fibi first international bank of israel o verview 30.09.14

FIBI

FIRST INTERNATIONAL BANK OF ISRAEL

Overview 30.09.14

FIBI


2

Net Profit and ROE (NIS Millions)

* Assuming equity capital (tier 1) to risk components ratio of 9.35% (the Israeli Other 4 leading Banks average) as of 30.06.14, the ROE is 8.9% in 1-9/14 and 9.2% in Q3/2014.** The 1-9/14 Net profit includes amortization of 39 NIS Millions, reflecting a 0.8% annual reduction on the ROE.

Average capital

Equity capital (tier 1) to risk components ratio

6,890

9.93%

6,648 4.0%+

ROE8.7%

8.6%*9.0%

6,6246,9885.1%+

FIBI


3

Statements of income 1-9/2014 – 1-9/2013 ((NIS Millions

1-9/20141-9/2013Gross change

Change in %

Interest income and non-interest financing , net (Without the effect of initial implementation of FAS 91)FAS 91 effect on interest income

1,69465

1,793-

(99)65

(5.5%)

(Income) Expenses from credit losses (0.02% income provision rate)

(8)65(73)

Commissions (Without the effect of initial implementation of FAS 91)1,1011,050514.8%

FAS 91 effect on commissions(79)-(79)

Other Income (including sale of FIBI London )60441636.4%

Total income (after expenses from credit losses)2,8492,822271.0%

Total operating and other expenses2,1372,106311.5%

Profit before taxes712716(4)(0.6%)

Provision for taxes on profit (Last year includes a decrease in the provision for tax as a result of the increase in the tax rate on deferred tax balances 22 NIS millions)

29929541.4%

The bank’s share in VISA CAL profit2823521.7%

Net profit426429(3)(0.7%)

ROE8.3%8.7%

Equity capital (tier 1) to risk components ratio (end of period)9.93%(*) 10.11%

Bank of Israel average interest rate 0.72%1.52%(0.8%)

(*)Equity capital Basel III at 31.12.13

FIBI


4

Explaining of the main changes in net profit (1-9/2014 - 1-9/2013 (NIS Millions

1-9/20141-9/2013Gross change

Net change

88

Income from credit losses compared to expenses provisions last year8(65)7357

Increase in commissions*

Fas 91 effect on commissions

1,022

(79)

958

-

64

(79)

41

(50)

Gain on sale of FIBI London shares31-3126

Increased realized gains from bonds and shares202187159

Increased in banks share in profit of VISA CAL282355

positive influences

(*)excluding FAS 91 effect and income from credit card

FIBI


5

Explaining changes in net profit (1-9/2014 - 1-9/2013 (NIS Millions

1-9/20141-9/2013Gross change

Net change

(91)

Interest income, net (excluding FAS91 effect)FAS 91 effect on interest income

1,50565

1,564-

(59)65

(35)42

Net decrease in the reconciliations to fair value of derivative instruments

(11)36(47)(30)

The effect of last year increase in tax rate on deferred tax balances (22)

An increase in operating and other expenses(2,137)(2,106)(31)(19)

Decrease in other income* 107136(29)(17)

Other influences(10)

Negative influences

Total decrease of 3 Nis millions in net profit

(*)excluding the exercise of FIBI London and including credit card commissions

FIBI


6

Operating & Other Expenses(NIS Millions)

1-9/2014

1-9/2013

20

*

*Including amortization of 39 NIS Millions in 1-9/14.

31

1.5%

2

1-

10

FIBI


7

Statements of income 7-9/2014 – 7-9/2013 ((NIS Millions

Q3/2014Q3/2013Gross change

Net change

Interest income and non-interest financing , net (Without the effect of initial implementation of FAS 91)FAS 91 effect on interest income

564

22

560

-

4

22

3

14

(Income) Expenses from credit losses (income 0.02% provision rate)

(11)21(32)(21(

Commissions*3413142717FAS 91 effect on commissions(27)-(27)(17)Other Income4374(31)(20)

Total income (after expenses from credit losses)9549272718

Total operating and other expenses7116862516

Profit before taxes24324122

Provision for taxes on profit (Last year including a decrease in the provision for tax for the effect of the increase in the tax rate on deferred tax balances 16 NIS millions)

104931111

Profit after taxes139148((9((9

The bank’s share in profit of VISA CAL1211111Net profit14614422ROE8.6%9.0%

Bank of Israel average interest rate 0.50%1.25%(0.75%)

*Without the effect of initial implementation of FAS91 and credit card commissions .

