November 13, 2018 / 9:40 AM / a month ago

UPDATE 1-Israel's Bank Leumi Q3 profit beats estimates

(Adds detail, analyst)

TEL AVIV, Nov 13 (Reuters) - Bank Leumi beat third-quarter net profit forecasts on Tuesday helped by higher interest income and lower expenses.

Israel’s second-largest lender reported a profit of 936 million shekels ($253 million), up from 820 million a year earlier.

That beat the 853 million shekels expected by analysts in a Reuters poll which did not fully account for the bank’s sale of shares in the Tel Aviv Stock Exchange worth 47 million shekels.

Operating expenses fell 0.5 percent.

Net interest income in the quarter rose 14.5 percent to 2.196 billion shekels while credit loss expenses jumped to 198 million shekels from 3 million a year earlier.

The bank declared a quarterly dividend of 375 million shekels, representing 40 percent of net income.

It said that as of Nov. 8 it had purchased 642 million shekels worth of its own shares as part of a 700 million shekel buyback programme approved in March.

The bank’s Tier 1 ratio, which measures equity capital as a proportion of risk-weighted assets, was 11.25 percent at the end of September, down from 11.43 percent at the end of 2017.

Leumi shares were down 0.5 percent in late morning trade in Tel Aviv outpacing the broader bourse which was down 0.8 percent.

“We continue to like Leumi as we see the bank returning to accelerated credit growth alongside ongoing streamlining measures,” said Barclays analyst Tavy Rosner. “Leumi will (also) return the most cash to shareholders in 2018 given its 65 percent effective payout ratio thanks to the ... buyback plan alongside its 40 percent dividend payout ratio.”

Leumi’s newly launched online bank Pepper will also help the bank gain retail market share, he said.

$1 = 3.6982 shekels Reporting by Tova Cohen and Steven Scheer; editing by Jason Neely

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