Bank Leumi Le-Israel (LUMI) Q1 2022 earnings summary

Executive summary

• Q1 net income attributable to shareholders was NIS 1,609 million, up 20.1% YoY; ROE was 15.6% under the revised annualized presentation method.

• Net interest income growth and lower operating expenses outweighed a sharp decline in noninterest finance income amid market losses.

Financial highlights

• Net interest income was NIS 2,899 million, up 23.5% YoY; positive CPI effects contributed NIS 383 million versus NIS 40 million in Q1 2021.

• Loan loss income was NIS 40 million versus NIS 212 million; noninterest income fell 30.9% to NIS 950 million, while fees and commissions rose 7.1% to NIS 930 million.

• Operating expenses declined 2.4% YoY to NIS 1,794 million; the efficiency ratio improved to 46.6% from 49.4%.

• EPS was NIS 1.11 versus NIS 0.92; tax provision fell to NIS 483 million from NIS 753 million, reflecting merger-related tax income and lower prior-year tax expenses.

Outlook and guidance

• The completed US merger is expected to deliver the remaining NIS 451 million of its NIS 645 million after-tax gain in Q2; the transaction is expected to improve capital ratios by 0.5 percentage points.

• Beit Mani sale is expected to generate a NIS 524 million pre-tax gain when management and staff relocate to Lod, planned for H2 2023.

• The planned Paxos crypto service is to begin with Pepper customers and Bitcoin and Ether, subject to required regulatory approvals.