First Quarter 2011 Results Review May 31, 2011 Disclaimer This - - PowerPoint PPT Presentation

Israel Discount Bank

First Quarter 2011 Results Review

May 31, 2011

• This document has been prepared by Israel Discount Bank solely for use of the company's presentation
• f its first quarter 2011 results as well as strategic updates at various investor forums.
• The information contained herein is partial and may include information that has not been

independently verified by any outside entity. It is further emphasized that this presentation does not constitute an offer or invitation to purchase any securities and/or investments whatsoever.

• This presentation should not be relied upon in connection with any transaction, contract, commitment
• r investment. For full and complete overview of the Banks financial position and results of operations

please view the Bank’s Annual Report for 2010.

• Neither the Bank nor any of its employees or representatives shall have any liability whatsoever for any

loss and/or damages howsoever arising, directly or indirectly, from any use of this presentation.

• It is hereby emphasized that no representation or warranty whatsoever is given as to the achievement or

fulfillment of any forecasts about the future prospects of the Bank and the actual results of the Bank may differ materially from those contemplated taking into account the various risk factors, changing economic conditions and uncertainties which exist regarding the Banks business and the result of various

• perations.
• For further details see Forward Looking Information section in the Banks financial statements.

Disclaimer

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143 158 288 135 278

5.8% 6.3% 11.3% 5.1% 10.8%

• 20%
• 15%
• 10%
• 5%

0% 5% 10% 15% 20%

• 100

100 200 300 400 500

Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Net income ROE

Net Income & ROE(NIS mm) Lower quarterly provisions & expense levels lead to improved earnings

3

Income Statement Highlights (NIS mm)

4

Q1 2011 Q1 2010 YoY Q4 2010 QoQ Interest Income before provision for Loan Losses 1,289 1,115 15.6% 1,293

• 0.3%

Provision for Loan losses 112 117

• 4.3%

274

• 59.1%

Interest Income net 1,177 998 17.9% 1,019 15.5% Operating & Other Income 653 640 2.0% 704

• 7.2%

Operating & Other Expenses 1,460 1,397 4.5% 1,560

• 6.4%

Net income 278 143 94.4% 135 105.9% ROE 10.8% 5.8% 5.1%

Key Trends of Q1 2011

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• Net Income of NIS 278m compared to NIS 135m in Q4
• ROE was 10.8% compared with 5.1% in Q4

Profitability

• Showing continued improvement due to closer

management attention to retail and corporate credit

Asset Quality

• Core Tier-1 of 7.7% after accounting for Impaired

Debts brings us closer to our 8% upper target level

Capital

• Growth in total revenues remains constrained by

proactive management of risk weighted assets

Revenues

• Decreased over Q4 due mainly to a reduction in

Other Expenses

Operating & Other Expenses

Interest Income Before Provision for Loan Losses (NIS mm) Increase of 15.6% over Q1 ‘10; stable over Q4 ‘10

6 551 419 104 41 1,115 554 441 83 13 1,091 593 388 62 288 1,331 608 433 86 166 1,293 599 457 87 146 1,289

200 400 600 800 1,000 1,200 1,400

Retail Corporate Private Banking Finance Total Q1 10 Q2 10 Q3 10 Q4 10 Q1 11

3,359 3,054 36 49 3,395 3,103 2.69% 2.57%

2.00% 2.10% 2.20% 2.30% 2.40% 2.50% 2.60% 2.70% 2.80%

• 1,000

2,000 3,000 4,000 5,000 6,000 7,000 8,000

31.12.10 31.03.11

Non Performing Assets

Other Non Performing Loans NPL/Loans 8,707 7,839

500 1,500 2,500 3,500 4,500 5,500 6,500 7,500 8,500

31.12.10 31.03.11

Criticized Commercial Debts Asset Quality (NIS mm) Better management attention to loans leads to improved Asset Quality Metrics

7 Terminology on this slide is based on a convenience translation from the Hebrew, as prescribed by the Bank of Israel Impaired debt reporting figures are not comparable with previous year data 117 274 112 0.39% 0.88% 0.38%

0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 0.70% 0.80% 0.90% 50 100 150 200 250 300 350

Q1 10 Q4 10 Q1 11

Provision for Loan Losses

Total provisions Provision for Loan Losses/ Total Loans

634 632 635 646 635 6 26 24 58 18 640 658 659 704 653

100 200 300 400 500 600 700 800 900

Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Other Income Commmisions

Operating & Other Income (NIS mm) Current high levels of commissions inhibited by constraints on loan growth