FIBI


72.9%72.9%

74.6%74.6%

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) %%

8

75.2%

75.0%75.0%

FIBI


30.09.1430.09.14 31.12.1331.12.13

Capital Notes 5.6

Capital Available for Investment 5.2

Public Deposits

88.7

Gov. & Bank Bonds2.4

Credit to the Public69.9

State of Israel Bonds 8.1

Bank of Israel Deposits 20.8

Corporate Bonds (foreign & Israel currency) 0.9

Structures, Hedge funds &Stocks 0.6

Market risk in VAR(0.03)

(*) illustration – not to scale9

FIBI Strategic Assets & Liabilities compositeFIBI Strategic Assets & Liabilities composite(*) (*) 3300..0909.1.144 (NIS Billion(NIS Billions)s)

FIBI Strategic Assets & Liabilities Structure )NIS Billions(

capital to risk assets Total

ratio

equity capital (tier 1) to risk components

ratio

Deposits to Credit Ratio

Liquid Assets to Deposits

Ratio

14.56% 14.78%

9.93% 10.11%

126.9% 129.7%

35.3% 38.4%

capital available for

Investments to investment

capital Ratio

29.9% 28.2%

FIBI


10

Statement Of Changes in Equity 1-9/2014((NIS Millions

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

7,120

Net Earnings426

Net profit Attributed to non-controlling interests17

Change in capital reserve(5(

Dividend(230(

Balance At 30/9/14 Total Shareholders Equity(non-controling interests (Including

7,328

The Highest dividend yield in the Israeli banking system Dividend yield of 3.5% in 2013, and 5% in 2014 (Includes 55 Nis Millions dividend after 30.9.14).

FIBI


11

Credit to the Public by segments (NIS Millions)

30.9.1431.12.1330.9.13

Change in%

30.6.1430.9.13

Private + Retail (Households)

16,86416,39016,0483.0%5.0%

Mortgage 18,18417,42717,3542.1%4.8%

Total private clients35,04833,81733,4022.5%4.9%

Corporate 22,09821,94620,3835.8%8.4%

Commercial + Small Business

12,76212,94313,1100.0%(2.7%)

Total Credit to the Public

69,90866,70666,8953.1%4.5%

Our share in local activity (average for the period)

8.8%8.8%

– ()30.9.13

)24%(

)20%(

)30%()26%(

FIBI


12

*In Q1/2013 the Bank has implemented a one time regulatory provision on its mortgage portfolio which sets the credit losses expenses ratio at 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


13

Deposits from the Public breakdown by segments ((NIS Millions

30.9.1431.12.1330.9.13

Gross Change Compared to

Change in%

31.12.1330.9.1331.12.1330.9.13

Total private clients

48,39750,04949,633(1,652)(1,236)(3.3%)(2.5%)

Corporate29,14727,99924,6861,1484,4614.1%18.1%

Commercial + Small Business

11,19311,07411,0611191321.1%1.2%

Total 88,73789,12285,380(385)3,357(0.4%)3.9%

– ()30.9.13

)13%(

)58%()29%(

FIBI


14

12%

8%

14%

326

291 35

28

7

Client assets portfolio (deposits & securities) present Continued growth (average balances, NIS Billions)

Increase of 12% (35 NIS Billions) in client assets portfolioIncrease of 12% (35 NIS Billions) in client assets portfolio

FIBI


13.42%

*

14.30%14.57%

13.42%

*

*

*

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

Equity capital (tier 1) ratio

15

%

%%

Fibi and Mizrahi as 30.9.14, other banks- 30.6.14

%

FIBI


Fibi and Mizrahi as 30.9.14’ other banks – 30.6.14.*In annual terms **Calculated only on the balance sheet credit.

