Leumi posts biggest profit among Israel’s banks, fueled by steady rate hike

Net profit in 2022 rose 27% to a record NIS 7.7 billion; net interest income jumped 28% to NIS 13.2 billion versus the previous year

Sharon Wrobel is a tech reporter for The Times of Israel.

Illustrative image: Israelis walk next to Bank Leumi in Jerusalem on November 16, 2014. (Yonatan Sindel/Flash90)
Illustrative image: Israelis walk next to Bank Leumi in Jerusalem on November 16, 2014. (Yonatan Sindel/Flash90)

Bank Leumi posted the biggest profit in 2022 among Israel’s largest lenders as fast interest rate hikes and rising inflation helped fuel financing income and helped its credit and loan operations to flourish.

Net profit in 2022 rose 27% to a record NIS 7.7 billion ($2.2 billion) from NIS 6 billion in the previous year. In the fourth quarter of 2022, Leumi saw its profit jump almost 60% to NIS 2.3 billion versus NIS 1.5 billion in the same quarter in 2021. Its competitor Bank Hapoalim last week said it earned a record NIS 6.5 billion in 2022.

Leumi published its earnings ahead of a meeting between President Isaac Herzog and 30 entrepreneurs, business and bank executives to discuss the repercussions of the proposed judicial revamp on the economy and on doing business in and outside of Israel.

“After this earnings report, public events began – legislative and social – which carry great uncertainty regarding the manner of their development and the extent of their influence onto the Israeli economy in the medium and long term, and as a result on the bank’s results,” Bank Leumi chairman Samer Haj-Yehia stated in the earnings report. “I am hopeful that the situation will be contained, and that we will all come out of it strengthened.”

Leumi said finance income in 2022 grew 28% to NIS 14.4 billion year-on-year. The lender attributed the growth mostly to the increase in the bank’s loan portfolio amid a rising inflation environment and higher interest rates. Net interest income in 2022 rose 28% to NIS 13.2 billion versus the previous year.

In 2022, the Bank of Israel started to steadily hike the benchmark interest rate from a low of 0.1% last April to 3.25% at the end of 2022. The central bank last raised its key lending rate by 50 basis points to 4.25% in February in a bid to rein in inflation, which has been hovering above 5%, and bring it back into a target range of between 1% and 3%.

Bank Leumi President & CEO Hanan Friedman. (Courtesy)

Leumi emphasized that it continues to focus on growth in its credit portfolio in the corporate, commercial and mortgage sectors. In 2022, Leumi’s credit portfolio grew by a total of 18.4%. The bank’s corporate portfolio soared 28.7%, its commercial portfolio was up 18.3% and the mortgage portfolio grew 15.7%.

Leumi’s operating expenses in 2022 declined 2% or NIS 134 million compared with the previous year.

Leumi President & CEO Hanan Friedman stated that 2022 results were achieved partly by the “successful execution of our digital strategy.”

The bank’s net loans to the public as of December 31, 2022, stood at about NIS 385 billion compared with NIS 325 billion in 2021 – an increase of 18.4% mostly in mortgage and corporate loans. Public deposits at the end of 2022 reached NIS 557.1 billion, rising 8.2% from the NIS 515 billion recorded in 2021.

Leumi’s board of directors approved a NIS 698 million dividend payment, or 30% of the fourth quarter net profit. For the full year of 2022, Leumi paid an accumulative dividend of NIS 1.8 billion.

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