Israel Discount Bank Limited Class A · TASE:DSCT
Israel Discount Bank Limited Class A — Q2 2014 Earnings Presentation
27 slides from Israel Discount Bank Limited Class A's earnings presentation, 2014
Slide 1: Q2-2014 Financial Results & Strategic Plan
Q2-2014 Financial Results & Strategic Plan Investor Presentation www.discountbank.co.il/IR | TASE :DSCT | BLOOMBERG :DSCT.IT | REUTERS:DSCT.TA
Slide 2: Q2-14 Results
ISRAEL DISCOUNT . BANK , Q2-14 Results
Slide 3: Highlights of Q2
Highlights of Q2 1 Capital CT-1 continuously increasing in line with plan; Adequacy Sufficient capital to support future growth 2 Asset Continuously improving asset quality; negative LLP Quality 3 Credit Retail credit growth Growth 4 Initial indication of expense restraint ; Expenses Provision of NI
Slide 4: Sufficient capital to support future growth
1 Sufficient capital to support future growth (NIS mm) Basel 3 Basel 2 9.3% 8.6% 9.3%-9.4% 150.0 8.1% 9.1% 9.2% 8.9% 148.0 7.7% CT-1 ratio 146.0 144.0 142.0 140.0 138.0 RWA 136.0 141.8 134.0 138.5 138.9 137.4 135.5 135.7 132.0 130.0 Target Q1-14 Q2-14 Q4-14 4
Slide 5: Continuously improving asset quality
2 Continuously improving asset quality (NIS mm) 998 821 778 Provisions 998 726 821 580 778 726 580 75 75 -35 LLP/ 0.83% 0.66% 0.65% 0.61% 0.49% Q1-14 0.25% Q2 14 -0.12% Total Credit -35 Q1-14 Q2 14 2012 2013 Q2-14 Impaired 5,667 4,168 3,741 Substandard 612 1,015 768 Special Mention 2,763 2,560 2,285
Slide 6: Retail credit growth
3 Retail credit growth 31.03.14 (NIS mm) 30.06.14 +1.3% 56,452 57,180 -1.8% +4.7% +1.0% 20,190 19,835 19,611 20,526 13,108 13,234 +1.2% 3,543 3,585 Total Retail Mortgages Consumer Credit SME Private Banking -2.4% 59,419 57,981 -5.0% +2.8% 40,035 38,047 19,384 19,934 Total corporate commercial Corpor
Slide 7: Initial indication of expense restraint
4 Initial indication of expense restraint (NIS m) +9.2% - 3.8% 1,632 1,800 1,437 1,600 1,504 1,494 1,600 261 1,400 Other expenses 268 260 1,400 261 268 260 1,200 Maintenance & 303 299 298 1,200 303 298 299 1,000 depreciation 1,000 800 800 600 600 Salary & Related 933 933 936 1,072 936 877 400 400 20
Slide 8: Robust subsidiaries' performance
5 Robust subsidiaries’ performance IDBNY Mercantile CAL Net income and ROE, USD m Net income and ROE, NIS m Net income and ROE, NIS m 13 13.2 14 51 48 51 51 44 13.2 40 8 7.9 34 33 48 48 7.9 2 2.3 44 44 2.3 Q2-13 Q1-14 Q2-14 Q2-13 Q1-14 Q2-14 Q2-13 12.6% Q1-14 12.8% Q2-14 14.5% 3.8% 6.9% 1.2% 10.7% 1
Slide 9: Primary factors impacting Q2-14 results (compared to Q1-14)
Primary factors impacting Q2-14 results (compared to Q1-14) Negative provision of NIS 35 million for Loan losses due to several recoveries Positive CPI (0.5% compared to -0.7% in Q1-14) contributed NIS 58 million to Interest Income Reduction of 6% in salary expenses, excluding provision for se
Slide 10: P&L and Ratios for Q2 results
P&L and Ratios for Q2 results (NIS mm) Change in % compared to Q2-13 Q1-14 Q2-14 Q2-13 Q1-14 Net interest Income 1,041 1,018 1,100 5.7 8.1 Loan Loss Provisions 141 75 (35) - - Non-Interest Income 924 807 778 (15.8) (3.6) P&L commissions 668 631 637 (4.6) (1.0) Operating & Other Expenses 1,504 1,494
Slide 11: 2015-2019 Strategic Plan
ey wee” 2015-2019 Strategic Plan
Slide 12: Discount Group has a solid base to build upon…
Discount Group has a solid base to build upon… Strong brand Strong brand recognition, extensive retail network Loyal customer Long term relationship with significant part of our customer base; Potential to deepen relationship and increase share of base wallet Strong subsidiaries Market expertise in
Slide 13: …and several key performance issues to be resolved
…and several key performance issues to be resolved High cost base Need to reduce cost base and improve CIR to align with the industry average Low-moderate Below average market growth in several segments, growth primarily in high growth segments Organizational Execution challenges; culture History of
Slide 14: The 5 year Group strategic plan is built around key guiding principles
The 5 year Group strategic plan is built around key guiding principals… • Focus on the key elements which will transform the bank Focus • Align budgets, investments & management resources to focused area • Build on core strengths at Mercantile, CAL, IDB NY Group • Group-wide management Perspective •
