF ISRAEL

5

Operating & Other Expenses(NIS Millions)

1-3/2014

1-3/2013

9

*

*Including amortization of 13 NIS Millions in Q1/14.

Continued budgetary restraint trend - significant decrease (2.6%) in operating expenses in comparison to Q1/11Continued budgetary restraint trend - significant decrease (2.6%) in operating expenses in comparison to Q1/11

8

1.9%

7.5%

17

2.4%

Mainly due to commissions paid in

relation to capital market operations

4

3.7% 4-8.7%-

FIBI

FIRST INTERNATIONAL BANK OF ISRAEL

Consolidated Operational Efficiency Ratio Total Operating Expenses to Total Income

6

75.0%75.0%

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) %%

FIBI

FIRST INTERNATIONAL BANK OF ISRAEL

Capital Capital AdequacyAdequacy

Basel IIIBasel III

Core Capital Core Capital AdequacyAdequacy Basel IIIBasel III

Deposits to Deposits to Credit RatioCredit Ratio

Liquid Assets Liquid Assets to Deposits to Deposits

RatioRatio

14.48% 14.78%

9.73% 10.11%

134.2% 129.7%

40.0% 38.4%

31.3.1431.3.14 31.12.1331.12.13

Capital Notes 5.6

Capital Available for Investment 4.9

Public Deposits

91.1

Gov. & Bank Bonds2.1

Credit to the Public67.9

State of Israel Bonds 6.9

Bank of Israel Deposits 24.8

Corporate Bonds (foreign & Israel currency) 0.7

Structures, Hedge funds &Stocks 0.7

Market risk in VAR(0.03)

(*) illustration – not to scale7

FIBI Strategic Assets & Liabilities compositeFIBI Strategic Assets & Liabilities composite(*) (*) 31.31.33.1.144 (NIS Billion(NIS Billions)s)

FIBI Strategic Assets & Liabilities Structure NIS Billions

FIBI

FIRST INTERNATIONAL BANK OF ISRAEL

8

An increase in total balance sheet NIS Billions

4.1%

5.1%

1.3%

FIBI

FIRST INTERNATIONAL BANK OF ISRAEL

9

Statement Of Changes in Equity Q1/2014NIS Millions

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

7,120

Net Earnings120

Dividend(230(

Movement in the capital reserve of available for sale securities and non-controling interests

13

Balance At 31/3/14 Total Shareholders Equity(non-controling interests (Including

7,023

Core capital ratio (Basel III, 31/3/14) was 9.73%, 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, 4% in 2014 and 7.51% for the past 12 months

FIBI

FIRST INTERNATIONAL BANK OF ISRAEL

10

Credit to the Public by segments NIS Millions

 31.3.1431.12.1331.3.13

Gross Change Compared to

31.12.1331.3.13

Private + Retail (Households)

16,56016,39015,7781.0%5.0%

Mortgage 17,52717,42716,5450.6%5.9%

Total private clients

34,08733,81732,3230.8%5.5%

Commercial + Small Business

12,81412,94313,159(1.0%)(2.6%)

Corporate 20,99321,94621,939(4.3%)(4.3%)

Total Credit to the Public

67,89468,70667,421(1.2%)0.7%

– ()31.3.13

)23%(

)19%(

)33%()25%(

FIBI

FIRST INTERNATIONAL BANK OF ISRAEL

11

Provisions for Credit losses 2007-I/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

FIRST INTERNATIONAL BANK OF ISRAEL

12

Breakdown of credit for problematic debts 31.3.14 NIS Millions

31.3.1431.12.13

Balance sheet

Off balance sheet

Total Balance

sheetOff balance

sheetTotal

Impaired credit risk 9471351,0821,0121421,154

Inferior credit risk 602134736609115724

Credit under special supervision risk

8941411,03588474958

Total problem credit risk  

2,4434102,8532,5053312,836

Ratio of credit loss allowance for credit to the public to total impaired credit to the public not accruing interest income (excluding mortgages) - NPL

79.5%

The highest rate in the Israeli

banking system

FIBI

FIRST INTERNATIONAL BANK OF ISRAEL

13

Deposits from the Public breakdown by segments NIS Millions

31.3.1431.12.1331.3.13

Change in % Compared to

31.12.1331.3.13

Private Banking

25,91725,97027,487(0.2%)(5.7%)

