Israel Discount Bank Q3-16 Financial Results Conference Call

Transcription

1 Israel Discount Bank Financial Results Conference Call November 17,

2 Profit & Loss (NIS m) Change compared to: P&L Q3-15 Q2-16 Q3-15 Q2-16 Interest income, net 1,067 1,155 1, % 2.8% Loan loss provision % 143.1% Non-interest financing income % (88.1%) Commissions % 6.6% Other income (88.1%) (81.5%) Total non-interest income 722 1, % (32.8%) Total non-interest income adjusted 722 Salaries and related 820 Salaries and related adjusted (2) 820 Maintenance and depreciation 294 Other expenses 306 Other expenses adjusted 306 Total expenses 1,420 Total expenses adjusted 1,420 Income before taxes 284 Net income 168 Net income adjusted (1) (2) (3) 1,464 1,404 (2)(3) (4) % 0.4% % (3.6%) % (1.3%) 272 (7.5%) 1.5% % 11.3% 328 (5) 7.2% 11.2% 1, % 0.8% 1,430 (5) 0.7% 1.9% % (58.1%) % (52.2%) % (10.4%) (1) (2) (3) (4) (5) Excluding NIS 360 m income from the sale of rights in Visa Europe Excluding a NIS 20 m bonus to CAL employees Excluding a NIS 40 m provision in CAL Excluding a NIS 152 m net impact of the non-recurring items Excluding a NIS 45 m provision in CAL 2

3 9M-16 Profit & Loss (NIS m) P&L 9M-15 9M-16 % Change Interest income, net 3,182 3, % Loan loss provision % Non-interest financing income % Commissions 1,962 1,932 (1.5%) Other income % Total non-interest income 2,357 2, % Total non-interest income adjusted 2,357 2,241 (1) (4.9%) Salaries and related 2,523 2, % Salaries and related adjusted 2,523 2,530 (2) 0.3% Maintenance and depreciation (6.4%) Other expenses % Other expenses adjusted (3) 3.3% Total expenses 4,271 4, % Total expenses adjusted 4,271 Income before taxes 1,179 Net income 690 Net income adjusted 690 4,250 (2)(3) 1, (0.5%) 18.7% 10.1% (7.8%) (1) (2) (3) Excluding NIS 360 m income from the sale of rights in Visa Europe Excluding a NIS 20 m bonus to CAL employees Excluding a NIS 85 m provision in CAL 3

4 & 9M-16 Balance Sheet and Ratios (NIS m) Balance Sheet Total assets Credit to the public, net Securities Deposits from the public Total equity Q , ,592 39, ,068 13,747 Q , ,092 38, ,987 14, , ,315 37, ,892 14,568 Change compared to: Q3-15 Q % 12.7% (4.5%) 7.7% 6.0% 2.2% 4.7% (1.5%) 1.8% 2.7% Key Ratios CIR CIR adjusted ROE ROE adjusted NIM (excluding ALM derivatives) Common equity tier 1 Leverage ratio LCR Q % 79.4% 5.2% 5.2% 2.13% 9.5% 6.6% 131.5% Q % 74.6% (1) 12.3% 7.4% (1) 2.28% 9.5% 6.5% 133.9% 76.9% 74.6% (2) 5.5% 6.4% (2) 2.34% 9.8% 6.7% 129.7% 9M % 77.1% 7.2% 7.2% 2.13% 9M % 75.4% (3) 7.6% 6.3% (3) 2.25% (1) (2) (3) Excluding: NIS 360 m income from the sale of rights in Visa Europe, a NIS 20 m bonus to CAL employees and a NIS 40 m provision in CAL Excluding a NIS 45 m provision in CAL Excluding: NIS 360 m income from the sale of rights in Visa Europe, a NIS 20 m bonus to CAL employees and a NIS 85 m provision in CAL 4

5 Highlights of Results 5

6 Highlights Infrastructure o CET-1 of 9.8%, positively impacted by capital raising, which contributed 0.4% o Public offering of shares and warrants at the amount of NIS 580 m (gross), NIS 763 m assuming full exercise of warrants o LCR at 129.7%, LR at 6.7% o Robust asset quality Cost o Expansion of efficiency plan: net reduction of 2,000 employees by 2021 o Adjusted total expenses increased by 0.7% compared to Q2-16 o Adjusted salary and related expenses declined by 3.2% compared to Q2-16 Growth o Continuing to demonstrate the fastest credit growth in the sector: Consumer credit 6.3% QoQ, 12.5% YTD, 16.2% YoY Small businesses 4.3% QoQ, 11.8% YTD, 16.7% YoY Subsidiaries o Robust underlying performance and profitability of IDB NY, Mercantile & CAL Organizational Culture o Advanced stage of negotiations with the labor union 6

