Israel's Mizrahi Tefahot Bank Q2 profit tops expectations

In the April-June period, the bank said it earned 1.05 billion shekels ($325 million), up from 988 million a year earlier.

 A man uses an ATM at Bank Mizrahi-Tefahot in Tel Aviv, Israel November 22, 2021. Picture taken November 22, 2021.  (photo credit:  REUTERS/ALI KHARA)
A man uses an ATM at Bank Mizrahi-Tefahot in Tel Aviv, Israel November 22, 2021. Picture taken November 22, 2021.
(photo credit: REUTERS/ALI KHARA)

Mizrahi Tefahot, Israel's third-largest bank, reported a higher than expected second-quarter profit, citing a 25% rise in financing income amid higher inflation and the start of a Bank of Israel interest rate cycle.

In the April-June period, the bank said it earned 1.05 billion shekels ($325 million), up from 988 million a year earlier and above a forecast of 911 million in a Reuters poll of analysts.

Its bottom line was weighed down by a credit loss provision of 107 million shekels in the quarter, after taking income from the provision of 240 million a year earlier. To protect against defaults, Israeli banks took large loan loss provisions during the COVID pandemic but last year started unwinding them.

Mizrahi said it would pay a quarterly dividend of 316 million shekels or 30% of net profit. In the first quarter, it had opted not to distribute a dividend, saying it sought to maintain sufficient capital to allow it to address a growing demand for credit.

It noted that its credit portfolio grew in the second quarter, recording double-digit growth in businesses.

 Mizrahi-Tefahot branch in Jerusalem on February 22, 2018. (credit: DARIO SANCHEZ/FLASH90) Mizrahi-Tefahot branch in Jerusalem on February 22, 2018. (credit: DARIO SANCHEZ/FLASH90)

"Despite the global economic slowdown, the Israeli economy continued to present strength, with high demand for credit across all operating segments," said Chief Executive Moshe Lari.

"Despite the global economic slowdown, the Israeli economy continued to present strength, with high demand for credit across all operating segments."

Mizrahi Tefahot Chief Executive Moshe Lari

Inflation rose sharply in the first half of 2022 to reach a 14-year high of 4.4%. The Bank of Israel in April began to raise its benchmark interest rate, bringing it to 1.25% in July from 0.1% in April. The central bank is expected to continue raising rates this year.

As a result of higher inflation and rates, net financing income rose to 2.63 billion shekels from 2.1 billion.

($1 = 3.2300 shekels)