1
Financial Statements
31 December 2008
Financial StatementsSeptember 2017
2
Disclaimer
•This document has been prepared by Mizrahi-Tefahot Bank Ltd (UMTB) solely for use at the company's presentation.
The information contained in this document constitutes information from the bank's 2017 quarterly reports and/ or immediate
reports, as well as the periodic, quarterly and annual reports and/or immediate reports published by the bank in previous
years.
•Accordingly, the information contained in this document is only partial, is not exhaustive and does not include the full details
regarding the bank and its operations or regarding the risk factors involved in its activity and certainly does not replace the
information included in the periodic, quarterly or immediate reports published by the bank. In order to receive the full picture
regarding the bank's 2017 quarterly reports, the aforesaid reports should be perused fully, as published to the public.
•None of the company, or any of their employees or representatives shall have any liability whatsoever (in negligence or
otherwise) for any loss howsoever arising from any use of this document or its contents or otherwise arising in connection
with this document.
•The bank's results in practice may be significantly different from those included in the forecasting information, as a result of
a large number of factors, including, inter alia, changes in the domestic and global equity markets, macro-economic changes,
geo-political changes, legislation and regulation changes, and other changes that are not under the bank's control, which
may lead to the estimations not realizing and/or to changes in the business plans.
•The forecasting information may change subject to risks and uncertainty, due to being based on the management's
estimations regarding future events, which include, inter alia: global and local economic development forecasts, particularly
regarding the economic situation in the market, including the effect of macro-economic and geo-political conditions;
expectations for changes and developments in the currency and equity markets; forecasts related to other various factors
affecting exposure to financial risks; forecasts with respect to changes to borrowers' financial strength, public preferences,
changes in legislation and the provisions of regulators, competitors' behavior, the status of the bank's perception,
technological developments and human resources developments.
•This document does not constitute an offer to sell, or a solicitation of an offer to buy, or a recommendation of any kind
regarding any security or any interest in security.
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Facing new challenges and opportunities:
- Possible acquisition and merger of Union Bank into Mizrahi
Tefahot
- A new collective agreement 2016 - 2021
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“Mizrahi Tefahot Bank’s acquisition of Union Bank would be
credit positive”*
* Moody’s Investors Service, Credit Outlook, Issuer Comment August 7, 2017
“Union Bank is significantly weaker than Mizrahi as a brand and in terms
of profitability and efficiency. The bank was loss making in 2016 and had
a cost-to-income ratio (adjusted for one-offs) of around 85% during
2016, much weaker than Mizrahi’s cost-to-income ratio of 59%, the best
among rated Israeli banks.
Integrating Union bank’s employees with Mizrahi’s staff, which has a
high-quality-of-service focus, will likely be difficult. Mizrahi ranks first in
terms of customer satisfaction among Israeli banks. However, Mizrahi’s
successful track record of merging banks into its business, such as the
merger of Tefahot bank and the acquisition of a 50% stake in Bank Yahavfrom Bank Hapoalim, suggests the bank will likely be successful.”*
5
The acquisition received the support of the supervisor of
banks
* Bloomberg, August 9, 2017
** TheMarker, August 14, 2017
“Israel bank regulator signals support for Mizrahi – Union deal
