Union Bank of Israel (TASE: UNON) today published its financial report for the second quarter of 2008. Israel's sixth largest bank showed both higher revenue and profits. Net profit totaled NIS 37 million, up from the NIS 36 million for the corresponding quarter of 2007. The bank noted that it had no one-time profits for the second quarter, while its profit from regular operations was NIS 36 million for the corresponding quarter.
The bank's net profit from regular activity totaled NIS 61 million in the first half of the year, compared with NIS 59 million for the corresponding half of last year.
Union Bank reported a capital adequacy ratio of 11.9% and its shareholders' equity totaled NIS 1.63 billion at the end of June. Like Israel's other banks, the bank saw its market cap fall, reducing its equity multiple to 0.55, after a 24.5% drop in its share price in the first half.
Union Bank saw its provision for doubtful debts nearly halve to NIS 27 million in the first half from NIS 47 million in the corresponding half. Most of the decline was in the diamond business, where the bank's provision for doubtful debts fell two-thirds to NIS 13 million in the first half from NIS 32 million in the corresponding half.
The bank's salary cost rose 4.6% to NIS 181 million. Union Bank CEO Haim Freilichman said, "There will the usual salary increase in the banking sector, with differentiation among employees. As for compensation for inflation, the banking system will course give fair compensation, depending on the bank's results."
"Globes": There were expectations that the small banks would exploit the bank fees reform to set lower rates to attract customers. Instead, your rates are among the highest in the sector.
Freilichman: "I don’t agree. We have very attractive rates. You shouldn’t look at this or that fee, but take an overview. In my opinion, there's too much noise about fees when customers' interest payments are three times as high. It's also necessary to look at interest rates. We've defined a customer segment of wage-earners with more than NIS 7,000 whom we give interest on their credit balances and from whom we don’t charge overdraft interest up to their salary level. We also give them higher interest on deposits."
How will the slowdown affect Union Bank?
"The slowdown will have no effect in 2008, but in 2009."
Published by Globes [online], Israel business news - www.globes-online.com - on August 21, 2008
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