[PPT] - Fourth Quarter and Annual 2009 Results Review March 25, 2010 PowerPoint Presentation

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Israel Discount Bank

Fourth Quarter and Annual 2009 Results Review

March 25, 2010

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This document has been prepared by Israel Discount Bank solely for use of the company's presentation
f 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
r 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

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

Disclaimer

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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

Interest Income

Consistent multi-year growth driven by core businesses (retail and corporate)
Fee Income on upward trend throughout 2009 as we deepen our SOW

Operating Income

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

Asset Quality

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

Retail

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

Capital

Key Highlights

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4

Israel has performed better than most developed markets through the recession Foreign investment continues long term positive trend Macroeconomic Environment

Source: Bank of Israel

Public Debt as % of GDP Balance of Foreign Investment in Israel (bln)

78 62 57 56 80 84 71 69

10 20 30 40 50 60 70 80 90

Israel USA OECD EU

2007 2009 54 63 64 71 70 87 71 95 55 59 57 60 179 209 192 226

50 100 150 200 250

2006 2007 2008 2009

Total Other Investment Portfolio Investment Direct Investment

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The banking sector supported the private sector throughout the cycle Macroeconomic Environment

5

363 384 415 393 82 90 97 102 112 122 138 156

557 596 650 651

100 200 300 400 500 600 700 800

2006 2007 2008 2009

Business Sector Private Individuals, Others Private Individuals, Mortgages Totals Source: Bank of Israel

Private Sector Debt to Domestic Banks (NIS bln)

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Q4 2009 Q4 2008 QoQ Change FY 2009 FY 2008 YoY Change Interest Income before loan provisions 1,222 873

40.0%

4,757 4,127

15.3%

Loan Provisions 269 366

(26.5%)

998 780

27.9%

Interest Income net 953 507

88.0%

3,759 3,347

12.3%

Operating & Other Income 802 745

7.7%

3,091 2,573

20.1%

Operating & Other Expenses 1,476 1,468

0.5%

5,486 5,348

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%

Income Statement Highlights (NIS m)

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(93) ROE Strategic Target: 9-11% for 2010/2011 Net Income, ROE & ROAA (NIS m)

121

140 337 292 154

5.5%

6.5% 15.8% 12.7% 6.3%

20%
15%
10%
5%

0% 5% 10% 15% 20%

100

100 200 300 400 500

Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 1,265 245 923

14.7% 2.7% 9.8%

20%
15%
10%
5%

0% 5% 10% 15% 20%

400

100 600 1100 1600

2007 2008 2009

Net income ROE

7

ROAA 0.5% 0.8% 0.1% 0.5% 2006 2007 2008 2009

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Strong recovery , exceeding pre-recession levels Stability in margins despite low interest rates in 2009 NIMS consistently among “best-in-sector” Interest Income Before Loan Provisions (NIS m)

* Financing income (adjusted by accounting effects) to income yielding assets 8

873 1,329 1,222

0.2 0.4 0.6 0.8 1 1.2 (100) 100 300 500 700 900 1,100 1,300 1,500

Q4 08 Q3 09 Q4 09 4,225 4,127 4,757

1.71 1.57 1.39 2.66 2.73 2.66

0.5 1 1.5 2 2.5 3

2,000

4,000 6,000 8,000 10,000 12,000

2007 2008 2009

Interest Income Interest Margin NIM*

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Corporate & Retail: Core drivers of interest income over long-term Interest Income by Sector (NIS m)

9

1,928 2,168 2,023 1,663 1,625 1,752 320

10

629 314 344 353 4,225 4,127 4,757

500

500 1500 2500 3500 4500 5500

2007 2008 2009

Total Private Banking Finance Corporate Retail Move Graph Up

602 496 523 359 416 434

155

331 180 67 86 85

873 1,329 1,222

500

500 1000 1500

Q4 08 Q3 09 Q4 09

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Up over 2008 levels due to recession; consistent around 85-90bps through 2009 Provisions for Doubtful Debt (NIS m)

10

366 246 269 1.20% 0.80% 0.89%

0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 50 100 150 200 250 300 350 400 450

