Israeli bank Bank Leumi says it prefers 20% dividends for now


A man walks into a branch of Bank Leumi in Tel Aviv, Israel November 22, 2021. Picture taken November 22, 2021. REUTERS/Corinna Kern

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JERUSALEM, May 24 (Reuters) – Bank Leumi (LUMI.TA), one of Israel’s two biggest lenders, reported a 20% rise in quarterly net profit on Tuesday, beating estimates, and said it plans to continue distributing dividends this year.

The bank said it would pay a dividend of NIS 322 million ($96 million), or 20% of first-quarter net profit.

That’s less than previous payouts of 30% to 40%, but Leumi said he prefers to use his capital to further stimulate credit growth, while placating shareholders.

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The bank added that it preferred to remain cautious given rising interest rates and economic uncertainties, but may adjust its dividends during the year depending on credit developments.

Leumi’s credit portfolio grew by 7.6% in the first three months of the year. Its Tier 1 capital ratio stood at 10.78%, compared to 11.5% at the end of 2021.

Leumi said it earned NIS 1.6 billion in the first quarter, up from NIS 1.3 billion a year earlier and above expectations of NIS 1.2 billion in a Reuters poll of analysts.

Net interest income rose 24% to 2.9 billion shekels, while it had income in its loan loss provisions of 40 million shekels from 212 million a year earlier, with Israeli banks continuing to unwind the provisions made during the pandemic.

Following the merger between its US unit and Valley National Bank, Leumi recorded a gain of 194 million shekels in the first quarter. Another 451 million will be recorded in the second quarter, he said.

Its main competitor, Hapoalim (POLI.TA), reported higher net profit in the first quarter on Monday, but chose not to distribute a dividend, also citing the need to exercise caution in the current economic environment. He said he hoped to resume regular dividend payments from the second quarter. Read more

Shares of Leumi were down 1.2% at the start of trading in Tel Aviv.

($1 = NIS 3.3500)

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Reporting by Steven Scheer Editing by Ari Rabinovitch, Kirsten Donovan

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