Israel’s Bank Hapoalim says Q4 profit nearly doubles on rate hikes

Reuters/Corinna Kern

Bank Hapoalim has reported a near doubling of net profit in the fourth quarter 2022, helped by a sharp rise in interest rates that boosted financing income.

Hapoalim, one of Israel’s two largest lenders and the first of Israel’s banks to issue quarterly results, said it earned a net 1.75 billion shekels ($487 million) in the quarter ended December 31, compared with a profit of 934 million shekels a year earlier.

Helped by aggressive Bank of Israel rate hikes to fight inflation, net interest income jumped to 3.9 billion shekels from 2.5 billion. Its provision for credit losses was 430 million shekels compared with 187 million shekels last year.

Inflation in Israel has reached a 2008 high of 5.4 percent, above the government’s one to three percent target. The central bank responded with a series of rate increases that brought the key rate to 4.25 percent from 0.1 percent last April. At least one more hike is expected in the current cycle.

Hapoalim said it would pay a dividend of 525 million shekels, or 30 percent of the fourth-quarter net profit, after resuming ongoing dividends in the second quarter.

Its ratio of common equity Tier-1 capital to risk components capital rose to 11.25 percent by the end of 2022 from 10.96 percent in 2021.

The bank’s credit portfolio grew 1.9 percent in the October-December period and 10.2 percent for all of 2022, with corporate funding leading the growth. Housing loans also rose, although consumer credit declined last year, the bank said.

Hapaolim’s board approved a new five-year strategic plan aimed at strengthening its leadership in core banking, boosting productivity, and increasing innovation.