Q4 08 Q3 09 Q4 09

Total provisions Provisions / Total Loans

447 780 998

0.41% 0.64% 0.83%

0.00% 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 0.70% 0.80% 0.90% 200 400 600 800 1000 1200

2007 2008 2009

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40.5% 42.8% 46.4% 48.1% 43.5% 44.2%

36% 38% 40% 42% 44% 46% 48% 50%

2004 2005 2006 2007 2008 2009

NPLs on consistent downward trend Asset Quality Ratios

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Coverage Ratio*

3.5% 3.1% 2.8% 2.2% 2.0% 1.9% 10.2% 9.0% 7.8% 6.3% 7.0% 7.3%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

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

Problematic Loans at year-end 2009 NIS 8,391 m

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Balance sheet & off balance sheet Total Credit Risk:

Dec. 31, 2009 – NIS 138,031m

Vs.

Dec. 31, 2008 - NIS 145,441m

A well-balanced portfolio with 36% total credit risk to private individuals… Retail credit and mortgages continue on upward trajectory Breakdown of Total Credit Risk for Dec. 31, 2009 (NIS m)

Israel only

…Resulting from multi-year retail growth

12 Private Individuals 36% Financial Services 9% Industry 14% Construction & Real Estate 17% Others 24%

22.0% 22.8% 24.0% 8.9% 10.2% 12.4% 30.9% 33.0% 36.4%

0% 5% 10% 15% 20% 25% 30% 35% 40%

2007 2008 2009

Total Private Individuals Private Individuals - Mortgages Private Individuals - Other

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Account Management 25% Credit Cards 39% Securities Transactions 13% Credit Services - Loan Fees 8% Others 15%

Upward trend driven by growing Retail & Corporate sector and increasing share-

f-wallet over time

Operating & Other Income (NIS m)

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2,474 2,495 2,625 177 78 466 2,651 2,573 3,091

300

200 700 1,200 1,700 2,200 2,700 3,200

2007 2008 2009

Commisions Other Income

Commissions

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1,872 1,920 2,153 582 627 653 140 172 187 57

146

98 2,651 2,573 3,091

700
200

300 800 1,300 1,800 2,300 2,800 3,300

2007 2008 2009

Finance Private Banking Corporate Retail Move graph up

Sustainable & growing multi-year trend in retail & corporate Operating & Other Income by Sector (NIS m)

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3.3% 3.1% 3.2% 2.9%

2.7% 2.8% 2.9% 3.0% 3.1% 3.2% 3.3%

2006 2007 2008 2009

Ongoing efficiency initiatives lead to controlled costs… Operating & Other Expenses (NIS m)

Costs / Average Assets Operating Expenses & Cost Income Ratio

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3,030 3,106 3,175 819 910 981 1,296 1,332 1,330

5,145 5,348 5,486

74.8% 79.8% 69.9%

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

1,000

2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000

2007 2008 2009

Total Operating & Other Expenses Other Maintenance & Depreciation Salary & Related Cost/Income Ratio

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Israel Discount Bank

Balance Sheet Highlights

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* Reclassified

Scaling back on RWA during cycle led to reduced loan growth in 2009 Increased deposit levels further enhance liquidity Balance Sheet Highlights (NIS m)

Credit to the Public Deposits Loan Deposit Ratio Total Assets

17 130,517 130,518 139,232 141,825

124,000 126,000 128,000 130,000 132,000 134,000 136,000 138,000 140,000 142,000 144,000

2006 2007 2008 2009

89,901 101,731 116,456 114,426

20,000

40,000 60,000 80,000 100,000 120,000 140,000

2006* 2007* 2008* 2009

0.69 0.78 0.84 0.81

0.10

0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90

2006 2007 2008 2009

162,327 168,478 181,831 187,817

145,000 150,000 155,000 160,000 165,000 170,000 175,000 180,000 185,000 190,000

2006* 2007* 2008* 2009

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Material reduction in RWA through pro-active measures Organic profitability & capital gains together with NIS 2.2 bln issuance Led to materially improved capital ratios Capital Ratios and Shareholders Equity (NIS m)