Retail (Households)

23,84824,07923,151(1.0%)3.0%

Commercial + Small Business

11,23511,07410,5561.5%6.4%

Corporate30,10327,99921,2247.5%41.8%

Total 91,10389,12282,4182.2%10.5%

– ()31.3.13

)13%(

)33%(

)28%(

)26%(

FIBI

FIRST INTERNATIONAL BANK OF ISRAEL

14

Average balances NIS Millions

consolidated

Total

Gross Change

Change in %

1-3.20141-3.2013

Total Deposits89,03282,1796,8538.3%

Securities clients portfolio232,037198,47433,56316.9%

Total Client Assets321,069280,65340,41614.4%

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

FIBI

FIRST INTERNATIONAL BANK OF ISRAEL

13.42%

*

14.30%14.57%

13.42%

*

*

*

**

* **-1.3* **-1.3-0.83 -0.56 0.59-

Minimal Regulatory Requirement For

HAPOALIM&LEUMI

Minimal

Regulatory

requirement

Ga

p

Core Capital Ratio 31.3.14

15

Ba

se

l II**B

as

el III

%%%

Note: The core capital ratio in banks is according to Basel III.

FIBI

FIRST INTERNATIONAL BANK OF ISRAEL

16

Subsidiaries net profit

Specialization

Net profit 1-3/2014

Nis Millions

ROECore

Capital Ratio

Growth centers

Retail customers

Commercial/ Corporate

Defense forces personnel

Factoring

25.49.5%9.75%

• Extension of the agreement with Hever

• Participating in the new Small Business Fund operations and development of new initiatives in this field

Capital Markets, Trust & Custody services

Private & affluent banking

10.410.2%15.80%• Expansion activities with

private and institutional clients

Retail customers

Teachers sector

Israeli-Arab sector

10.29.0%15.06%

• Winning in the teachers loans tender

• Growth at the Israeli-Arab sector

Ultra orthodox sector6.57.5%12.30%

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

FIBI

FIRST INTERNATIONAL BANK OF ISRAEL

17

Highlights for the first quarter of 2014

Fair Value of derivatives

Income from interest & inflation

Substantial Substantial Macro & Macro &

AccountingAccountingeffecteffect

The Interest income were influenced by the decline in bank of Israel interest rate in the period (0.83%) and the effect of the negative CPI on the CPI-linked positions

Expense for Fair Value of derivatives for the quarter compared to Income last period (timing differences) led to a decrease in financial income by approximately 21 NIS Million.

FAS 91 Increased financial income by approximately 21 NIS Million with a

corresponding reduction of approximately 25 NIS million in income from commission, led to a decrease in profit of about 2 NIS million.

Continued investment growth

Continued growth in client assets portfolio (deposits and securities) of 40 NIS billion (14%)

Innovation in capital markets

New product and services launch (i.e. the investment radar, Duchifat trading platform, etc.)

Growth in the other operating

income

An increase of 9.4% in income from commissions (excluding the impact of FAS 91), related to growth in client activity (especially in capital markets)

Continued Continued growth in growth in activityactivity

Subsidiaries Continuing development of corporate clients through the Small Business Fund Focus in growth segments

FIBI

FIRST INTERNATIONAL BANK OF ISRAEL

18

Highlights for the first quarter of 2014

Dividend of 230 NIS million in the first quarter of 2014 Dividend yield Dividend yield of 3.5% in 2013, 4% in 2014 and 7.51% for the

past 12 months

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

Operating expenses growth rate of only 2.4% in comparison to Q1/13 Mainly resulted by an increase in salaries and in capital markets related

commissions

credit portfolio credit portfolio quality and quality and

diversificationdiversification

Moderate Moderate increase in increase in operating operating expensesexpenses

Decrease in provisions for credit losses - 0.06% (0.14% on 2013).

Ratio of credit loss allowance to total impaired credit is the highest in the system - 79.5%

Decrease in provisions for credit losses

NPL (excluding mortgages)

consistent budgetary restraint

Moderate increase in operating expenses

Continued budgetary restraint trend - significant decrease (2.6%) in operating expenses in comparison to Q1/11

High financial High financial stabilitystability

Core Capital Ratio

The highest in the Israeli banking system (also under Basel III)- 9.73%

Deposits to credit ratio

Deposits to credit ratio – 134.2%