Bank Hapoalim 2003 Net Profits up 288% to $309.9 Million.

Business Editors

TEL AVIV, Israel--(BUSINESS WIRE)--March 31, 2004

The Bank Hapoalim Group's (LSE:BKHD) (TASE:POLI) financial statements for 2003 showed an impressive, almost threefold increase in profitability. Net profit for January to December 2003 rose 287.7% to $309.9 million, as compared with $79.9 million for the same period in 2002.

Net return on equity was 10.4%, compared with 2.7% for the whole of 2002.

Shareholders' equity for the Bank Hapoalim Group was $3.3 billion, compared with $3.0 billion in 2002.

Net profit per share of NIS 1 par value of share capital amounted to $ 0.25 compared with $ 0.06 in 2002.

Total consolidated assets of the Bank amounted to $59.1 billion as of December 31, 2003, an increase of 0.5%. Credit to the public decreased by 2.1% to $42.0 billion and deposits from the public decreased by 1.5% to $46.6 billion.

The rise in net profit in 2003 was mainly attributable to an increase of $76.5 million in profit from financing activities before the provision for doubtful debts, a $196.4 million decrease in the provision for doubtful debts, a $65.5 million increase in operating and other income, a $27.4 million increase in the Bank's share of the net profits of equity-basis investee companies, and a $34.7 million increase in net profit from extraordinary transactions after taxes.

Offsetting these factors were a $20.3 million increase in operating and other expenses, a $129.3 million increase in the provision for taxes, a $15.3 million increase in minority interest's share in the results of consolidated companies, and a $5.7 million cumulative effect of the change in accounting methods concerning derivative instruments and hedging activities.

Profit from financing activities before provision for doubtful debts in 2003 amounted to $1,563.4 million, an increase of 5.1% over 2002. The provision for doubtful debts totaled $535.7 million compared with $732.1 million in 2002, a decrease of 26.8%.

Operating and other income totaled $824.6 million compared with $759.1 million in the same period last year, an increase of 8.6%. Operating and other expenses for 2003 totaled $1,352.1 million, an increase of 1.5% over the same period last year.

The operational coverage ratio, measuring operating and other expenses by operating and other income, reached 61.0% in 2003, compared with 57.0% for 2002.

The ratio of expenses to income (calculated as to the ratio of operating and other expenses, to profit from financing activities before provision for doubtful debts and operating and other income) reached 56.6% for 2003, compared with 59.3% in 2002.

The Bank's share in the net operating results of equity-basis investee companies after taxes, totaled $14.4 million, compared with a loss of $13.0 million in 2002.

The ratio of capital to risk assets on December 31, 2003 reached 10.37%, compared with 9.89% at the end of 2002. The ratio of core (Tier 1) capital to risk assets was 6.63% and the ratio of supplementary (Tier 2) capital was 3.76%.

On November 30, 2003, the Board of Directors of the Bank decided to pay a dividend in the amount of $108.2 million, which was paid on December 23, 2003.

Banking subsidiaries in Israel contributed $45.0 million compared with $27.6 million in 2002. Most of the contribution to profit, $22.2 million, derived from Bank Mishkan, which was merged into the Bank at the end of 2003. The Bank's return on investments in banking subsidiaries in Israel reached 9.2%, compared with 5.9% in 2002.

The Bank made a strategic decision to increase its activity abroad, in order to enhance its profitability and diversify its risk. This was seen in all areas of international activity, including raising deposits, development of Global Private Banking, participation in international transactions, floating issues abroad, expansion of local activity of the Bank's branches worldwide, and enhancing relations with correspondent banks.

Net profit of Bank Hapoalim (Switzerland) Ltd. in 2003 totaled Sfr 18 million, compared with Sfr 13 million for the same period in 2002. Bank Hapoalim (Switzerland) engages in the provision of private banking services to its international customers.

Poalim Asset Management (PAM), develops complex new products for global private banking customers in cooperation with worldwide Frank Russell Company, ended 2003 with a net profit of 2 million pound sterling compared with one million pound sterling in 2002.

The Signature Group, through Signature Bank and its subsidiary Signature Securities Group, provides personalized service to privately owned businesses, their owners and senior management ended 2003 with a net profit of $3 million, compared with a loss of $12 million for the same period in 2002.

The full financial statements for the year 2003 are available upon request, and can be accessed on the Bank's Internet site www.bankhapoalim.co.il.