Bank Hapoalim Half-Yearly Profit Climbs 63.1% to $232.8 Million.

TEL AVIV, Israel -- The Bank Hapoalim Group's (LSE:BKHD) (TASE:POLI) financial statements for the first half of 2004 continued to show impressive growth in profitability.

Net profit rose 63.1% $232.8 million, compared to $142.8 million in the first half of 2003. Net profit for the second quarter of 2004 rose 53% $118.7 million, compared to $77.6 million for the same period last year.

Net return on equity was 15.3% in annual terms, compared with 10.1% for the same period last year and 10.4% for the whole of 2003.

Shareholders' equity for the Group was $3.3 billion as of June 30, 2004, an increase of 3.3% over the end of 2003.

Total consolidated assets of the Bank amounted to $58.1 billion. Credit to the general public was $40.9 billion, while deposits from the public were $45.7 billion.

The Bank paid a dividend of $105.8 million, and declared a dividend of $80.7 million.

The increase in the Bank's profit in the first half of 2004 was due mainly to a $20.2 million increase in profit from financing activity before provision for doubtful debts and taxes, a $62.5 million decrease in the provision for doubtful debts before taxes, a $69.4 million increase in operating and other income before taxes, and a $31.6 million increase in net profit from extraordinary activities after taxes. These factors were offset by a $88.5 million increase in operating and other expenses, before taxes.

Profit from financing activities before provision for doubtful debts totaled $799.0 million in the first half of 2004, an increase of 2.6% over the same period last year.

The provision for doubtful debts declined by 24.0% to $197.5 million, compared with $260.0 million in the first half of 2003.

Operating and other income totaled $458.3 million, compared with $388.9 million in the same period last year, an increase of 17.8%. Income from capital market activity increased by 34.3% over the first half of 2003 to $141.9 million, deriving mainly from a rise in activity on the Tel Aviv Stock Exchange.

Operating and other expenses were $720.0 million, an increase of 14.0%. Salary expenses increased 16.3% to reach $432.3 million, due mainly to a higher provision for employee bonuses resulting from improved profitability and a new wage agreement.

The operational coverage ratio, measuring operating and other expenses by operating and other income, reached 63.7% in the first half of 2004, compared with 61.6% in the first half in 2003 and 61.5% for the whole of 2003.

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 57.3% for the first half of 2004, compared with 54.1% in the first half of 2003, and 57.4% in the whole of 2003.

The Bank Hapoalim Group is managed by segments of activity. In the first half of 2004 International Activity showed net profit of $42.0 million, Corporate Activity $7.1 million, Households $26.0 million, Private Banking $36.2 million, Housing Finance $11.3 million, Small Businesses $0.9 million, and Commercial Activity $3.8 million.

Subsidiaries abroad ended the first half of 2004 with profit of $32.9 million, compared with $7.6 million in the first half of 2003. Signature Bank ended the first half of 2004 with net profit of $21 million, compared with $1 million for the same period in 2003. In March 2004, Signature Bank's shares were issued on NASDAQ. As a result, the Bank Group's holdings decreased from 100% to 76.3%.

The full financial statements for the first half of 2004 are available upon request, and can be accessed on the Bank's Internet site www.bankhapoalim.com.