US Tax Probe Clips Bank Leumi Q2 Profits 39%

Bank Leumi (TASE: LUMI) reported its results for the second quarter and first half of 2014 this morning. Net profit attributable to the bank’s shareholders totaled NIS 915 million in the half, compared with $132 million in the corresponding half of 2013, representing a 12.4% decline.

In the second quarter, the bank posted an expense of $132 million arising from the investigation by the US authorities into suspicions that it abetted tax evasion by its US customers. This expense amounted to NIS 502 million in the first half of 2014 and NIS 38 million in the corresponding period last year.

Excluding this expense, Bank Leumi made net profit of $144 million in the first half of 2014, compared with$305 million in the first half of 2013, representing a rise of 32.7%.

Factors that contributed to this rise and to some extent set off the amount written off for the US investigation were a reduction in the credit loss expense of $64 million, and an improvement in the contribution of associated companies amounting to $17.2 million.

The bank posted a net profit of $83 million for the second quarter of 2014, compared with $135.5 million for the corresponding quarter of 2013, representing a decline of 38.8%, and giving an annualized return on capital of 4.3%.

Excluding the expense for the US investigation, the bank’s net profit was $218.5 million in the second quarter, compared with $143.7 million in the corresponding quarter, representing a rise of 52%. The adjusted net profit in the second quarter of 2014 gives an annualized return on capital of 11.7%.

At the end of the second quarter of 2014, Bank Leumi had a capital adequacy ratio of 14.25%, and a core capital adequacy ratio of 9.34%.

Published by Globes [online], Israel business news – www.globes-online.com