Israel Discount Bank Investor Presentation, Annual Report 2011 - - PowerPoint PPT Presentation
Israel Discount Bank Investor Presentation, Annual Report 2011 March, 2012 www.discountbank.co.il/IR TASE DSCT BLOOMBERG DSCT.IT REUTERS DSCT.TA Net Income & ROE (NIS mm) 10.2% 918 8.2% 11.3% 9.4% 852 8.7% 7.0% 4.7% 278 231
www.discountbank.co.il/IR
TASE DSCT BLOOMBERG DSCT.IT REUTERS DSCT.TA
March, 2012
7 500 409
56 392 377
Finance Private Banking Corporate & Commercial Retail (Household & SME)
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704 918 228
2.6% 10.2% 7.0% 8.2%
2010 2011
222 121 231 278 8.7% 4.7% 9.4% 11.3%
Q411 Q3 11 Q2 11 Q1 11
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2011
2011
Change
2011
2010
Change Interest Income
before provision for Loan Losses
1,140 1,067 +6.8% 4,785 4,830
Expense for credit losses 252 226 +11.5% 778 821
Interest Income net 888 841 +5.6% 4,007 4,009 0% Operating & Other Income 658 718
2,690 2,660 +1.1% Operating & Other Expenses 1,461 1,478
5,838 5,659 +3.2% Net income 222 121 +83.5% 852 704 +21.0% ROE 8.7% 4.7%
7.0%
Capital / Total Assets
14.1%
Capital Adequacy
75.9%
Loans / Deposits
8.1%
Adjusted Return on Risk Weighted Assets
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Management of Core Tier-1 Capital
YE CT-1 of 8.1% , Exceeded YE 2011 target
Allows for a return to moderate growth in RWA’s in 2012 (~3%), dependant on macro conditions.
Launch Multiple Efficiency Initiatives
Long term agreement reached with unions. Retirement program launched in Q3; closed Q1/12; 340 employees retired at cost of NIS 340m Cost saving - NIS 150m in 2012. Lower replacement ratio will allow for material
Additional cost- savings from reduction of temporary & outsourced employees.
Merger of Mortgage Bank into Banking Division
Merger to be completed by YE 2012. Additional HR & IT efficiencies. Better integrated & improved client service
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Reduced volatility in financial performance
Recognition by BOI of IDBNY as “Autonomous Business Entity” Changes in MTM value of capital invested in IDBNY from $/NIS fluctuation will pass through Capital Fund rather than P&L
Change in Management
New management team assembled by Q3/2011 Immediate Attention to Addressing Revenue & Cost-Related Issues
Asset Management & Domestic Private Banking Division established Q3/2011
“Discount Invest” platform launched Q1/12; Aimed at client retention & increased SOW. Improved marketing, service & IT platforms Targeting additional NIS 120 m from securities & capital market activity over next 4 years.
Re-allocation of assets in nostro portfolio
Diversification into corporate bonds (domestic & off-shore) Improved Yield on Securities Portfolio
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From Existing Business Lines:
Retail & SME Corporate Credit Cards IDBNY Mercantile Mortgages Investment Banking
From New Business Lines:
Capital Markets Domestic Private Banking &Client Asset Management
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Core Tier 1 reaches 8.1% Interest Income (Net of Expense for Credit Losses) up 5.6% over Q3 Expense for Credit Losses up NIS 26m over Q3 Operating & Other Income down 8.4% over Q3 due mostly to one-off’s in the previous quarter Salary & Related Costs down 5.2% over Q3; Total Operating & Other Expenses down 1.1% Trachtenberg Committee tax reforms lead to saving of NIS 177m on deferred tax assets
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Growth In Israel, USA & Eurozone Components Of Growth In Israel (% change)
0% 2% 4% 6% 8% 10% 12% 14% 16% 18%
GDP of Business Sector GDP Import of Goods and Services* Export of Goods and Services Gross Fixed Capital Formation General Government Consumption Expenditure* Private Consumption Expenditure
2010 2011 2012 F
Excluding Defence Imports*
0.5% 1.5% 2.5% 3.5% 4.5% 5.5% 6.5% 7.5%
Eurozone USA ISRAEL
Q4/2010 Q1/2011 Q2/2011 Q3/2011 Q4/2011 TA-100 Government Bonds Not Linked Government Bonds CPI Linked Corporate Bonds CPI Linked 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% 4.50%
Quarterly Change in Sectors Annual Inflation (Y/Y) & BOI Interest Rate
2010 2011 2012 BOI Interst Rate (End of quarter) Annual Inflation
Margins 2.11% (2011) 2.87% (2010) Retail up 3.3%; Corporate up 4.9% Decrease in credit spreads during 2011 partly mitigated by widening of deposit spreads
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2010 2011
1,140 1,067 1,289 1,289 Q4 11 Q3 11 Q2 11 Q1 11 295 343 1,764 2,383 508 335 1,681 2,306
Finance Private Banking Corporate & Commercial Retail (Household & SME)
5,755 6,098 774 965 2,086 2,544 31.12.11 31.12.10
Special Mention Sub-Standard Impaired
3,182 3,384 4 36
2.70% 2.80% 31.12.11 31.12.10 Other Non Performing Loans NPL/Loans
