JERUSALEM (Reuters) - Bank Hapoalim (POLI.TA), Israel’s largest lender, on Wednesday reported a 22.5% drop in third quarter net profit after taking a one-off impairment related to its stake in a bank in Turkey.
The bank said its quarterly net profit totaled 736 million shekels ($213 million), down from 950 million shekels a year earlier and below a Reuters poll of analysts that had forecast 836 million shekels.
It recorded a non-recurring impairment of about 63 million shekels on its investment in Bank Pozitif in Turkey, which Hapoalim is in the process of selling. Excluding this, net profit would have totaled 798 million shekels.
Income from regular financing activity rose 1.3% to 2.4 billion shekels in the quarter. But that was hindered by a negative consumer price index that resulted in an expense of 76 million shekels compared with income of 19 million a year earlier, the bank said. Banks provide loans that are linked to CPI, so when it drops their income can be affected.
Jefferies analyst Joseph Dickerson said the CPI effect was greater than they modeled but added that “underlying trends (were) better than optics suggest”.
Fees and other income slipped 1.1%.
Shares in Hapoalim were down 0.6% in early trading in Tel Aviv.
Hapoalim distributed a 1 billion shekel dividend from a capital surplus generated from the sale of a 65% stake in credit card business Isracard (ISCD.TA).
Barclays analyst Tavy Rosner said the bank had legal costs of approximately 100 million shekels to handle an ongoing tax evasion investigation by the U.S. Justice Department.
Hapoalim has already put aside $611 million to cover a possible future settlement. It has not made further provisions so far this year.
Hapoalim has also undergone a management shake-up, and its new chief executive, Dov Kotler, took office on Oct. 1.
($1 = 3.4605 shekels)
Reporting by Ari Rabinovitch and Tova Cohen. Editing by Jane Merriman