WRAPUP 1-Israel's top banks post poor quarterly results

By Tova Cohen

TEL AVIV, May 29 (Reuters) - Israel's top two banks, Hapoalim (POLI.TA: Quote, Profile, Research) and Leumi (LUMI.TA: Quote, Profile, Research), reported poor first quarter results on Thursday, weighed down by the U.S. subprime crisis and higher provisions for bad debt respectively.

Hapoalim, Israel's top bank in terms of assets, said it would issue billions of shekels in subordinated notes to meet its capital adequacy targets after slumping to a loss in the first three months of the year.

The bank made a net loss of 1.57 billion shekels ($476 million), or 1.23 shekels per share diluted, compared with net profit of 635 million shekels, or 0.5 shekel per share, a year earlier.

Leumi, Israel's largest bank in terms of market value, reported a sharp drop in first-quarter net profit, due to lower capital gains and higher bad debt provisions.

It had a net profit of 470 million shekels, or 0.33 shekels per share in the three months, down from 917 million shekels, or 0.65 shekels per share, in the same period last year when it recorded capital gains of 259 million shekels.

Hapoalim's losses from the sale of mortgage-backed securities, the decline in value of other asset-backed securities and a loss in the credit derivatives portfolio totalling 3.76 billion shekels, on top of 300 million shekels for a voluntary retirement programme, were recorded in the quarter, Hapoalim said.

Excluding those effects, net profit would have totalled about 1 billion shekels.

"The result was slightly better than we had anticipated as we failed to factor in the positive tax impact emanating from the large loss," Citigroup analyst Simon Nellis wrote in a note.