Israel Discount Bank Fourth Quarter and Annual 2009 Results Review March 25, 2010
Disclaimer • This document has been prepared by Israel Discount Bank solely for use of the company's presentation of its fourth quarter and full year 2009 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 or investment. For full and complete overview of the Banks financial position and results of operations please view the Bank’s Annual Report for 2009. • 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 operations. • For further details see Forward Looking Information section in the Banks financial statements. 2
Key Highlights Interest Income • NIM's and margins remained stable and strong throughout the cycle • Both retail and corporate core businesses were major drivers of upward trend in Interest Income Operating Income • Consistent multi-year growth driven by core businesses (retail and corporate) • Fee Income on upward trend throughout 2009 as we deepen our SOW Asset Quality • Loan Coverage ratio among strongest in the sector • NPL's continue downward trend • Private individuals and mortgage loans now constitute 37% of total credit risk • Securities - significant increase in size of capital fund during 2009 Retail • Increase in relative weighting of retail as a % of total credit risk • Public Sector employees - reached and surpassed 2yr goals; new target of 100,000 net Capital • Reached 2009 strategic targets in accordance with Basel 2 compliance • Raised NIS 2.2bln during 2009 • Proactive management in reducing RWA and more beneficial allocation of capital 3
Macroeconomic Environment Israel has performed better than most developed markets through the recession Foreign investment continues long term positive trend Public Debt as % of GDP Balance of Foreign Investment in Israel (bln) 250 90 226 Total 209 80 192 200 60 179 70 59 Other 57 60 Investment 55 150 50 95 2007 84 Portfolio 80 87 78 40 71 71 100 Investment 2009 69 70 62 30 57 56 Direct 20 50 71 Investment 63 64 54 10 0 0 Israel USA OECD EU 2006 2007 2008 2009 Source: Bank of Israel 4
Macroeconomic Environment The banking sector supported the private sector throughout the cycle Private Sector Debt to Domestic Banks (NIS bln) 800 651 650 700 596 557 600 138 156 122 112 500 97 102 90 82 400 300 415 393 384 200 363 100 0 2006 2007 2008 2009 Business Sector Private Individuals, Others Private Individuals, Mortgages Totals Source: Bank of Israel 5
Income Statement Highlights (NIS m) Q4 Q4 QoQ FY FY YoY 2009 2008 Change 2009 2008 Change Interest Income 1,222 873 4,757 4,127 40.0% 15.3% before loan provisions Loan Provisions 269 366 998 780 (26.5%) 27.9% Interest Income net 953 507 3,759 3,347 88.0% 12.3% Operating & Other Income 802 745 3,091 2,573 7.7% 20.1% Operating & Other Expenses 1,476 1,468 5,486 5,348 0.5% 2.6% Net income (Reported) 154 (121) 923 245 276.7% ROE (Reported) 6.3% (5.5%) 9.8% 2.7% Net income (Adj.) 214 (163) 962 212 353.8% ROE (Adj.) 8.8% (7.3%) 10.3% 2.3% 6
Net Income, ROE & ROAA (NIS m) ROE Strategic Target: 9-11% for 2010/2011 14.7% 20% 15.8% 500 20% 12.7% 9.8% 15% 1600 15% 400 6.5% 6.3% 10% 10% 2.7% 1100 300 5% 5% 0% 200 -5.5% 0% 1,265 337 600 Net income 292 923 -5% -5% 100 154 140 245 ROE -10% -10% 100 0 -15% -15% -121 -100 -400 -20% -20% Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 2007 2008 2009 ROAA 0.8% 0.5% 0.5% 0.1% (93) 2006 2007 2008 2009 7
Interest Income Before Loan Provisions (NIS m) Strong recovery , exceeding pre-recession levels Stability in margins despite low interest rates in 2009 NIMS consistently among “best -in- sector” 1,500 1.2 2.73 12,000 3 2.66 2.66 1,300 1 10,000 2.5 1,100 1.71 0.8 8,000 2 1.57 900 1.39 6,000 1.5 700 0.6 500 4,000 1 0.4 300 2,000 0.5 0.2 4,225 4,127 4,757 873 1,329 1,222 100 - 0 (100) 0 Q4 08 Q3 09 Q4 09 2007 2008 2009 Interest Income Interest Margin NIM* * Financing income (adjusted by accounting effects) to income yielding assets 8
