Bank Hapoalim Doubles Net Profit in Third Quarter 2002.

Business Editors

TEL AVIV, Israel--(BUSINESS WIRE)--Nov. 27, 2002

The Bank Hapoalim Group (LSE:BKHD) (TASE:POLI) doubled its net profit in the third quarter of 2002, from $32.0 million to $64.1 million.

For the first nine months of 2002, net profit decreased 5.4% to $155.4 million, from $164.2 million for the same period in 2001.

Net return on equity was 7.6% in annual terms for the first nine months of 2002, compared with 8.4% for the same period last year and 7.6% for the whole of 2001.

Shareholders' equity totaled $2.8 billion on September 30, 2002, a rise of 3.0 % over the end of 2001 and 4.7% compared with September 30, 2001.

Total consolidated assets of the Bank amounted to $54.9 billion. Credit granted to the general public was $39.4 billion, while deposits from the public totaled $43.9 billion.

The decrease in profitability was largely due to a significant increase in the specific provision for doubtful debts and a million net loss from extraordinary transactions after taxes. The increase in the specific provision derived mainly from the deepening recession in the economy and the serious security situation, which adversely affected repayment ability and led to an erosion in collateral for some borrowers.

This was offset by an increase in profit from financing activities before provision for doubtful debts, an increase in operating and other income, a decrease in operating and other expenses, a decrease in the provision for taxes on operating profit and a decrease in the Bank's share in the losses of equity-basis investees.

Profit from financing activities before provision for doubtful debts totaled $946.2 million for January to September 2002, an increase of 2.1% over the same period last year.

The provision for doubtful debts totaled $263.6 million in the first nine months of 2002, compared with $157.7 million for the same period in 2001, an increase of 67.2%. The specific provision for doubtful debts totaled $260.3 million, compared with $163.4 million for the first nine months of 2001, an increase of 59.3%.

Operating and other income increased 0.9% to $549.8 million in the first nine months of 2002, compared with $545.1 million for the same period last year.

Operating and other expenses from January to September 2002 totaled $873.7 million, a decrease of 2.2% over the same period last year. Salary expenses decreased 4.8% for this period, totaling $510.0 million compared to $535.4 million in the same period in 2001.

The operational coverage ratio, measuring operating and other expenses by operating and other income, rose to 62.9% in the first nine months of 2002 compared to 61.0% in the first nine months in 2001 and 59.2% for the whole of 2001.

The ratio of expenses to income, calculated according to the ratio of operating and other expenses to profit from financing activities before provision for doubtful debts and operating and other income, reached 58.4% for the first nine months of 2002, compared with 60.7% in the same period in 2001 and 61.9% for all of 2001.

Subsidiaries abroad form part of the Bank's international activity, which is conducted mainly via branches of the Bank. Hapoalim's banking subsidiaries abroad include Bank Hapoalim (Switzerland) Ltd., Bank Hapoalim (Luxembourg) S.A., Bank Hapoalim (Cayman) Ltd., Hapoalim (Latin America) S.A., the Signature Group and Poalim Asset Management Ltd.

Subsidiaries abroad ended the first nine months of 2002 with a net profit of $1.2 million. However, taking into account the exchange rate differentials on the investment, subsidiaries abroad contributed $26.3 million to the Bank's net operating profit in the first nine months of 2002, a return of 11.3%.

The full financial statements for the first nine months of 2002 are available upon request, and can be accessed on the Bank's internet site www.bankhapoalim.co.il.