7 Infrastructure Basel III CET-1 ratio Basel III CET-1 ratio Strong Capital Position Ahead of BOI Threshold Comparison of CET-1 ratio, Q2-16 Jan 2017 requirement by BOI Board of directors target 9.2% BOI Threshold for Jan % 10.5% 10.81% 10.75% 8.9% 9.4% 9.5% 9.8% 10.0% 10.27% 10.2% 10.1% 9.3% 9.85% 9.85% 10.0% 9.75% 9.2% Target LUMI POLI FIBI MZTF DSCT 7

8 Infrastructure Capital Increase Due to the Capital Raising Allowed us to Enhance Credit Growth Capital raising rational: Main factors impacting CET-1 ratio We have identified an opportunity to significantly enhance the planned growth pace in the next few quarters, without harming margins & cost of risk, and without changing our cost reduction plans. 0.37% -0.27% The capital injection allows us to capture this growth potential, directly improve key performance metrics, while continuing to strengthen our capital position and allowing for potential future dividend payments 0.13% RWA growth of NIS 3.8 bln (growth of NIS 4.3 bln in credit RWA) 9.75% 9.5% Capital raising results: Total of NIS 760 m (gross) comprises from: 69.5 m shares for NIS 472 m and 40.6 m warrants for NIS 97 m total of NIS 569 m (net) Additional NIS 183 m (net) in warrants, Q2-16 Net profit Added capital RWA growth assuming full exercise of warrants 8

9 Infrastructure Robust Liquidity and Leverage Position Liquidity Coverage Ratio (LCR) Comparison of LCR, 131.5% 128.0% 133.9% 133.9% 129.7% BOI Threshold for Jan % 100% 109.0% 117.0% 129.7% 130.0% Q3-15 Q4-15 Q1-16 Q2-16 MZTF FIBI POLI DSCT LUMI Leverage Ratio (LR) Comparison of LR, 6.6% 6.5% 6.4% 6.5% 6.7% BOI Threshold for Jan 18 5% 5.3% 5.7% 6.7% 6.8% 7.4% Q3-15 Q4-15 Q1-16 Q2-16 MZTF FIBI DSCT LUMI POLI 9

10 Infrastructure Loan loss provision 0.49% Robust Credit Quality LLP ratio 0.42% (NIS m) % 0.15% 0.24% 0.14% 0.18% M-16 Q1-16 Q2-16 Key asset quality indicators Total Problematic Credit Risk Allowance for LLPs/ Impaired Loans Impaired Substandard Special Mention Impaired Debt Balance/ Total Loans Allowance for LLPs/ Total Loans 73.8% 69.7% 73.8% 55.4% 3.3% 2.3% 2.3% 2.1% 1.8% 1.7% 1.6% 1.6% 76.4% 2.0% 1.5% 86.2% 1.8% 1.5% 7,743 2,560 1,015 4,168 6,803 3, ,838 5,250 1, ,042 5,394 2, ,881 6,167 2, ,936 5,135 1, , Q1-16 Q Q1-16 Q

11 Cost Continued Cost Restraint (NIS m) Total Expenses, Group 1, % 1,414 1, % 1, % % % % % % 814 Q3-15 Adj. ** Salary & Related Maintenance & Depreciation Q2-16 Adj. Other * ** Adj. * Excluding a NIS 20 m bonus to CAL employees and a NIS 40 m provision in CAL ** Excluding a NIS 16 m of efficiency plan cost and a NIS 45 m provision in CAL 11

12 Growth Credit balances growth by segments Continued Credit Growth in Targeted Segments (NIS bln) 17.1% Mortgages 14.9% 16.2% Consumer credit * Micro & small enterprises 16.7% Total Credit 12.5% 11.8% 12.7% 6.6% 6.3% 4.3% 9.5% YoY YTD QoQ YoY YTD QoQ YoY YTD QoQ 4.7% Medium enterprises Corporate 9.8% 6.4% 7.4% 6.4% 4.5% YoY YTD QoQ 0.0% YoY YTD QoQ YoY YTD QoQ * Consumer credit includes households, excluding mortgages 12