- Merger would boost competition in Israel’s banking sector
- Mizrahi hopes to take on Israel’s leaders in corporate landing”*
“We are for a merger between Mizrahi and Union. It will create abank that will challenge Leumi and Hapoalim”**
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• Synchronizing the agreement with the strategic plan – including
industrial peace until end of 2021
• Full support for M&A’s of banks in Israel
• For the first time in the Israeli banking system – part of the
remuneration of all employees is linked to ROE goals
• For the first time in the bank – creating “second generation”:
with regards to veterancy - compensation of 3% (rather than 4%)
and expanding the transitional period to 7 years (rather than 5)
• Additional understandings creating even higher managerial
flexibility
MOU regarding a new collective agreement
7
“It is all about
G R O W T H”
8
Continuous loan growth
Average annual growth rate 7.2%
218,617
411,317
049,215
697,514
658,513
1,65821
icblto the puedit Cr
NIS mil
20172017Q3Q320162015201420132012
9
Continuous loan growth
218,617337,117
683,017
411,317
208,616155,516
732,016049,215
967,915
172,315940,615
icblto the puedit Cr
3Q
2
2Q
20
1Q
20
4Q
20
3Q
20
2Q
20
1Q
20
4Q
20
3Q
20
2Q
2
00
1Q
20
17
17
17
16
16
16
16
15
15
15
15
ilNIS m
10
Credit growth in most segments
Loans to the public (NIS mil)
30.9.2017 30.9.2016 %of change
Housing loans 118,685 112,273 5.7%
Households and Private banking
19,511 18,241 7.0%
Small and micro businesses
16,114 14,764 9.1%
Medium businesses 5,642 4,887 15.4%
Large businesses and Institutional investors
15,448 15,068 2.5%
Overseas operations 3,221 3,387 (4.9%)
Total 178,621 168,620 5.9%
Double digit growth in small businesses and medium businesses in accordance with the strategic plane
10.7%
11
Continuous deposit growth
214,218
528,217
802,316
792,315
441,214
1,08821
icble pu from thsitspoDe
20173Q20162015201420132012
NIS mil
2017Q3
Average annual growth rate 8 %
12
Continuous deposit growth
1,22481
800,618220,718
528,217
8,74371219,616
015,016802,316
078,115363,715
023,015
clibue pm th frositsopDe
3Q
2
2Q
2
00
1Q
20
4Q
20
3Q
20
2Q
20
1Q
20
4Q
20
3Q
20
2Q
20
1Q
20
17
17
17
16
16
16
16
15
15
15
15
NIS mil
13
Financing revenues from current operations continue
to grow (NIS m)
1,105
1,071
1,047
1,018
990
946
922
909898
854849
3Q
20
2Q
20
1Q
2
4Q
20
3Q
20
2Q
20
1Q
20
4Q
20
3Q
20
2Q
20
1Q
2
00
17
17
17
16
16
16
16
15
15
15
15
14
Financing revenues from current operations continue
to grow (NIS m)
233,2
582,8
from enuesvreg nancinFinstioperaent ocurr
12.8%
7019/2-16019/2-1
051,1
990
from enuesvreg nancinFinstioperaent ocurr
11.6%
7013Q26013Q2
15
Growth in financing revenues in all main business
segments
Financing revenues (NIS m)
1-9/2017 1-9/2016 % of change
Housing loans 956 811 17.9%
Households 844 746 13.1%
Private banking 43 37 16.2%
Small and micro businesses
654 594 10.1%
Medium businesses 153 138 10.9%
Large businesses and institutional investors
428 413 3.6%
Overseas operations 122 123 (0.8%)
Double digit growth in financing revenues in most of the business segments
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“And taking market share in relevant segments”
17* According to supervisory operating segments, % out of 5 major banking groups
** Source: financial reports of the 5 banking groups *** In accordance with UMTB’s strategic plan for 2016-2021
Market share in Israel* in business credit and deposit –
growth** and targets***
sessnebusito medium Credit
sessneicro busim and smallom frits ospeDsessnebusiicro m andl almto sCredit
sessneium busidemom frits ospeD
(₪ יארדיליבמ)צעת ו ממרהית
141
121111109
108
105
102100
3Q
17
2Q
17
1Q
17
4Q
16
3Q
16
2Q
16
1Q
16
4Q
15
275262249
244
(₪ ירדיליאבמ) תצעוממתרה י
235215
ce analb taloT
)lib S,Ie)(Nerag(av
etn es,uenevr estterni taloT
)lmi S,I(N
284
18
Mortgages –balance and revenues*
* Operating segments in conformity with management approach.