18 9,204 8,797 9,994 7.3 6.5 7.6 7.0 10.8 10.2 13.1 12.1 8.1 7.4 8.8 7.5

7,000 8,000 9,000 10,000 11,000 12,000 13,000 14,000 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0

2007 2008 2009 Basel 2

Shareholders' Equity Core Tier -1 Capital Adequacy Ratio Tier -1 Capital

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Dominant & stable core retail deposits continue to serve as primary funding source Loans & Deposits by Business Sector (NIS m)

Loans Deposits

19 Retail (Household & SME) 41% Corporate 39% Commercial Banking 17% Private Banking 3% Retail (Household & SME) 49% Corporate 16% Commercial Banking 7% Private Banking 28%

Total= 114,426 Total= 141,825

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Stocks 2% Government Debt 62% US Govt GSEs 25% Others 11%

Together with proactive management
f RWA, the relative portfolio

weighting of "low-risk" securities has increased

Fair Value of Govt and Govt-related

securities = 87% (79% in 2008)

Portfolio Weighting of Govt.

Treasuries = 62% (40% in 2008)

Mark-to-market difference +0.3%,

compared to (1.5)% at end-2008

Increase in Capital Fund from NIS

(196) m. end-2008 to NIS 57 m end- 2009 Conservative investment strategy pays off over long term Group Securities Portfolio (NIS m)

Total Fair Value: NIS 36,363 m Depreciated Value: NIS 36,266 m

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Israel Discount Bank

Sector and Subsidiary Highlights

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10 17 27 49 66 100

20

40 60 80 100 120

Dec '07 Mar '08 Aug '08 Aug '09 Mar '10 New Target

Thousands

Core Domestic Focus; Key contributor to interest & fee income Reached 2yr recruitment target; significant contribution to P&L Raising the bar even further, despite increasing competition Retail as a Core Business Segment

Public Sector Contribution

Total contribution NIS 9 bln

(loans, deposits , securities: b/s and off b/s) Target

Surpassed original target of

60,000, reaching 66,000 new clients

New Target: 100,000 clients
Avg. Retail Asset Growth (NIS m)

Pubic Sector Recruitment

22 27,808 31,168 36,137 42,665 46,254

5,000

10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000

2005 2006 2007 2008 2009

Original Target: 60

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Significant improvement in performance despite US backdrop Poised for further growth in 2010 on a more efficient operating platform Discount Bancorp. (USD m)

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

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582 631 624 710

100

200 300 400 500 600 700 800

2006 2007 2008 2009

6,937 6,242 6,205 6,208

1,000

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

2006 2007 2008 2009

28 38 35 44 5.1% 6.3% 5.5% 6.6%

0% 1% 2% 3% 4% 5% 6% 7%

10

20 30 40 50

2006 2007 2008 2009

3,120 3,758 3,937 3,491 45.0% 60.2% 63.4% 56.2%

0% 10% 20% 30% 40% 50% 60% 70%

1,000

2,000 3,000 4,000 5,000

2006 2007 2008 2009

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Consistently strong multi-year performance Risk management & compliance issues being addressed Israel Credit Cards

Revenues NIS 1.2 bln up 11% YoY

(excl. dividend issued in ‘08)

Total Assets NIS 8.6 bln up 18% YoY
Shareholders Equity NIS 1 bln up

30% YoY

Capital Adequacy Ratio 13.7%

(Basel II)

Total Card Transaction Volume NIS

43 bln up 4% YoY

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Reorganization in international clearing business due to high

levels of charge-backs & inadequate compliance with standards set by Visa International and Mastercard

Immediate remedial measures have been taken, covering

internal controls, risk management procedures and personnel changes

Expectation to return to full international clearing activities in

Q2 10

126 184 279 249 39.3% 44.1% 44.5% 26.3%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

100

200 300 400 500

2006 2007 2008 2009

Net Income ROE

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Consistently strong performance in niche sectors, complements domestic franchise Mercantile Discount Bank (NIS m)

