Israel Discount Bank (DSCT) Q1 2023 earnings summary

Executive summary

• Q1 2023 net profit was NIS 1,269 million, up 29.1% YoY; annualized ROE was 20.1%, versus 18.3%.

• Net interest income rose 52.2% to NIS 2,740 million, while credit loss expense increased to NIS 204 million from a NIS 60 million release a year earlier.

• Growth reflected higher rates and credit balances; results also included material ICC separation-related items and an ICC building-sale gain.

Financial highlights

• Revenue, as total income, was NIS 4,257 million, up from NIS 3,086 million YoY; net financing income rose 66.3% to NIS 3,069 million.

• Net interest income increased by NIS 940 million, including a positive price effect of NIS 786 million and a positive volume effect of NIS 155 million.

• Non-interest income increased 18.0% to NIS 1,517 million; non-interest financing income was NIS 329 million and fees and commissions were NIS 887 million, up 7.5%.

• Operating expenses rose 14.9% to NIS 1,962 million; salaries increased 10.5% to NIS 945 million and other expenses rose 26.2% to NIS 693 million.

• Adjusted net profit, excluding specified asset realization, settlement and ICC separation components, was NIS 1,201 million, up 79.8% YoY; adjusted ROE was 19.0%.

Outlook and guidance

• Strategic plan targets for 2025: ROE above 12.5%, efficiency ratio below 55%, net profit above NIS 3.5 billion, and dividends up to 30% of profits under the existing policy.

• Most strategic financial targets were already achieved in 2022: 15.1% ROE, 55.8% efficiency ratio and NIS 3,495 million net profit.

• Plans focus on growing credit and income faster than the banking system, especially housing, small businesses and commercial banking, while maintaining credit quality.

• Management cautioned that execution depends on interest rates, inflation, regulatory and geopolitical changes, technology, competitors and customer behavior.