Mizrahi Tefahot Bank (MZTF) Q4 2022 earnings summary

Executive summary

• FY22 net profit was NIS 4,472 million, up 40.3% YoY; Q4 net profit was NIS 1,087 million, up 60.1% YoY.

• Robust operating growth and 20.1% ROE accompanied completion of the Union Bank merger by year-end 2022.

• Major strategic-plan targets were reached ahead of the 2025 end date; merger synergies are expected to contribute further from 2023.

Financial highlights

• Total revenue was NIS 13,668 million, up 32.4%; financing revenue before credit-loss expenses was NIS 10,994 million, up 36.0%.

• Financing revenue from current operations rose to ILS 9.2bn from ILS 6.6bn in 2021.

• Commissions and other revenue rose 19.7% to NIS 2,674 million; operating and other expenses increased 10.9% to NIS 6,173 million.

• Credit-loss expenses were NIS 532 million, versus net credit-loss income of NIS 278 million in 2021; 2022 increases were mainly from collective provisions and macro adjustments.

• Total assets reached NIS 428,292 million, up 9.2%; public deposits rose 11.9% to NIS 344,514 million and net public loans rose 13.3% to NIS 307,472 million.

Outlook and guidance

• Management expects responsible credit growth consistent with the strategic plan; FY22 growth was not viewed as a steady-state level, and Q4 growth was lower than H1.

• Further rate hikes are expected to deliver a diminishing marginal contribution to financing revenue.

• Cost-income target is below 50% by 2025; management may consider revised targets after reaching key goals ahead of schedule but gave no new targets.

• No forward guidance was given for cost of risk; residential mortgage demand moderated in the final months of 2022 after a record year for originations.