Israel Discount Bank Capital Raising

Transcription

1 Israel Discount Bank Capital Raising September 26,

2 Disclaimer This presentation is published in Hebrew on the website of the Israel Securities Authority and the Tel Aviv Stock Exchange. The English translation is prepared for convenience purposes only. In the case of any discrepancy between the English and Hebrew versions, the Hebrew will prevail. This slideshow was prepared by the Bank for purposes of presentation in meetings and conversations with institutional investors in the capital market, in order to explore the possibility of an equity offering by the Bank to the public. This slideshow does not constitute an offer to acquire securities of the Bank or an invitation for receipt of such offers, and is meant for informational purposes only and constitutes an essential, marketing presentation of the Bank. The information included in this slideshow (hereafter, the "Information") does not constitute a basis for investment decisions, nor does it constitute advice or an opinion of an investment adviser or tax advisor. The Information is merely summary information. An investment in securities generally and in the Bank in particular carries with it risks. One should take into consideration that past results do not guarantee future performance. This presentation was prepared as a summary and for convenience only, and cannot serve as a substitute for a detailed analysis of the Bank's reports to the Israeli Securities Authority and the Tel Aviv Stock Exchange, including the Bank's annual, quarterly and immediate reports, in each case before reaching an investment decision concerning the Bank's securities. This slideshow includes forward-looking information, as defined in the Israeli Securities Law, Such information found on page 17 of the slideshow includes, among other things, projections, objectives, estimates and assessments of the Bank, which relate to future events or issues, the occurrence of which is not certain and is outside of the control of the Bank. Forward-looking information does not constitute proven, factual information, and it is based solely on the viewpoint of the Bank's management, which is based, among other things, on analysis of general information that is known to the Bank's management as of the date of this slideshow. Forward-looking information, by definition, is subject to the substantial risk of not coming to fruition, and such information is not definite and cannot be estimated in advance and is at times even beyond the Bank's control. The fulfillment of forward-looking information is impacted by risk factors that are characteristic of the Bank's activities and also by developments in the general environment and external factors that affect the Bank's operations, which cannot be estimated in advance and that by their nature are beyond the control of the Bank. Therefore, readers of this presentation are hereby warned that the results and achievements of the Bank in the future may be significantly different than those presented in the forward-looking information included in this presentation. Similarly, forward-looking projections and estimations are based on assumptions and information in the possession of the Bank as of the time of the presentation, and the Bank shall not be required to update or revise any such projection or estimation in order to reflect events or conditions that transpire after the date of the presentation. 2

3 Executive summary 1 We are on the right path to close the gap with the sector, with sufficient capital for growth and cost reduction, capital strengthening requirements and potential future dividend payments 2 However, we have an exceptional opportunity now to significantly enhance the planned growth pace, without harming margins & cost of risk 3 Capital injection would allow us to capture the full growth potential aiming at improving the key performance metrics, while continuing to strengthen our capital position and allowing for potential future dividend payments 3

4 1 Two years ago the Bank launched a 5-year strategic plan Relentless Execution Reduce & Simplify Costs Focus Grow Retail Change Culture 4 4

5 1 The successful results of the plan are evident across all key dimensions Capital o CET-1 has crossed the BOI threshold Cost o Reduction of 4.4% in total expenses since the launch of the plan Growth o Fastest credit growth in the sector (YoY), especially in targeted segments Focus o Sold / closed non-core activities o Expanded core activities Organizational Culture o Applied performance management across the organization (managers, projects, etc.) 5

6 1 Capital has strengthened to allow for growth, cost reduction, capital requirements and potential future dividend payments Capital Total equity (NIS bln) Basel III CET-1 ratio 14.2% % BOI threshold for Jan % 9.5% 9.5% % Q Q2-16 Q2-14: Launch of plan Q Q2-16 Q2-14: Launch of plan 6

7 1 Total expenses, Group* Cost is restrained & reduced Cost (NIS m) 2,851 2,949 2, % 2,833 2, ,760 1,778 1,703 1,669 1,699 H1-14 H2-14 H1-15 H2-15 H1-16 Q2-14: Launch of plan Salary & Related Maintenance & Depreciation Other * Adjustments: H1-16: NIS 60 m for bonus and provision in CAL ; H2-15: NIS 41 m in connection with the sale of IDB (Swiss) Bank ; H2-14: NIS 308 m for early retirement and loss from the sale of DBLA ; H1-14: NIS 306 m for early retirement 7

8 1 While demonstrating impressive credit growth Growth (NIS bln) Credit to the public, net balances CAGR: 7.1% 4.6% % % % Q2-16 Aug 14 - Launch of plan 8

