Bank Leumi Le-Israel (LUMI) Q1 2024 earnings summary

Executive summary

• Net income attributable to shareholders was NIS 2.785bn, up 183.9% YoY; ROE was 20.2% versus 7.8%.

• Q1 results included NIS 830m in pre-tax gains from selling two Tel Aviv headquarters buildings, equivalent to a NIS 632m after-tax capital gain.

• Activity recovered across much of Israel in Q1, but the war, geopolitical uncertainty and credit-rating downgrades clouded the outlook.

Financial highlights

• Net interest income declined 4.1% YoY to NIS 3.767bn; lower CPI contribution and eroding credit and deposit spreads offset portfolio growth and higher rates.

• Noninterest income rose 136% YoY to NIS 2.528bn, including NIS 830m in pre-tax property-sale gains; noninterest finance income was NIS 734m.

• Profit before tax rose 43.3% to NIS 4.248bn; basic EPS was NIS 1.83 versus NIS 0.64.

• Operating expenses rose 12% to NIS 1.825bn, mainly on higher performance-based bonuses; the efficiency ratio improved to 29.0% from 32.6%.

Outlook and guidance

• Israeli activity recovered in Q1; 2024 GDP growth forecasts included 1.6% from the IMF, 2% from the Bank of Israel, and 1.8% for 2024 and 3.0% for 2025 in Bank Leumi estimates.

• The Bank of Israel held its policy rate at 4.50% on April 8; its Research Department expected 3.75% in Q1 2025, subject to inflation, markets, activity and fiscal policy.

• Deposit-spread erosion may continue as customers shift from current accounts to interest-bearing deposits.