Lior Shila, a banking analyst from the IBI investment house refers to the Leumi reports published yesterday: Bank Leumi presented a strong report with a return on capital of 18.5% in the second quarter which was primarily due to the one-time profit from the sale of BLUSA to VALLEY, while at the same time it recognized for the first time equity gains from its holdings in the bank (14.2 %). In addition, the high index and the increase in interest added a considerable contribution to the results. If this is not enough, Leumi continues to enjoy the fruits of the efficiencies it has made over the years as a result of the transition to digital alongside the reduction of excess units and also in manpower.
Excluding the impact of the one-time profit, the return on equity was around 14%, still very impressive numbers.
The bottom line is that this is a strong report for Leumi with impressive growth and one of the best efficiency in the system. If we try to exclude the less positive things, then the margin is greatly eroded due to the strengthening of the large businesses and the taking of the share from Bank Hapoalim. Looking ahead to the third quarter and the rest of the year, after the latest index data, it seems that The third quarter will be very strong for the system and especially for Leumi. In addition to this, we estimate that the rate of credit growth will gradually slow down after signals from the bank’s investor calls, the provisions will likely continue to climb against the background of the fear of deterioration in the macro data and the efficiency will continue to support the bottom line from quarter to quarter.
We raise the target price slightly to NIS 36.5 per share but remain with the market yield recommendation.
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