The health crisis continues to affect economies and capital markets all over the world. Our Bank is confronting this new reality while demonstrating financial stability, noted across all stability indices: the capital ratio, being at a significantly higher level than that required by regulation, high liquidity, a high quality and broad credit portfolio, while continuing on our long-term efficiency measures. This stability enables us to continue to support our customers, both private and business, while maintaining functional and business continuity. The Bank continues to provide credit to its customers, also within the framework of funds guaranteed by the State, and even reached a leading rating compared with the other banks, under a survey conducted by the Ministry of Finance.
The Bank continues its accelerated digital development across all banking areas, with a focus on advisory and investments areas. The usage rates, as well as customer satisfaction from the advanced digital channels, increased considerably during the crisis period.
• Net earnings of NIS 540 million for the first nine months of 2020.
Return on equity: 8.4%
• Net earnings of NIS 201 million for the third quarter of 2020.
Return on equity: 9.5%
• Since the start of the year, there was a 2.2% growth in the credit to the public and 21.1% in deposits from the public by households and private banking
• Expenses due to Credit loss in the third quarter were NIS 91 million, as compared to NIS 33 million in the corresponding period last year, and in the first nine months of 2020 were NIS 413 million as compared to NIS 92 million in the corresponding period last year
• The efficiency ratio reached 61.0%, as compared to 64.9% in the corresponding period last year
• Ratio of Tier I equity capital: 10.93%
• Ratio of comprehensive capital: 14.23%
Net earnings of the First International Bank Group in the third quarter of the year amounted to NIS 201 million. Return on equity reached 9.5%. In the first nine months of the year, net earnings amounted to NIS 540 million and return on equity reached 8.4%.
Earnings in the first nine months of the year and thereafter in the present quarter were affected by the impacts of the Corona crisis. This was mostly due to the sharp increase in credit loss expenses, mainly under the collective provision item, and this on the basis of the uncertainty surrounding the crisis and its impact on borrowers.
Implications of the Corona crisis on the Bank
Expenses in respect of credit losses in the first nine months of the year amounted to NIS 413 million, in contrast to NIS 92 million in the corresponding period last year. The rate of the provision for credit losses amounted to 0.62%, as compared to 0.14% in the corresponding period last year.
Credit loss expenses in the third quarter of the year amounted to NIS 91 million, compared to NIS 33 million in the corresponding quarter last year, a growth of 176%. The provision rate for credit losses in the third quarter of the year amounted to 0.41%, as compared with 0.15% in the corresponding quarter last year.
The growth in credit loss expenses was mostly due to the impact of the changes in the macro-economic environment, because of the Corona pandemic and the uncertainty with regard to the impact on the condition of borrowers. Due to the macro-economic uncertainty, the Bank decided to increase the collective provision, which in the first nine months of the year amounted to NIS 366 million, the majority of it (NIS 322 million) in respect of the crisis.
Until September 30, 2020, the Bank deferred repayment of loans to customers in an amount of NIS 144 million. The outstanding balance of the loans, repayment of which had been deferred, as of September 30, 2020, amounted to NIS 2,858 million, comprising 3.1% of total credit to the public. This rate is lower than the rate as reported in the second quarter, which amounted to 8.0%, and is significantly lower than the rate of deferred debts across the Israeli banking system as a whole.
Since the outbreak of the crisis, the Bank has implemented a series of measures, the aim of which is to assist customers and make banking services more accessible to customers, enabling them to overcome the challenges and implications of the crisis. Among other things, the Bank has provided a reprieve from loan repayments and mortgages, as well as offers and grants of credit to business customers out of loan funds guaranteed by the State. In addition, the Bank has introduced a series of assistance services for the older population, including courier service to their homes, avoiding lines at the branches, as well as introducing a series of new and advanced digital services. These include joining the Bank's advisory services, video meetings with investment consultants, prolonged business hours for telephone consultation, opening of an account digitally, fixing branch appointments using the online 'chat', and more.
In the first nine months of the year, financing profit from current operations increased by 1.2%, in comparison with the corresponding period last year. Total commission income increased by 7%. Most of the increase was due to the growth in capital market activity as a result of a growth in trading turnover on the Stock Exchange and from the growth in income from exchange spreads. This growth was partly offset by a decline in income from management fees and commissions on financing transactions, as a result of a decline in the volume of this activity resulting from the effect of the crisis.
The growth in the activity of the Group is noted also in the balance sheet data, both on the credit side and on the deposit side. The average outstanding balance of credit to the public amounted to NIS 89,475 million in the first nine months of the year, a growth of 4.9% in comparison with the corresponding period last year. Deposits from the public in the first nine months of the year increased by 13.2%, amounting to NIS 135,914 million, of which deposits by households and private banking increased by 21.1% amounting to NIS 71,816 million.
The Bank continued to increase efficiencies and the efficiency ratio continued to improve, reaching 61.0% as compared with 64.9% in the corresponding period last year. Operating and other expenses amounted to NIS 1,894 million, a reduction of 5.3% in relation to the corresponding period last year.
The capital attributed to the shareholders of the Bank reached NIS 8,944 million, a growth at the rate of 4.4% compared with that of the end of 2019. The Tier I equity capital ratio reached 10.93% (2.6 percentage points over the regulatory requirement) in comparison to 10.81% as at December 31, 2019, and the comprehensive capital ratio reached 14.23%.
The local credit rating companies have recently during the crisis period, reiterated the rating of the First International Bank, which is rated at AAA, the highest rating, similarly to that of the other large banks in Israel.
Smadar Barber-Tsadik, CEO