***Including dividend paid on the last 12 months and 55 NIS millions that was declared after 30.9.14.

9.93%

9.53%

9.34%

9.20%

9.01%

equity capital (tier 1) to risk components ratio

126.9%

106.7%

114.5%

126.2%

102.7%

Deposits from the public to credit to

the public

75.2%

63.2%

73.8%

84.4%

61.0%

Total operating expenses /

Revenue (before credit losses

expenses)

90.9%

53.2%

67.4%

62.9%

78.4%

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

mortgages)

Other 4 leading Banks Average 9.35% 111.6% 70.4% 60.4%

16

FIBI is demonstrating relative strength in main financial ratios 1-9/2014

***5.0%

1.56%

-

-

0.87%

Dividend yield (according to

17.11.14)*

-

(0.02%)

(0.01%)

(0.05%)

0.07%

0.02%

(income) Expenses for

credit losses to credit to the

public*

((0.01%

1

2

3

4

5

1

2

3

4

5 1

2

4

3

5

1

5

2

1

3

4

5

3

4

2

FIBI


17

Subsidiaries net profit

Specialization

Net profit 1-

9/2014 Nis Millions

ROE

equity capital (tier 1) to risk components ratio

Growth centers

Retail customers

Commercial/ Corporate

Defense forces personnel

Factoring

51.66.2%9.8%

• Extension of the agreement with Hever

• Renewal of activities with Small Business Fund

Capital Markets, Trust & Custody services

Private & affluent banking

35.811.1%16.2%

• Expansion activities with private and institutional clients

• Developing wealthy clients branches

Retail customers

Teachers sector

Israeli-Arab sector

31.99.0%14.7%

• Winning in the teachers loans tender

• Growth at the Israeli-Arab sector

Ultra orthodox sector26.29.6%12.5%

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

FIBI


18

Highlights for 1-9/2014

Q3/2014

1-9/2014

Net profitNet profit

Net profit of 426 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 8.9%

Net profit of 146 NIS million and ROE of 8.6%. Assuming adjustment of equity capital (tier 1) to risk components ratio to the the

Israeli banking industry average, the ROE is 9.2%

Income from interest & zero

inflation

Substantial Substantial Macro & Macro &

AccountingAccountingeffectseffects

Interest income was influenced by the reduction in the bank of Israel interest rate of 0.8% in the period.

Zero inflation resulted in a decrease in income from CPI-linked position. The group reduced its CPI-linked position.

The reduction of the Interest rate also affected the expense for fair value of derivatives

Compared with 1-9/13 Expense for reconciliation to fair value of derivatives for 1-9/14 decreased income by ~ 47 NIS Million.

FAS 91 Financing income increased by ~ 65 NIS million and reduced income from

commissions by ~79 million, resulting in a decrease in net income of 9 million

Fair Value of derivatives

FIBI


19


Continued customer’s activity growth in capital markets

Client assets portfolio (deposits & securities) present continued growth of 35 NIS Billion (12%)

Growth in operating income

An increase of 4.8% in income from commission (adjusted to FAS 91), due to an increase in clients activity )mainly in capital markets)

Continued Continued growth in growth in activityactivity

Subsidiaries Focus in growth segments (Ultra-Orthodox, teachers, security forces, Arab sector) Factoring - the leading bank in the system

Operating expenses growth rate of only 1.5% in comparison to 1-9/13, mainly resulted by an increase in the VAT rate and in commissions to s from capital markets

Moderate Moderate increase in increase in operating operating expensesexpenses

Consistent cost cutting and Budgetary

restraint

Moderate increase in operating expenses

Divestment of FIBI London in Order to focus on core banking activities in Israel increased net profits by 26 NIS Millions.

Reduction of several management team members across the group re-organization of all customer portfolio activities, including all dealing rooms, under

one division in order to create a customer centric attention and a one stop shop customer experience

Merger between 2 regional headquarters in FIBI Optimization and modifications of the group’s branch network, focused on reducing

branch numbers while taking into account current demographical trends Continued reduction of total real estate areas in the headquarters and branch

network

Continued growth in all credit segments

An 4.5%increase in the credit portfolio compared to 9/13 and 3.1% compared to 6/14

FIBI


20


Dividend of 285 NIS million in the 1-9/2014, including 55 NIS millions declared after 30.9.14.

Dividend yield of 3.5% in 2013, 5% 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

Problematic debt collection revenue brought register for credit income from credit losses - (0.02%) while 1-9/2013 provision rate amounted to 0.13%.

Ratio of credit loss allowance to total impaired credit is the highest in the system – 90.9% (excluding mortgages), 108.7% including mortgages.

Decrease in provisions for credit losses

NPL (excluding mortgages)

High financial High financial stabilitystability

High equity capital

)tier 1(Equity capital (tier 1) (under Basel III) – 9.93% higher then Bank of Israel target

Deposits to credit ratio

Deposits to credit ratio – 126.9%

fibi first international bank of israel o verview 30.09.14

Documents

income expenses

net profit

credit losses income

expenses nis millions

statements of income

income provision rate

bank of israel deposits

bank of israel average