Improvement during 2011 across all Credit Risk Categories; Continued positive momentum will depend on the intensity and duration of the economic slowdown
10 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
Total Classified Credit Risk
8.6 bln 9.6 bln
Delinquent Debt 90+ days/Total Credit
Provision for loan losses
778 821
5.2% -
Non Performing Assets
3,393 3,186
0.50% 0.51% 0.59% 0.70%
31.12.11 30.09.11 30.06.11 31.12.10
252 226 188 112 0.85% 0.75% 0.63% 0.38%
Q4 11 Q3 11 Q2 11 Q1 11 Total Provisions LLP's as a % of Total Credit
P R/ n M Co i O Tr Ho Co Ut A
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Domestic R/E & Construction Credit Risk/ Total Domestic Credit Risk
Total Credit Risk to the Public (By Sector)- NIS 176 bln
Problematic Credit Risk Problematic Credit Risk/ Total Credit
0.8% 1.4% 1.6% 1.7% 2.3% 7.1% 8.5% 10.9% 11.4% 14.2% 19.1% 20.9%
Private Individuals R/E & Construction Industry Mortgages Commerce Financial Services Other Transport Hotels & Tourism
Utilities Agriculture
17.6% 17.8% 17.6% 17.2% 19.0%
2011 2010 2009 2008 2007
Israel, 62% Ex- Israel, 38%
7.3% 8.0% 2011 2010
17.5%
614 621 619 635
Q4 11 Q3 11 Q2 11 Q1 11 Credit Cards, 922 Account Management, 617 Capital Markets, 415 Loan Documentation, 258 Other, 217 FX Trade Finance, 169 Capital Gain on Shares, 92
255 528 1,929
226 462 2,034
Finance Private Banking Corporate & Commercial Retail (Household & SME)
Continued pressure on fees prevails; increases from credit cards, capital gains on shares sold; marked improvement in corporate sector 12
3,088
Distribution of Fees (31.12.2011) Total Fees
2,633
2,660
2,547
2,489
Total Fees
653 661 718
2010 2011
658
69% 78.1% 75.6% 69.4% 80.2% 2013 2011 2010 2009 2008
Increase in OPEX of 3% YoY mostly from group companies (salaries/ bonuses) Q4 Salaries lowest level throughout 2011 Savings of NIS 150m from early retirement program to be reflected in Q1/12
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Cost/ Income Ratio Cost/ Avg. Assets Ratio
Pressure on Revenues Slowing Progress Toward meeting CI target
Target
Total Salaries & Related costs
1,461 1,478 1,440 1,459 828 873 855 903
Q4 11 Q3 11 Q2 11 Q1 11 Total Salary & Related
3.0% 3.0% 2.9% 3.1% 2011 2010 2009 2008
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31.12.11 31.12.10 Change Securities 42,898 37,176 +15.4% Net Loans 116,383 118,666
Deposits 153,368 138,011 +11.1% Loan Deposit Ratio 75.9% 86.0%
11,115 11,152
Total Assets 202,491 185,576 +9.1% Total Capital to Total Assets 5.5% 6.0%
120,256 125,628 13,418 13,233 1,875 2,907
31.12.11 31.12.10 Credit Risk Operational Risk Market Risk
14.1 13.3 13.3 12.9 13.2
Core Tier-1 Tier-1 Capital Capital Adequacy Ratio
8.1 7.6 7.6 7.4 7.6 8.8 8.3 8.2 8.0 8.2
31.12.11 30.09.11 30.06.11 31.03.11 31.12.10
CT-1 of 8.1% at YE 2011 exceeds target of 8% by YE 2012
(Despite ~ NIS 1.2bln charge due to Impaired Debts and Actuarial Severance Provisions Incurred During 2011)
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New Regulatory CT-1 Target Basel 3: 9% YE 2014
Risk Weighted Assets
141,768 135,549
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Business Plan- Determine Capital Targets Formalized Risk Appetite & Define Capital Cushions Derive Max. Growth in RWA’s Allocate Capital To Business Units In Accordance With ROE Maximization Ongoing Management & Monitoring At All Business Units & Group Companies
Total Portfolio NIS 43bln at YE 2011 (growth mostly from IDBNY portfolio) During 2012, diversification of a small part into credit and interest rate risk, (Israel & Abroad) in order to improve yields
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Acc
Accrued Losses to Capital Fund – MTM of AFS Securities
Acc Acc
MBS/ABS F.I'S (Ex. Israel) Foreign Govts. F.I'S (Israel) Other
51.5% 35.9% 6.3% 3.0% 2.3% 1.0% Credit Risk to Foreign Financial Institutions AFS Portfolio
129 56
196
31.12.11 31.12.10 31.12.09 31.12.08 31.12.07
Under A-
Over A-
(including A-)
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Loan/Deposit Ratio 75.9% Deposits up 11% over YE 2011;
Loans
31.12.10 31.12.11 31.12.10 31.12.11
153,368 149,197 139,296 136,088
31.12.11 30.09.11 30.06.11 31.03.11 3,514 64,006 48,683 3,662 63,916 51,088
Private Banking Corporate & Commercial Retail (Household & SME)
116,383 118,516 117,289 116,670
31.12.11 30.09.11 30.06.11 31.03.11 39,710 34,807 78,852 37,395 29,094 71,522
Private Banking Corporate & Commercial Retail (Household & SME)
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Discount Bancorp : Net Income & ROE (mil $) Discount Bancorp : Loans and Deposits (mil.$)
Loans Deposits
6.9% 5.9%
Low re-investment rates continue to put pressure on earnings. Ramp-Up of domestic private banking in US expected to provide partial revenue compensation.