Interest Income by Sector (NIS m) Corporate & Retail: Core drivers of interest income over long-term 5500 Total 4,757 1,329 353 1500 4,225 1,222 4500 86 4,127 Private Banking 629 85 314 344 331 320 180 3500 873 Finance 67 1000 1,625 1,752 1,663 434 416 2500 359 Corporate 500 1500 523 496 Retail 2,168 2,023 1,928 602 500 Move Graph Up -10 0 -155 Q4 08 Q3 09 Q4 09 2007 2008 2009 -500 -500 9
Provisions for Doubtful Debt (NIS m) Up over 2008 levels due to recession; consistent around 85-90bps through 2009 0.83% 450 1.40% 1200 0.90% 1.20% 400 0.80% 1.20% 1000 0.64% 350 0.70% 0.89% 1.00% 300 800 0.60% 0.80% 0.80% 250 0.50% 0.41% 600 200 0.40% 0.60% 150 400 0.30% 0.40% 100 0.20% 200 0.20% 50 0.10% 366 246 269 447 780 998 0 0.00% 0 0.00% Q4 08 Q3 09 Q4 09 2007 2008 2009 Total provisions Provisions / Total Loans 10
Asset Quality Ratios NPLs on consistent downward trend Problematic Loans Coverage Ratio* 50% 12.0% at year-end 2009 10.2% 48% NIS 8,391 m 9.0% 10.0% 7.8% 46% 7.3% 7.0% 8.0% 6.3% 44% 6.0% 48.1% 42% 46.4% 3.5% 3.1% 4.0% 2.8% 44.2% 40% 43.5% 2.2% 42.8% 2.0% 1.9% 40.5% 2.0% 38% 36% 0.0% 2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009 NPL / Total Loans Problem Debt / Total Loans *Coverage ratio calculated as end-of-period provision balance divided by end-of-period provision balance plus balance sheet problematic debt 11
Breakdown of Total Credit Risk for Dec. 31, 2009 (NIS m) Israel only A well-balanced portfolio with 36 % total credit risk to private individuals… Retail credit and mortgages continue on upward trajectory Balance sheet & off balance sheet … Resulting from multi-year retail growth Total Credit Risk: 40% Dec. 31, 2009 – NIS 138,031m 36.4% Vs. Total Private 33.0% 35% Dec. 31, 2008 - NIS 145,441m 30.9% Individuals 12.4% 30% 10.2% Others 8.9% 25% 24% Private Individuals - 20% Construction Mortgages & Real Estate 15% 17% 24.0% 22.8% 22.0% Private 10% Private Individuals Individuals - 36% Industry 5% Other 14% Financial 0% Services 2007 2008 2009 9% 12
Operating & Other Income (NIS m) Upward trend driven by growing Retail & Corporate sector and increasing share- of-wallet over time 3,091 Commissions 3,200 466 2,651 2,573 2,700 Others 177 78 15% 2,200 Account Credit Management Services - 25% 1,700 Loan Fees 8% 2,625 2,495 2,474 1,200 Securities Transactions 700 13% Credit Cards 200 39% 2007 2008 2009 -300 Commisions Other Income 13
Operating & Other Income by Sector (NIS m) Sustainable & growing multi-year trend in retail & corporate 3,091 98 3,300 2,651 187 2,573 57 2,800 140 172 653 Finance 582 2,300 627 Private Banking 1,800 Corporate 1,300 2,153 1,872 1,920 Retail 800 300 Move graph up -146 -200 2007 2008 2009 -700 14
Operating & Other Expenses (NIS m) Ongoing efficiency initiatives lead to controlled costs… 10,000 100% Operating Expenses & Cost Income Ratio Costs / Average Assets 9,000 90% 79.8% Total Operating 74.8% & Other 8,000 80% 69.9% 3.3% Expenses 7,000 70% Other 3.2% 5,486 6,000 5,348 60% 5,145 3.1% 5,000 50% 1,330 1,332 Maintenance & 1,296 Depreciation 4,000 40% 3.0% 981 910 3.3% 819 3.2% 3,000 30% Salary & 2.9% 3.1% Related 2,000 20% 3,175 3,106 3,030 2.9% 2.8% 1,000 10% Cost/Income Ratio 2.7% - 0% 2006 2007 2008 2009 2007 2008 2009 15
Israel Discount Bank Balance Sheet Highlights 16
Balance Sheet Highlights (NIS m) Scaling back on RWA during cycle led to reduced loan growth in 2009 Increased deposit levels further enhance liquidity Credit to the Public Deposits 140,000 144,000 142,000 120,000 140,000 100,000 138,000 136,000 80,000 134,000 141,825 116,456 114,426 60,000 139,232 101,731 132,000 89,901 130,000 40,000 130,517 130,518 128,000 20,000 126,000 - 124,000 2006* 2007* 2008* 2009 2006 2007 2008 2009 Loan Deposit Ratio Total Assets 0.90 190,000 0.80 185,000 0.70 180,000 0.60 175,000 0.50 170,000 187,817 0.84 0.81 0.78 181,831 0.40 165,000 0.69 0.30 160,000 168,478 162,327 0.20 155,000 0.10 150,000 - 145,000 2006 2007 2008 2009 2006* 2007* 2008* 2009 * Reclassified 17
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