Note 12 to quarterly reports, Note 29 to annual reports
19
Net profit analysis (NIS mil)
40
104
261
713Q20613Q20
י נקוחור שכר הת הסכםשפעה
373
יילשל דדהשפעת מ etivcellCo
tceffe ntmeegreat ne
itprof etivNegatceff eCPI
Reported
104
982
7019/2-16019/2-1
י נקוחור
011,0
שכר הת הסכםשפעהReported
itrofnet p etivcellCo
tceffe ntmeegrea
The effect of negative CPI and collective agreement
20
ROE analysis
The effect of negative CPI and collective agreement
%1.3
%3.3
%8.0
73Q20163Q201
ר השככםהס תעפשה להוןשואהת
12.4%
ליליש דד מתעפשה etivcellCo
tceffe ntmeegrea
etivNegatecff ePIC
Reported OER
%1.1
%.110
7019/2-16019/2-1 להוןשואהת
11%
ר השככםהס תעפשה etivcellCo
teceff ntemeagreOER Reported
ROE
21
Efficiency ratio analysis
The effect of negative CPI and collective agreement
%2.4
%.011
73Q20163Q201
תלועי ייחס ר השככםהס תעפשה
67.2%
55.2%
ליליש דד מתע etivcellCo
tceffe ntmeegrea השפ
%.63
7019/2-16019/2-1תלועי ייחס
60.7%57.8%
ר השככםהס תעפשה etivcellCo
tceffe ntmeegreaNegative CPI effect
22
Increasing equity base
Average annual growth rate 10.4%
Core tier 1 as of Q3/2017 – 10.16%
13,39971412,
471,81
79710,
819,68,730
017,6
710Q23201620152014201320122011 2017Q3
23
Double digit ROE despite dramatic increase in equity
and extremely low interest rate
In black – Bank of Israel interest rate at the end of the period
13,399 16%
12,714 000, 13
%13.114%1,847 1
000, 12%1.8112%
%10.1%10.6 %10.2%10.0
000, 11%01
10,797 9,681 8%000, 10
8,730 6% 9,000
4%
8,0002%
7,0000%201720162015201420132012
2%
1%
0.25%0.1%0.1%
yquitEil) mS I(NROE
0.1%
2017p eS
24
Dividend distribution –dividend payout of 30% of net
profit
mil)(NIS periodant levthe refor onutiibstrdiend idDiv295
190
122120
75
9/2017-12016201520142013201220112010
25
Financial results
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Net profit (NIS mil)
2016
400373
340321
288261265
Q3Q2Q1Q4Q3Q2Q1
2017
27
Net profit (NIS mil)
9821,001
2017/9-12016/9-1
28
Return on equity
1.0110.1
9/2016-1 9/2017-1
29
Equity (NIS bil)
.413.812
30.9.2016 30.9.2017
30
Loans to the public (NIS bil)
178.6171.3
159.2
147.6
138.6
17.9.203016.20.123115.20.123114.20.123113.20.1231
31
Deposits from the public (NIS bil)
184.2.2178
162.4
152.4
141.2
17.9.203016.20.123115.20.123114.20.123113.20.1231
32
Financing Revenues (NIS mil)
f ote Ra2016/9-12017/9-1
echang
2,83013,21tens, eunerev restteIn
17681seunerev cingninaf resteint-Non
9.53,0063,292seunerev gncininafl taoT
ss:eL
)19(22sitionopI CPtoct esp reithwls tianreefifd eginkaL
3333tbe dledbutro no resteint fo nctioellco romfs euneRev
7441res tunebed romfin Ga
iraft as etivavried fot netmatre gtinnuccoa foct effE60)27(rsetho dna lueav
14869snratioepot nerrcu nathr ethocts effel taoT
12.82,8583,223snratioepot nerrcu romfs eunerev gncininafl taoT
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Provisions / loans to the public
4Q3Q2Q1Q
0.01%
0.14% 0.14%0.19%
0.12% 0.09% 0.09%
Q1 Q2 Q3
2016 2017
34CPI etivagen eth dnat nemreega ectivellco ethct effe eth ingcludxE(1)
2016 2017
67.2
59.060.8 58.557.8 56.355.2
(1)53.8
Q3Q2Q1Q4Q3Q2Q1
Cost / income ratio
35
Capital adequacy
tioRaotal T
Iier T
17.9.203016.20.123116.9.2030
9.85% 10.10% 10.16%
13.52% 13.80%13.48%