8 488 117 58

• 23

640 510 91 38 19 658 519 134 70

• 64

659 518 120 60 6 704 501 128 70

• 46

653

• 200
• 100

100 200 300 400 500 600 700 800

Retail Corporate Private Banking Finance Total Q1 10 Q2 10 Q3 10 Q4 10 Q1 11

Operating & Other Expenses (NIS mm)

Difference between Corresponding Quarters explained mainly by profit/loss on employee severance fund

9 849 754 738 849 904 271 267 286 324 279 277 337 292 387 277

1,397 1,358 1,316 1,560 1,460

10 210 410 610 810 1,010 1,210 1,410 1,610 1,810

Q1 10 Q2 10 Q3 10 Q410 Q1 11

Other* Maintenance & Depreciation Salary & Related

* Including depreciation & decline in value of intangibles

Israel Discount Bank

Balance Sheet Highlights

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Balance Sheet Highlights (NIS mm)

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31.03.11 31.12.10 Change Securities 34,257 37,176

• 7.9%

Net Loans 116,670 118,666

• 1.7%

Deposits 136,088 138,011

• 1.4%

Loan Deposit Ratio 85.7% 86.0% Total Shareholders' Equity 10,814 11,569

• 6.5%

Total Assets 183,956 185,814

• 1.0%

Total Equity to Total Assets 5.9% 6.2%

Capital Ratios and Total Shareholders Equity (NIS mm) Strong progress made in Q1 toward reaching upper level CT-1 target of 8%

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Core Tier-1 Capital target for 31.12.11: 7.5% - 8.0% Capital Adequacy Ratio: =>13% 10,292 11,569 10,814

7.1 8.0 7.7 7.6 8.5 8.3 12.1 13.7 13.4

5,000 10,000 15,000 20,000 25,000 0.0 4.0 8.0 12.0

31.12.09 31.12.10 31.03.11 Core Tier -1 Tier -1 Capital Capital Adequacy Ratio 141,654 138,863 31.12.10 31.03.11

Risk Weighted Assets

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Evolution of Loans & Deposits (NIS mm) Net Loans down 1.7%; Households & middle market were strongest performers

46,976 64,540 2,910 114,426 51,088 63,916 3,662 118,666 51,460 62,747 2,463 116,670

• 20,000

Retail (Household & SME) Corporate & Commercial Private Banking Total

Loans

31.12.09 31.12.10 31.03.11

71,188 31,636 39,001 141,825 71,522 29,094 37,395 138,011 73,097 26,689 36,302 136,088

• 20,000

Retail (Household & SME) Corporate & Commercial Private Banking Total

Deposits

Israel Discount Bank

Sector and Subsidiary Highlights

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15 13 14 9 14 8.6% 7.0% 7.6% 4.6% 7.6%

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 10 20 30 40 50

Q1 10 Q2 10 Q3 10 Q4 10 Q1 11

733 747 766 767 783

700 710 720 730 740 750 760 770 780 790

Q1 10 Q2 10 Q3 10 Q4 10 Q1 11

3,501 3,570 3,921 3,858 3,680 58.8% 62.1% 67.2% 63.1% 61.7%

0% 20% 40% 60% 80%

• 2,000

4,000 6,000

Q1 10 Q2 10 Q3 10 Q4 10 Q1 11

5,958 5,747 5,839 6,112 5,966

• 1,000

2,000 3,000 4,000 5,000 6,000 7,000

Q1 10 Q2 10 Q3 10 Q4 10 Q1 11

Discount Bancorp. (USD mm) Continues to post consistently strong quarterly earnings

Shareholders Equity Net Income & ROE Deposits Credit & Loan/ Deposit Ratio

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Israel Credit Cards (NIS mm)

Focus will remain on increasing card issuance, transaction volumes & consumer finance Israel Credit Cards

16

279 249 215 64 64 44.5% 26.3% 18.3% 25.8% 26.1%

• 10%

0% 10% 20% 30% 40% 50%

• 100

200 300 400 500 600

2008 2009 2010 Q1 2010 Q1 2011 Net Income ROE

17,037 18,178 18,736 19,047

15,500 16,000 16,500 17,000 17,500 18,000 18,500 19,000 19,500 20,000

2008 2009 2010 Q1 '11

14,326 13,848 15,082 15,018 84.1% 76.2% 80.5% 78.8%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

