Mizrahi Tefahot Bank (MZTF) Q2 2022 earnings summary

Executive summary

• Q2 net profit was NIS 1,053m, up 6.6% YoY, with ROE of 19.4%; H1 net profit rose 32.6% to NIS 2,207m, with ROE of 20.6%.

• H1 ROE was 18.2% excluding asset-sale gains; a separate reported measure was 18.0% excluding the Q1 capital gain.

• Higher financing revenue, loan growth and interest rates supported results; realized asset-sale gains also lifted H1 revenue.

Financial highlights

• H1 total revenue was NIS 6,416m, including NIS 4,597m net interest revenue; H1 net profit was NIS 2,207m versus NIS 1,664m a year earlier.

• Q2 financing revenue from current operations rose 27.2% YoY to NIS 2,053m; total Q2 financing revenue was NIS 2,629m, up 25.1%.

• H1 non-interest revenue was NIS 1,819m, including NIS 371m of realized-asset gains; operating and other expenses rose 5.8% to NIS 2,830m.

• At June 30, assets were NIS 417bn, loans to the public NIS 298.2bn and public deposits NIS 327.9bn; YoY growth was 17.3% in loans and 11.4% in deposits.

• H1 credit-loss expense was NIS 186m, versus NIS 227m of provision releases in H1 2021.

Outlook and guidance

• Credit growth was expected to moderate from H1 levels as higher rates weighed on demand; management said the recent pace was neither perpetual nor steady-state.

• Mortgage market volume fell from NIS 12bn in June to NIS 10bn in July; credit demand persisted at a decreasing pace.

• Bank of Israel forecasts put 2022 GDP growth at 5.0% and 2023 growth at 3.5%; interest rates were expected to rise further through year-end.

• Underwriting remained prudent, with borrower and collateral quality monitored amid higher rates and inflation.