13 Growth Fastest Credit Growth in the Sector Credit Balances (gross), Israeli Banks Total credit Consumer credit * 12.7% 11.6% 16.2% 6.7% 1.5% 0.7% 4.7% 1.9% 2.6% -0.6% -0.4% 11.4% 12.1% 6.9% 4.6% 6.3% 3.2% 3.5% 2.1% 0.4% YoY QoQ YoY QoQ Small businesses 16.7% Mortgages 17.1% 5.5% 5.8% 4.6% 3.3% 4.3% 1.0% 1.4% 0.1% -0.3% 7.7% 8.5% 4.4% 2.1% 6.6% 1.4% 2.1% -0.4% 0.4% YoY QoQ YoY QoQ FIBI POLI LUMI MZTF DSCT * Consumer credit includes households, excluding mortgages 13

14 Subsidiaries Robust Performance of Subsidiaries (NIS m) (USD m) 74.7% 7.3% % % % % % % % % % 11 Q3-15 Q2-16 Q3-15 Q2-16 Q3-15 Q2-16 * ** Net income ROE Net income adjusted ROE adjusted * ** Excluding NIS 263 m income from the sale of rights in Visa Europe, a NIS 20 m bonus to CAL employees and a NIS 40 m provision Excluding a NIS 45 m provision 14

15 IDB NY Subsidiaries (USD m) Change compared to: P&L and Balance Sheet Q3-15 Q2-16 Q3-15 Q2-16 Net interest income % 0.3% Loan loss provision % 57.9% Non-interest income % 19.6% Operating & other expenses % 3.2% Income before tax (18.8%) (14.6%) Net income (23.9%) (22.3%) ROE 7.3% 6.8% 5.2% CIR 65.0% 57.9% 57.1% Total assets 9,867 9,168 9,361 (5.1%) 2.1% Loans, net 5,279 5,394 5, % 6.4% Securities 2,752 2,861 2,727 (0.9%) (4.7%) Deposits 6,658 7,162 7, % 3.0% Total equity % 1.1% Change in Asset Mix Loans, net Total Credit /Total Assets Total Securities/ Total Assets 50.0% 39.4% 46.3% 50.3% 58.1% 61.3% 5,279 5,412 5,456 5,394 5, % 37.3% 34.8% 30.6% 30.1% 29.1% 8.7% growth Q3-15 Q4-15 Q1-16 Q

16 Subsidiaries P&L and Balance Sheet Net interest income Loan loss provision Non-interest income Operating & other expenses Income before tax Net income ROE CIR Mercantile Q3-15 Q % 8.7% 71.2% 71.9% % 68.2% Change compared to: Q3-15 Q % 4.4% (65.0%) (63.2%) (7.3%) 4.7% (0.9%) (0.9%) 36.6% 40.6% 25.0% 33.3% (NIS m) Total assets Credit to the public, net Securities Deposits from the public Total equity 29,112 20,268 2,777 24,081 2,091 30,814 21,508 4,227 25,815 2,172 31,434 21,925 6,134 26,400 2, % 8.2% 120.9% 9.6% 4.6% 2.0% 1.9% 45.1% 2.3% 0.7% Credit Balances, in NIS bln Consumer credit * Micro & small enterprises %growth 11.9% growth Q3-15 Q4-15 Q1-16 Q2-16 Q3-15 Q4-15 Q1-16 Q2-16 * Consumer credit includes households, excluding mortgages 16

17 Subsidiaries P&L and Balance Sheet Credit card transactions Net interest income Non-interest financing income Non-interest financing income adjusted Total income Total expenses Total expenses adjusted Income before tax Net income Net income adjusted ROE ROE adjusted CIR CIR adjusted CAL Q3-15 Q (1) (2) (1)(2) 14.8% 74.7% 14.8% 62.4% 44.4% 60.9% 16.7% (1)(2) 61.1% (1)(2) (3) (3) 3.4% 18.0% (3) 74.2% 61.8% (3) Change compared to: Q3-15 Q % 25.0% 33.3% 33.3% 12.8% 31.0% 12.9% (50.0%) (73.8%) 33.3% 8.3% 5.6% (98.5%) 100.0% (39.5%) 1.2% 7.7% (87.0%) (94.3%) 9.8% (NIS m) Turnover and Active Cards Total active cards (in thousands) 17,316 17,210 16,976 1,861 1,863 1,882 Total turnover 18,938 17, % growth 1, % growth 1,946 Q3-15 Q4-15 Q1-16 Q2-16 Consumer Credit Balances 7.1% 8.4% 6.3% 7.6% 3,412 3,186 2,938 2,764 2, % growth Q3-15 Q4-15 Q1-16 Q2-16 (1) (2) (3) Excluding a NIS 263 m income from the sale of rights in Visa Europe Excluding a NIS 20 m bonus to CAL employees and a NIS 40 m provision Excluding a NIS 45 m provision 17

