Bank Leumi Le-Israel B.M. (LUMI) Q2 2024 earnings summary

Executive summary

• Net income for Q2 2024 was NIS 2.3 billion, with H1 2024 at NIS 5.05 billion, reflecting strong performance despite a NIS 0.6 billion impairment on Valley National Bank and capital gains from real estate sales.

• Q2 2024 ROE was 15.9% (20.2% excluding Valley impairment); H1 2024 ROE was 18.0%.

• Cost-income (efficiency) ratio improved to 28.7% in Q2 2024.

• Macroeconomic backdrop showed modest recovery with rising wages, falling unemployment, and increased retail sales, despite ongoing geopolitical risks.

• Dividend and share buyback for Q2 2024 totaled NIS 908 million, representing a 40% payout ratio and ~7.5% annualized yield.

Financial highlights

• Net interest income for Q2 2024 was NIS 4.38 billion, up 2.2% year-over-year; H1 2024 net interest income was NIS 8.72 billion, up 6.2%.

• Fee and commission income for Q2 2024 increased 2.2% year-over-year to NIS 910 million.

• Credit growth was 1.2% sequentially in Q2, or 2.4% excluding capital markets; total loans grew 3.4% year-to-date.

• Credit losses were nearly zero, with net provisions at 0.09% for H1 2024.

• Core deposits grew 3.4% year-to-date, reaching NIS 224.2 billion.

Outlook and guidance

• GDP growth for 2024 is estimated between 1.4% and 2.8%, with a rebound expected in 2025 if the war ends.

• Credit cost expense ratio is expected to remain low if current trends persist.

• Tax rate guidance for the next financial year is 37%-39.32% due to special government levies.

• The Bank of Israel interest rate is expected to remain at 4.5% through 2024, with possible reductions in 2025.

• Geopolitical risks and war-related uncertainty continue to impact the outlook.