• 2,000

4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000

2008 2009 2010 Q1 '11

Mercantile Discount Bank (NIS mm)

Net Income & ROE Credit & Loan/ Deposit Ratio Deposits

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148 180 147 30 43 10.3% 11.1% 8.2% 7.3% 10.6%

0% 2% 4% 6% 8% 10% 12%

• 50

100 150 200 250 300

2008 2009 2010 Q1 10Q1 11 Net Income ROE

Management Focus & Operative Measures

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• Core Tier-1 Target of 7.5% - 8% by Year End 2011
• Core Tier-1 will be supplemented by internal profit generation &

realizing assets

• Internal Capital Allocation based on profitability considerations

Capital

• Provide long-term sustainable solution
• Initial focus on the bank; group companies thereafter

Efficiency

• Focus on profitability and Return on Equity
• Structural and managerial changes will facilitate improved

execution

Profitability

Appendix

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About Discount Bank Profile

• Branches across the country…
• Discount Bank : 147 Branches throughout

Israel

• Mercantile Discount Bank: 77 branches
• Domestic emphasis on Retail & Corporate Banking
• Emphasis outside of Israel on Commercial and

Private Banking

• Large Float & Trading Liquidity
• Market Cap NIS 6.8 bln ~ $1.9 bln
• Average Daily Trading Volume: ~ NIS 32 mm
• Key overseas operations in U.S., Switzerland and

London with representative offices throughout Latin America Main Shareholders

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Public Float (TASE: DSCT) 75% Controlling Shareholders 25%

Our Relative Share of the Israeli Banking Sector

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31.12.10 31.12.09 Total Assets 17.4% 18.0% Loans 16.1% 16.6% Deposits 17.1% 17.7% Interest Income 19.2% 20.6% Loan Loss Provisions 27.2% 19.3% Operating Income 18.1% 19.3% Operating Expenses 20.7% 21.7%

Bank Assets Capital Basel 2 Capital Ratio Israel Discount Bank 183,955 10,814 13.4% Discount Bancorp (US) 9,109($m) 783($m) 16.0%* Mercantile Discount Bank 22,741 1,687 12.8% Israel Credit Cards (71.8%) 8,347 1,107 16.3% DSCT Mortgage Bank 17,642 1,116 17.0%

Key Components of Group Assets/ Capital (NIS mm/ $)

(as of 31st March, 2011)

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*According to US Reporting Standards

DSCT Bank

• Retail

remains primary focus - Improved SOW among existing clients

• AUM
• Capital

Markets and Securities Trading

• Domestic

Private Banking

• Bank

Securities Portfolio ICC

• Domestic

Market Growth

• Increased

card issuance

• Maintain &

grow leadership in consumer finance

• Int’l clearing

will continue at a nominal IDBNY

• Continued

Growth in Private Banking

• Growth of

loan portfolio relative to total assets Mercantile

• Continued

focus on existing, fast- growing domestic niche segments, as well as entry into new niches Retail

• Higher

average number of products per client Corporate

• Improved

Share of Wallet among existing clients beyond lending

Primary Focus in Business Lines

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• Part of the UN Global Compact, a strategic policy initiative for businesses

that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption.

• The bank’s stock is traded as part of a CSR index on the Tel-Aviv Stock

Exchange called the “Tel-Aviv Maala Index” which includes the 20 leading socially responsible companies in Israel.

• Consistently recognized by Maala among the Top 10 Israeli companies in

terms of corporate social responsibility and community involvement.

• As of March, 2011, Israel Discount Bank included in the FTSE4GOOD Index
• The bank’s diversified activities continued even through the down cycle and

includes employee volunteer days, sponsorships, educational scholarships, sports and arts funding initiatives.

Corporate Social & Environmental Responsibility Latest Bank Report posted at www.discountbank.co.il/IR (Community)

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• Corporate Governance is an intrinsic part of all our decision-making processes.
• Our principles are based on the fundamental separation of functions between the board
• f directors and the company’s management team.
• Our guidelines are in keeping with Basel II, Israeli corporate governance code, the

Companies Law and the Proper Conduct of Banking Business regulations.

• We are committed to updating and adopting new procedures to ensure the highest code
• f ethics.
• A copy of our Statement of Corporate Governance Principles can be found on our

Investor Relations webpage: www.discountbank.co.il/IR

Corporate Governance The first Israeli bank to publish Corporate Governance Principles

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