18 Culture Continuous Effort to Improve Organizational Culture Advanced stage of negotiations with labor unions Headed by Head of HR Focused on: Wage agreement for the coming years Labor agreement framework 18

19 Strategic Update 19

20 Our Updated 5-Year Strategy with 5 Focus Areas for 2016 Relentless Execution 1 2 Accelerate cost reduction plan Enhance retail growth Reduce & Simplify Costs Focus Grow Retail 3 Build platform for future banking Change Culture 4 Realize subsidiaries potential 5 Strengthen organizational culture change 20

21 1 Cost reduction program is well on track. However, adverse macro impact, regulatory pressure and increased rivalry have forced us to accelerate our cost reduction plan. Accelerate Cost Reduction Plan Total Decrease of 20% in Workforce Decrease in workforce, Group Number of employees (in terms of positions) Original plan executed 10, ,000 9,369 9,068-1,000 Expanded plan Early retirement of 500 employees ; over 250 employees had already signed the retirement agreement Additional 500 employees will naturally retire + temps redundancy 8, Target On September 14, the Bank launched an expanded cost reduction plan to address these Natural retirement by years , challenges. 21

22 2 Enhance Retail Growth Capital Raising Allowing us to Accelerate the Pace of Growth, Particularly in Targeted Segments Total credit growth 9.5% Consumer credit growth 12.5% Mortgages growth 14.9% SME growth 11.8% 4.6% 5.9% 7.8% 7.2% 6M-16 9M-16 6M-16 9M-16 6M-16 9M-16 6M-16 9M-16 Growth has been achieved due to internal & external factors Improved capacity o Improved sales effectiveness o Improved cross-selling o Improved operational capacity While maintaining margins & cost of risk Net interest margin 2.34% Strong demand o Strong market demand in all segments, particularly in mortgages and consumer credit o Still below our natural market share in targeted segments 2.22% 2.13% 2.22% Structural advantage o Discount has a solid capital and liquidity position above BOI requirements o Some of our peers are still focusing on achieving their CET-1 and LCR thresholds Q

23 2 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 9M-16 Aiming at closing the gap faster: o Improved profitability o Improved ROE o Improved CIR o Improved productivity o Capital injection allowed us to fully capture this opportunity - without adding any cost o Top line impact translates directly to bottom line 23

24 2 Enhance Retail Growth Continue to Improve Productivity Expansion of back office Improved automated and simplified processes Wave I, which is focused on improving sales and service effectiveness in branches and other channels - is well on track. We have just started to test wave II in selected branches. Management of incoming calls Queue management and express service banker Improved sales and management routines March 16: 23 branches May 16: 40 branches Improved digital channels Multi-channel strategy Best practice CRM November 16: 65 branches Most of the branches by Dec New segmentation and service perception Personal-banker services leveraged by top digital capabilities 24

25 3 Build Platform for Future Banking Discount Bank in 2020 We have revised our strategy to better address potential future changes and to facilitate building a platform for future banking Our main focus remains traditional banking and the required transformation in each channel and, more importantly, in their seamless integration and client offering One of the initiatives in this area is establishing a FinTech & Innovation arm aimed mainly at enhancing innovation and improving client offering Main goal: Collaboration with FinTech companies to enhance our value proposition Main focus areas: Credit & alternative lending Payments Data Added value services to SME s and retail customers New business lines 25

26 THANK YOU! 26

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

28 Disclaimer This document has been prepared by Israel Discount Bank Ltd. (the Bank ) solely for use by the Bank in its presentation of its reports, as well as in strategic updates referred to in the Bank s reports. The information contained herein may be partial. It is emphasized that this presentation does not constitute an offer or invitation or recommendation to purchase any securities and/or investments whatsoever. This presentation should not be relied upon in connection with any transaction, contract, commitment or investment. For a full and complete overview of the Bank s financial position and results of operations, please view the Bank s report for. Neither the Bank nor any of its employees, officers, directors or representatives shall have any liability whatsoever for any loss and/or damages, howsoever arising, directly or indirectly, from any use of this presentation or its content or any part thereof. It is further 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 Bank s business and the results of various operations. For further details see the Forward Looking Information section in the Bank s financial statements. 28