9 1 Fastest credit growth in the sector Growth Change in credit balances (gross), Israeli banks, YoY (as of Q2-16) Total credit Consumer credit * 2.7% 5.3% 7.7% 8.6% 10.6% 1.8% 8.3% 9.9% 11.3% 12.7% POLI LUMI FIBI MZTF DSCT LUMI FIBI MZTF POLI DSCT Small businesses Mortgages 13.0% 5.0% 6.6% 8.7% 9.3% 4.4% 6.6% 8.6% 9.9% -0.8% FIBI POLI MZTF LUMI DSCT LUMI POLI FIBI MZTF DSCT * Consumer credit includes households, excluding mortgages 9

10 1 Enhanced cost reduction and growth performance allowed us to meet financial targets despite adverse macro conditions 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Implied BOI interest rate as of October 2014 Implied BOI interest rate as of September Enhanced cost reduction: o Reduction of 1,000 employees by December 2015, three years ahead of time o Reduction of additional 1,000 employees by the end of 2021, according to the enhanced cost reduction program Enhanced credit growth: o Credit risk-weighted-assets growth of NIS 9 billion (annualized*) in H1-16, versus average growth of NIS 1.8 billion in ** * Annualized growth rate based on growth in H1-16 ** Basel II 10

11 1 We are on the right path to close the gap with the sector, with sufficient capital for growth and cost reduction, capital strengthening requirements and potential future dividend payments 2 However, we have an exceptional opportunity now to significantly enhance the planned growth pace, without harming margins & cost of risk 3 Capital injection would allow us to capture the full growth potential aiming at improving the key performance metrics, while continuing to strengthen our capital position and allowing for potential future dividend payments 11

12 2 H1-16 Credit growth is way above historical pace Growth rate of total credit (net) at Discount Bank compared to peers Discount Bank annual growth rate Peers annual growth rate 9.2% 5.9% 4.7% 5.3% 3.7% 3.8% 1.9% -1.5% H1-16 * Aug 14 - Launch of plan * Annualized growth rate based on 4.6% growth in H1-16 at Discount Bank and 1.9% average growth of peers in H

13 2 Faster growth pace is evident in most segments, particularly in consumer credit & mortgages Change in consumer credit balances, Discount Bank compared to peers: 15.0% Change in mortgages balances, Discount Bank compared to peers: 15.6% 10.2% 9.3% 6.8% 8.5% 8.5% 9.1% 6.9% 5.4% 5.4% 2.0% H1-16 * H1-16 * Discount Bank annual growth rate Peers annual growth rate * Annualized growth rate based on growth rate in H

14 2 Growth has been achieved while maintaining margins & cost of risk Annual growth rate of net credit to the public Loan loss provision ratio NIM 0.14% 0.15% 0.14% 0.16% % * 5.9% 3.7% -1.5% Q2-14: Launch of plan 2015 H1-16 * Annualized growth rate based on 4.6% growth in H1-16 in Discount Bank 14

15 2 Growth has been achieved due to internal & external factors Improved capacity o Improved sales effectiveness o Improved cross selling o Improved operational capacity Strong demand Structural advantage o Strong market demand in all segments, particularly in mortgages and consumer credit o Still below our natural market share in targeted segments o Discount has a solid capital and liquidity position above BOI requirements o Some of our peers still focus on achieving their CET-1 and LCR thresholds 15

16 1 We are on the right path to close the gap with the sector, with sufficient capital for growth and cost reduction, capital strengthening requirements and potential future dividend payments 2 However, we have an exceptional opportunity now to significantly enhance the planned growth pace, without harming margins & cost of risk 3 Capital injection would allow us to capture the full growth potential aiming at improving the key performance metrics, while continuing to strengthen our capital position and allowing for potential future dividend payments 16

17 3 Enhancing cost reduction & revenue growth levers is aimed at increasing financial performance & closing the gap faster Reducing cost of revenue-generating platform o Ongoing effort to maintain cost flat o 1 st cost reduction plan reduced the workforce by 1,000 employees, 3 years ahead of time o 2 nd cost reduction plan will reduce the workforce by additional 1,000 employees o Resulting in 20% decrease in workforce Increasing revenues without adding cost o End of 2016 and 2017 might demonstrate similar growth potential to H1-16 Aiming at closing the gap faster: o Improved profitability o Improved ROE o Improved CIR o Improved productivity o Capital injection will allow us to fully capture this opportunity - without adding any cost o Top line impact translates directly to bottom line 17

18 THANK YOU! 18

19 Thank you. Stay Tuned. Subscribe to receive alerts. IR Contact: Tamar Koblenz