6.6%
6.6 10.9 14.0 14.3 3.3% 5.4% 7.1% 7.6% Q4-11 Q3-11 Q2- 11 Q1- 11 6,606 6,569 6,423 5,966 3,751 3,981 3,753 3,680 Q4-11 Q3-11 Q2- 11 Q1- 11
Improvement in Earnings & Revenues Despite Reduced Interchange Fees
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Net Income & ROE (NIS mm) Total Revenues (NIS mm) Consumer Finance(NIS mm)
1,979 2,103 2,117
2011 2010 2009
1,130 1,104 1,157
2011 2010 2009
230 215 249 279.0
20.6% 18.3% 26.3% 44.5%
2011 2010 2009 2008
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Focus in 2012 on Retail & Commercial business lines in niche client sectors, as well as Investment Advisory Services Planned Organizational changes to include shared operating platform (Trading Floor) with Discount Bank.
Deposits & Loans (mm NIS) Net Income & ROE (mm NIS)
Loans Deposits
20,981 18,736 18,178 15,716 15,082 13,848 2011 2010 2009
162 141 174
9.6% 8.1% 11.1%
2011 2010 2009
Net Income ROE
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and Domestic Private Banking
Representative Offices throughout Latin America
Main Shareholders
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Public Float
(TASE:DSCT)
Controlling Shareholders
100% 100% 100% 100% 100% 100%
Banks in Israel Banks Abroad Capital Markets & Investment
Mercantile Discount Bank Discount Mortgage Bank Discount Bancorp, Inc. Israel Discount Bank of New York Discount Bank Latin America IDB (Swiss) Bank Israel Discount Capital Markets and Investments Israel Discount Bank
Financial Companies
100% 100% Capital 71.8% Voting 79%
Israel Credit Cards (ICC)
Capital 51% Voting 57%
Diners Club Israel
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Total Assets 17.5% 17.4% 17.9% Loans 15.2% 16.1% 16.6% Deposits 17.5% 17.1% 17.8% Interest Income 18.8% 19.2% 23.0% Operating Income 19.1% 18.1% 20.4%
Bank Assets Capital Basel 2
Total Capital Ratio Israel Discount Bank (Consolidated) 202,491 11,115 14.1% Discount Bancorp (US) 9,488($m) 788($m) 16.5%* Mercantile Discount Bank 25,039 1,764 13.2% Israel Credit Cards (71.8%) 8,723 1,203 16.7% DSCT Mortgage Bank 18,380 863 13.9%
(as of 31th December, 2012)
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*According to US Reporting Standards
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$482m- Ave. Trading Volume in Equities
600 Listed Companies 140 TASE-Listed Tech Companies 724 Bonds Listed for Trading NIS 1.8bln Ave. Daily Trading
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President & Chief Executive Office
Chairman
Senior Executive Vice President Chief Accountant Head of the Accounting Group
Executive Vice President, Chief Risk Officer (CRO)
Executive Vice President, Head of Technology & Planning Division
Executive Vice President, Strategy, Marketing & service Division
Senior Executive Vice President Head of Banking Division
Senior Executive Vice President
Executive Vice President Head of Operation & Logistic Division
Executive Vice President Head of Corporate Banking Division
Executive Vice President Head of Finance Division
Executive Vice President Head of Asset Management Division
Executive Vice President Internal Auditor
Executive Vice President, Head of Human Resources
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, labor, 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 Ma’ala Index” which includes the 20 leading socially responsible companies in Israel. Consistently recognized by Ma’ala 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 include employee volunteer days, sponsorships, educational scholarships, sports and arts funding initiatives.
Latest Report posted at www.discountbank.co.il/IR (Community)
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This document has been prepared by Israel Discount Bank solely for use of the company's presentation of its fourth quarter and full year 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 or
the Bank’s Annual Report for 2011. 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.
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IR Contact:
Barry Simon barry.simon@discountbank.co.il +972-3-5146593
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