Aug.31, 2012 | 5:53 AM–Israel’s three biggest banks all yesterday reported lower profits in the second quarter as they struggled with a host of problems ranging from a slower economy to a weaker stock market.

Bank Hapoalim said its net profit for the three months ending June 30 was NIS 607 million – off 15% compared to a year earlier, and slightly under the NIS 613 million average forecast given in a Reuters poll of analysts. That left the bank with a net return on equity of 10.2%.

In spite of the stickier economy, Hapoalim only set aside 0.55% of its loan portfolio for possible credit losses – not much higher than the 0.49% rate in the first quarter and lower than 0.61% in the fourth quarter of 2011.

Bank Leumi saw its net profit fall by a sharper 50% to NIS 280 million, coming in well under the NIS 435 million average that analysts forecast. Credit-loss charges rose to NIS 333 million, which were also above expectations. Net ROE dropped to 4.7% from 10.3% a year earlier.

The bank was also hit by a NIS 101 million charge for the value of its stake in cell-phone operator Partner Communications, whose shares slid 45% in the quarter.

No. 3, Israel Discount Bank, also saw its second-quarter earnings pulled down by a non-bank investment. In Discount’s case it was its stake in First International Bank of Israel, whose falling share price erased NIS 73 million in value. That contributed to a 28% drop in Discount’s quarterly profit to NIS 165 million. Its ROE fell to just 6.1%.

Subtracting the impact of the FIBI stake, however, Discount’s net profit was NIS 238 million – above the average forecast in a Reuters poll of NIS 184 million.

Israel’s economy will probably grow 3.1% this year, down from 4.6% in 2011, but even that forecast may prove optimistic as a troubled Europe cuts into exports…Read More>>

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