Israel Discount Bank (DSCT) Q2 2022 earnings summary

Executive summary

• H1 2022 net profit attributable to shareholders was NIS 1,663 million, up 9.3% YoY; annualized ROE was 14.9%.

• Q2 net profit was NIS 680 million, down 20.9% YoY and 30.8% QoQ; annualized ROE fell to 11.8% from 17.2% in Q2 2021.

• Adjusted H1 net profit, excluding specified components including asset-realization gains, was NIS 1,348 million, down 16.6% YoY.

Financial highlights

• H1 net interest income rose 21.4% YoY to NIS 3,873 million, driven by credit growth and CPI effects; interest spread excluding derivatives was 2.30% vs. 2.20%.

• H1 credit-loss expense was NIS 71 million vs. a NIS 557 million release a year earlier; Q2 expense was NIS 131 million vs. a NIS 410 million release in Q2 2021.

• H1 non-interest income increased 10.6% to NIS 2,110 million; fees and commissions rose 11.1% to NIS 1,676 million, while non-interest financing income fell 95.3% to NIS 18 million.

• H1 operating and other expenses increased 4.9% to NIS 3,423 million; reported efficiency ratio was 57.2%, versus 64.0% in H1 2021.

• H1 included NIS 413 million of gains on building sales; excluding specified components, adjusted efficiency ratio was 61.4% vs. 61.3% in H1 2021.

Outlook and guidance

• 2025 strategic targets: ROE above 12.5%, efficiency ratio below 55%, net profit above NIS 3.5 billion, and dividends up to 30% of profit, subject to policy and execution.

• Management identified rising rates and inflation, geopolitical developments, market volatility and recession risk as uncertainties that could affect borrower repayment capacity and strategic-plan execution.