Climbing provision for doubtful debt savaged profits for First International Bank of Israel in the third quarter of 2001.
The bank's net shrank 62% against the parallel to NIS 27 million. In the third quarter of 2000, profit was NIS 70 million.
The comparison would have looked even worse, if the closure of credit card firm AlphaCard hadn't deducted NIS 14 million from FIBI's Q3 2000 profits. (AlphaCard's clients were moved to Visa Israel Credit Cards.)
Profit from financing activity before provision for doubtful debts shrank to NIS 272 million, 13% less than in the parallel, for which the bank posted financing profit of NIS 312 million.
Provision for doubtful debts jumped to NIS 143 million, five times the NIS 28 million posted for the same period of last year.
Annualized net return on equity for the first nine months fell to 6.8% from 11.1% for the parallel period and 11.5% for 2000.
Net return on equity, not factoring in the index gap, was 7.0%. In annual terms, net return on equity for the third quarter was 3.5%.
The bank said it calculated its provisions from a conservative bent. For the nine months provision for doubtful debts was NIS 228 million, 162% more than for the same period last year, when this item came to NIS 87 million.
The sharp increase was largely due to specific provisions due to the persistent slowdown in communications, construction, and commerce.
In annual terms, the provision for doubtful debts for the first nine months of the year comprised 0.6% of the bank's credit portfolio.
FIBI's total credit to the general public in the third quarter grew to NIS 47.3 billion, 9.7% up from Q3 2000.
Minimum capital ratio for the third quarter was 9.0%, compared with 9.5% for 2000.
The bank plans to increase its offering of deferred bank notes to 50% of its primary capital, thus lifting its minimum capital ratio to 9.7% based on its existing risk assets.
The bank raised NIS 167 million through a deferred notes offering after finalizing its financial statement.