Bank Leumi's net profit amounted to NIS 6 billion in 2021 - Record profit the highest in the sector

Bank Leumi's net profit amounted to NIS 6 billion in 2021, a record profit for the bank, the highest in the sector and almost three times the net profit in 2020, which stood at NIS 2.1 billion (an increase of 285%). The profit reflected a return on equity of 15%, compared to a return on equity of 5.7% in 2020. At the end of the fourth quarter, Leumi earned NIS 1.5 billion, an increase of 67% compared to NIS 900 million in the corresponding quarter.
Leumi's annual profit line is higher than NIS 1 billion than that of its major competitor, Bank Hapoalim, which reported an annual profit of NIS 4.9 billion yesterday. Another significant difference - Leumi decided to distribute a quarterly dividend of NIS 588 million, 40% of the net profit for the quarter, in the face of Poalim's decision to avoid a dispute, due to the decline in Poalim's capital adequacy ratio and the large exposure to the housing market.
The Bank's net interest income in 2021 amounted to NIS 10.3 billion, an increase of approximately 18.6% compared to 2020 and 16% higher than the average income in the last four years. Net credit to the public amounted to NIS 343 billion at the end of 2021, compared with NIS 295 billion at the end of 2020, an increase of 16%.
Most of the increase in credit comes from mortgages: the bank's mortgage portfolio stood at NIS 104 billion at the end of the year, compared with NIS 90 billion in 2020, an increase of 16%. Revenue from mortgages amounted to NIS 3.2 billion, compared with NIS 2 billion in 2020.
The commissions collected from customers amounted to NIS 3.5 billion in 2021, an amount higher than 10% of the commissions in 2020, and in 2019. At the same time, this is a lower amount than the high commissions collected between 2018 and 2017, in which commissions amounting to more than NIS 4 billion were collected.
Leumi's efficiency ratio (revenue sharing expenses) decreased to 46.8%, compared to 53.8% in 2020. The efficiency ratio in the fourth quarter of the year was 47.9%, compared to 50.7% in the corresponding quarter last year. Against the background of the quest for increased efficiency, the bank decided yesterday (Tuesday) that it will return the banking license of Bank Leumi UK (BLUK). The bank will be merged into the bank and the merged company will provide credit in the areas of real estate and hotels in the UK and Europe.
Discount Bank's net profit in 2021 amounted to NIS 2.77 billion, almost three times the profit in 2020, which was NIS 975 million (an increase of 184%). The profit reflected a return on capital of 13.6%, compared to 5.1% in 2020.
The profit in the fourth quarter was NIS 529 million, a decrease of 27% compared to the profit in the third quarter, but double that recorded in the corresponding quarter in 2020 - when the bank recorded a profit of NIS 264 million (an increase of 100%).
Following the profits, Discount decided to distribute a dividend of NIS 106 million, 20% of the net profit in the fourth quarter. Just yesterday, Poalim announced that it was avoiding a dividend dispute against the background of the decline in the Bank's capital adequacy ratio and the Bank's high exposure to the housing and real estate market.
Discount net interest income at the end of the year climbed to NIS 6.5 billion, an increase of 10.7% compared to NIS 5.9 billion in 2020. In the fourth quarter, the Bank's revenues amounted to NIS 1.68 billion, a slight increase from revenues in the third quarter, which stood at 1.66 billion and an increase of 12 % Compared to revenues in the corresponding quarter last year - NIS 1.5 billion.
The increase in income is due, among other things, to the jump in the Bank's housing loan activity, which shows the highest growth in its mortgage portfolio. In 2021, the portfolio grew to NIS 54 billion, compared with NIS 42.6 billion in 2020, a growth of 27%. This portfolio is the fourth largest in the banking industry, after the portfolio of Mizrahi Tefahot (NIS 175 billion), Poalim (115) and Leumi (NIS 104 billion).
The volume of fees charged by the bank in 2021 was NIS 3.1 billion, compared with NIS 2.8 billion in 2020. The highest fees were collected through credit cards, amounting to NIS 1.5 billion, compared to NIS 1.3 billion in 2020.
Discount is the only large bank left with a credit card company, CAL, following the decision of the Strum Committee. In the coming year, the Ministry of Finance will once again examine the outline of the separation between CAL and Discount, which is expected to materially hurt the company's revenues. A fee of NIS 407 million was charged for account management, compared with NIS 353 million in 2020.
Discount's efficiency ratio (revenue divided by expenses) in the fourth quarter of 2021 was 71% compared to 75% in the corresponding quarter in 2020. This is a relatively high ratio against the background of the Bank's high expenses for wage commitments. Under the Bank's new wage agreements, wage supplements will be paid to the various levels of the Bank and grants between 2022 and 2024.
In the fourth quarter, Discount made a one-time provision of NIS 150 million in favor of the wage agreement. Excluding one-time components, the efficiency ratio in the fourth quarter of 2021 was 62.1%, compared with 65.8% in the corresponding quarter last year. According to Discount Bank, it continues to make progress in the strategic plan and goals it set for 2025, which include a return on capital of more than 12.5%, a net profit of NIS 3.5 billion and an efficiency ratio of less than 55%.