Israel Discount Bank (DSCT) Q1 2022 earnings summary

Executive summary

• Net profit attributable to shareholders was NIS 983 million, up 48.5% YoY; ROE was 18.3% annualized versus 13.8%.

• Excluding asset realizations, nonrecurring awards, jubilee-award redemptions and a settlement effect, net profit was NIS 668 million, down 9.5% YoY; adjusted ROE was 12.4% versus 15.3%.

• Results benefited from higher net interest income and a NIS 315 million after-tax gain on property sales; lower credit-loss releases and weaker derivative-related income partly offset growth.

Financial highlights

• Net interest income rose 19.7% YoY to NIS 1.80 billion; net financing income increased 2.4% to NIS 1.845 billion.

• Non-interest income increased 24.5% to NIS 1.286 billion, including NIS 416 million of other income; fees and commissions rose 14.0% to NIS 825 million.

• Credit-loss release narrowed to NIS 60 million from NIS 147 million; operating and other expenses rose 3.3% to NIS 1.707 billion, while tax expense increased 26.6% to NIS 447 million.

• Reported EPS was NIS 0.84 versus NIS 0.57; comprehensive income attributable to shareholders fell to NIS 391 million from NIS 654 million, mainly reflecting unrealized bond losses.

Outlook and guidance

• FY2025 strategic targets: ROE above 12.5%, efficiency ratio below 55%, net profit above NIS 3.5 billion, and dividends of up to 30% of profits under the existing policy.

• Bank of Israel’s April 2022 forecast projected GDP growth of 5.5% in 2022 and 4.0% in 2023, inflation of 3.6% over the coming year, and a 1.5% policy rate within 12 months.

• Management expected higher rates, together with credit growth, to support interest income and shareholder value, but noted outcomes depend on market conditions and rate expectations.