Slide 15: Centered around 3 key pillars, supported by enablers and focus on execution
… and is centered around 3 key pillars, supported by infrastructure enablers and focus on execution 4 Relentless Execution 1 2 Reduce & Simplify Grow Retail Costs Focus Change Culture 3 15
Slide 16: Significant potential to cut costs mainly due to higher FTEs
1 Significant potential to cut costs mainly due to higher FTEs compared to the industry Personnel cost / Income, (%) Real estate-related expenses /Income, (%) 16.1 15.7 47 44 14.9 40 39 37 13.8 Avg. Avg. 11.9 Poalim Leumi Discount FIBI Mizrahi 5 4 3 1 2 Tefahot FTE cost, NIS ‘000 Other expenses /Inc
Slide 17: Reduction of personnel costs
1 Reduction of personnel costs The strategic plan leverages the significant natural attrition and early retirement potential to reduce FTE number substantially Reduction of over 1000 employees within the next 5 years out of which 700 within the next 3 years Over 600 employees retire within the n
Slide 18: Simplifying processes to support FTE reduction and improve customer service
1 Simplifying processes to support FTE reduction and improve customer service Focusing branches on customer service and sales Back office Process simplification and automation Migration of all relevant operational processes to the back office Applying Lean principles in branches and headquar
Slide 19: Reducing non-personnel costs
1 Reducing non-personnel costs Real estate cost reduction Rightsizing real estate for current operation, and further Real Estate significant impact due to planned FTE reduction Optimizing branch network, and reducing number and size of branches Reducing and optimizing maintenance costs while
Slide 20: Retail has significant growth potential, especially in credit
2 Retail has significant growth potential, especially in credit, given low penetration rates Domestic retail market share, Discount group, 2013 20.7% 18.3% 18.0% 16.4% 16.5% 10.7% 11.1% Total Credit Consumer Deposits& Revenues SME Credit Branches Customers Credit Securities Segments includes: Househ
Slide 21: The main focus is on retail growth in Discount, Mercantile and Cal
2 The main focus is on retail growth in Discount, Mercantile and Cal Focus on retail growth Strengthen and expand relationship with existing clients leveraging low share of wallet Retail Focus on growth products and segments, primarily Focus (Bank, Mercantile, consumer finance and SME Cal) I
Slide 22: Creating a change-enabling organization
3 Creating a change-enabling organization • Embed performance management culture and Performance implement required infrastructure management • Focus on execution • Ensure customer’s view is in always the center – of all Customer centric employees – in branches and headquarters • Equip leadership an
Slide 23: Outcomes of the plan
4 Outcomes of the plan Aiming at closing the gap with the Israeli industry leaders Reaching a double digit CAGR in net income, during the 5 year program Reduction of over 1,000 FTEs in 5 years, out of which c. 700 in the next 3 years Substantial non-personnel cost reduction including closing 10 bran
Slide 24: Execution is key
4 Execution is key • New management team Management • Top team leadership and full accountability determination • Stretching but achievable goals • Key initiatives led by top management Transformation • Chief Transformation Office appointment in order to capabilities accelerate and facilitate the tr
Slide 25: Thank You
THANK YOU HOPE TO SEE YOU AGAIN IN Q3-14 EARNINGS CALL STAY TUNED
Slide 26: Disclaimer
Disclaimer This document has been prepared by Israel Discount Bank Ltd. (the “Bank”) solely for use by the Bank in its presentation of its Q2 2014 reports as well as strategic updates referred to in the Bank’s reports. The information contained herein may be partial and may include information that
Slide 27: Investor Information
Investor Information http://www.discountbank.co.il/IR Subscribe to receive email alerts. IR Contact: Tamar Koblenz Tamar.koblenz@idbank.co.il +972-3-5146593 27