Israel Discount Bank (DSCT) Q4 2022 earnings summary

Executive summary

• FY22 net profit was NIS 3,495m, up 26.0% YoY; ROE reached 15.1% vs 13.6%, and efficiency improved to 55.8% from 65.4%.

• Results reflected 33.1% growth in net interest income and 13.1% growth in net credit; strategic targets set for 2025 were mostly achieved ahead of schedule.

• Q4 net profit was NIS 939m, up 5.2% QoQ and 77.5% YoY; Q4 ROE was 15.4% annualized and efficiency was 53.8%.

Financial highlights

• Net interest income rose 33.1% to NIS 8,693m; net interest margin excluding derivatives increased to 2.38% from 2.21%.

• Credit-loss expense was NIS 407m vs a NIS 693m release in FY21; non-interest income rose 7.3% to NIS 4,251m, including NIS 423m gross property-sale gains.

• Operating and other expenses rose 5.2% to NIS 7,217m; profit before tax increased 23.0% to NIS 5,320m and EPS was NIS 2.87 vs NIS 2.38.

• Adjusted for specified components, net profit was NIS 3,190m vs NIS 3,016m, ROE 13.8% vs 14.8%, and efficiency 57.4% vs 61.6%.

• Q4 net interest income was NIS 2,540m, up 11.4% QoQ; credit-loss expense was NIS 230m vs NIS 106m in Q3 and a NIS 10m release in Q4 2021.

Outlook and guidance

• 2025 strategic targets: ROE above 12.5%, efficiency below 55%, net profit above NIS 3.5bn, and dividends up to 30% of distributable earnings; FY22 ROE was 15.1%, efficiency 55.8%, net profit NIS 3,495m.

• Central 2023 scenario projected Israeli GDP growth of 2.5% vs 6.5% in 2022, with slower credit growth as inflation, higher rates, and economic deceleration weigh on demand.

• Planned 2023 information-technology investment budget was NIS 416m vs NIS 372m in 2022; 2023 priorities included cloud infrastructure, digital channels, core-system upgrades, cyber defense, and fraud prevention.

• Greenlend remained subject to a non-binding MOU with Ezbob: proposed ownership 70%/30%, with NIS 150m initial capital expected and no certainty of completion or regulatory approval.