November 27, 2019 / 10:11 AM / 19 days ago

UPDATE 1-Israel Discount Bank quarterly profit dips, dividend payout to double

(Adds details, bank comments, share reaction)

By Steven Scheer

JERUSALEM, Nov 27 (Reuters) - Israel Discount Bank reported on Wednesday a 3% fall in net profit in the third quarter, missing forecasts, but said it would double its dividend payout from the fourth quarter.

Israeli banks have been hit by lower profitability in the third quarter because of a drop in inflation, which hits income because their loans are linked to the consumer price index.

Israel’s fourth-largest bank by assets said it earned 427 million shekels ($123 million) in the July to September quarter, compared with 439 million shekels a year earlier. This was below a forecast of 452 million shekels in a Reuters poll of analysts.

“We saw continued growth of our credit balances particularly in the mortgage sector, our main focus area for lending, which grew 3.1% in the quarter,” the bank said.

It said it would pay a dividend of 64 million shekels for the third quarter, under its policy of paying 15% of net profit, but said it would double this to 30% from the fourth quarter, citing “strong profitability and solid capital position”.

Shares of Discount were up 2.4% at midday in Tel Aviv and are up 35% since the start of 2019.

Discount, which had raised its payout from 10% in late 2018, still lags other Israeli banks that pay at least 40%. Some, such as Bank Leumi, have also started buying back shares.

Net interest income before credit expenses dipped 1% to 1.4 billion shekels amid a fall in inflation, while credit loss expenses rose 24% to 152 million shekels.

The bank’s Tier 1 capital adequacy ratio, which measures equity capital as a percentage of total risk-weighted assets, rose to 10.41% in the first nine months from 10.02% a year earlier.

In July, Discount named Uri Levin, the head of its U.S. division, as its new chief executive after Lilach Asher-Topilsky said she would step down. Levin starts on Dec. 1.

$1 = 3.4684 shekels Reporting by Steven Scheer; Additional reporting by Tova Cohen; Editing by Edmund Blair

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