Bank Hapoalim Shows Net Profit of $92.7 Million for First Half of 2002.

Business Editors

TEL AVIV, Israel--(BUSINESS WIRE)--Aug. 29, 2002

Bank Hapoalim's (LSE:BKHD)(TASE:POLI) financial statements for the first half of 2002 showed a net profit of $92.7 million as compared to $134.2 million in the first half of 2001, a decrease of 30.9%.

Net return on equity was 6.8%, compared with 10.2% for the same period last year and 7.6% for the whole of 2001.

Shareholders' equity for the Group was $2.9 billion as of June 30, 2002, an increase of 3.0% over the end of 2001 and 5.8% as of June 30, 2001.

Total consolidated assets of the Bank amounted to $53.9 billion. Credit granted to the general public was $39.0 billion, while deposits from the public amounted to $42.9 billion.

The decline in the Bank's net profit resulted from a $75.7 million decrease in profit from financing activities before provision for doubtful debts -- mainly due to a sharp rise in inflation despite an increase in income from these activities -- as well as from an $80.9 million increase in the provision for doubtful debts.

Offsetting these factors were a $10.1 million decrease in operating and other expenses, a $52.8 million reduction in the provision for taxes on operating profit and a $39.0 million decline in the Bank's share of the net losses of equity-basis investees.

The provision for doubtful debts totaled $151.8 million in the first six months of 2002, compared with $70.9 million for the same period in 2001, an increase of 114.2%. The specific provision for doubtful debts totaled $161.0 million, compared with $88.1 million for the similar period of 2001, an increase of 82.9%. Most of the growth in the specific provision derived from the increasing slowdown in economic activity, the serious security situation that adversely affected the repayment ability and erosion of collateral of borrowers in various sectors of the economy.

The ratio of the specific provision for doubtful debts, to the overall balance of (balance-sheet and off-balance sheet) credit to the public reached 0.57% in annual terms, compared with 0.33% in the same period of 2001 and 0.49% during the whole of 2001.

Operating and other income totaled $376.0 million, compared with $375.1 million in the same period in 2001, an increase of 0.2%. Operating and other expenses from January to June 2002 totaled $590.9 million, a decrease of 1.7% over the same period last year. Salary expenses were $347.2 million for this period, compared to $369.1 million in the first half of 2001, a decrease of 5.9%.

The operational coverage ratio, measuring operating and other expenses by operating and other income, reached 63.6% in the first six months of 2002 compared with 62.4% in the first six months of 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 63.6% for the first half of 2002, compared with 59.8% in the first half of 2001, and 61.9% for the whole of 2001.

The ratio of capital to risk assets on June 30, 2002 reached 10.08%, compared with 9.10% at the end of 2001. The ratio of core (Tier 1) capital to risk assets was 6.38% and the ratio of supplementary (Tier 2) capital was 3.70%.

Bank Hapoalim maintained its status as the largest member of the Tel Aviv Stock Exchange in terms of the volume of trades conducted on and off the exchange.

Subsidiaries abroad form a substantial part of the Bank's international activity, which is conducted mainly via branches of the Bank. Banking subsidiaries abroad are Bank Hapoalim (Switzerland) Ltd., Bank Hapoalim (Luxembourg) S.A., Bank Hapoalim (Cayman) Ltd., Hapoalim (Latin America) S.A., the Signature Group in New York and Poalim Asset Management in London.

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