Net Income & ROE Credit & Loan/ Deposit Ratio Deposits

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61 214 148 180 5.6% 17.2% 10.3% 11.1%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

100

200 300 400 500 600

2006 2007 2008 2009

Net Income ROE 12,583 13,027 14,326 13,848 86.9% 82.8% 84.1% 76.2%

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

2006 2007 2008 2009

14,484 15,736 17,037 18,178

2,000

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

2006 2007 2008 2009

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Outlook for 2010 Looking Forward

Retail - double-digit growth
Corporate - high single digit growth

Growth Momentum (5 - 7% for 2010)

Capturing greater share of client securities trading (retail & corporate)
Working more with domestic institutionals
Leveraging capabilities of our trading floor

Capital Markets Initiative

Further roll-out of Lean-Banking initiative across another 30 branches

Continued Improvements in Operational Efficiency

Increased risk management initiatives across the Group in Israel and abroad
Maintain high levels of capital adequacy compliant with Basel-II

Risk Management

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Appendix

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Profile About Discount Bank

Branches across the country…
Discount Bank : 146 Branches throughout

Israel

Mercantile Discount Bank: 73 branches
Domestic emphasis on Retail & Corporate Banking
Emphasis outside of Israel on Commercial and

Private Banking

Large Float & Trading Liquidity
Market Cap NIS 8.1bln ~ $2.2 bln
Average Daily Trading Volume: NIS 35-40 m
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) 54% Controlling Shareholders 26% State of Israel 20%

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A seasoned team of banking professionals The Management Team

Giora Offer President & CEO Dorit Bensimon Head of Finance Joseph Beressi Chief Accountant Israel David Head of Retail Banking Noam Hanegbi Head of Operations Shlomo Pitchon Internal Auditor

Dr. Joseph

Bachar Chairman Ehud Arnon Head of Corp. Banking Amnon Gideon Head of HR Esther Deutsch Legal Advisor

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A dominant banking partner in Israel Our Share of the Israeli Market

As of Sept. 30, 2009

Loans 16.8% Deposits 17.8% Interest income before provisions 21% Total Assets 18.2% Net Income 19.6%

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Consistently recognized by Ma’alah among the Top 10 Israeli companies in terms of corporate social

responsibility and community involvement.

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

Ma’alah Index” which includes the 20 leading socially responsible companies in Israel.

New report issued in Q4 09 in accordance with GRI Standards (Level B) – reporting on a minimum of 20

performance indicators covering economic, environmental, human rights, labor, society, product responsibility

The bank’s diversified activities continued even through the down cycle and includes employee volunteer

days, sponsorships, educational scholarships, sports and arts funding initiatives.

All the banks activities are aligned with our long-term strategic plan of “Banking with a Human Face”

Corporate Social Responsibility is not something we do, it is what we believe Corporate Social Responsibility

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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 of 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 of ethics.
A copy of our Statement of Corporate Governance Principles can be found on our Investor Relations

webpage: www.discountbank.co.il/IR

The first Israeli bank to publish Corporate Governance Principles Corporate Governance

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Bank Assets Capital Basel 2 Capital Ratio Basel 1 Capital Ratio Israel Discount Bank 187,817 9,994 12.1% 13.1% Discount Bancorp (US) 9,520 ($m) 710 ($m) 14.9% Mercantile Discount Bank 21,807 1,695 12.3% 13.1% Israel Credit Cards (71.8%) 8,579 1,056 13.7% 22.8% DSCT Mortgage Bank 15,884 1,090 19.3% 12.1%

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

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Interest Income - Reported and Adjusted (NIS m)

Adjusted Interest Income

34 873 940 1,266 1,329 1,222 28 278 4 14

49

133 135

94
56

6 72

136
9
76
48
23
35
4

17 9

1,083 1,182 1,163 1,228 1,140

200

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

Q4 08 Q1 09 Q2 09 Q3 09 Q4 09

Adjusted Interest Income Realized and unrealized Losses

n Traded Bond Portfolio

Capital Gains and/or Provision

n Sale, of AFS Bonds

Impact of IDBNY Tax Hedge

Adj. to Fair Value of ALM

Reported Interest Income

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