Leumi reports highest profit in banking sector: Bank Leumi also ended the first quarter with the highest exposure to troubled PIGS economies, but has reduced the exposure since then. [Globes, Tel Aviv, Israel]

May 27--A week before the general shareholders of Bank Leumi (TASE: LUMI) will meet to elect new directors and a new chairman, the bank posted the largest quarterly net profit in Israel's banking system. Net profit was NIS 596 million (NIS 0.40 per share) for the first quarter, 38.9 percent more than the NIS 429 million for the corresponding quarter of 2009.

Net operating profit rose 38.3 percent to NIS 592 million for the first quarter from NIS 428 million for the corresponding quarter. Bank Leumi attributed the increase to higher net interest income, a smaller in provision for doubtful debt, and an increase in contribution to profit from equity non-bank subsidiaries, including Israel Corporation (TASE: ILCO), Paz Oil Company Ltd. (TASE:PZOL), and Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL), to NIS 85 million for the first quarter from NIS 34 million for the corresponding quarter.

Net return on equity rose to an annualized 11.2 percent for the first quarter

Net interest income before the provision for doubtful debt rose 32.7 percent to NIS 1.81 billion for the first quarter from NIS 1.36 billion for the corresponding quarter. Bank Leumi cut its provision for doubtful debt by almost two-thirds to NIS 130 million (0.16 percent of total credit) for the first quarter from NIS 354 million (0.49 percent of total credit) for the corresponding quarter.

Credit to the public rose 1.4 percent to NIS 207.6 billion at the end of March from NIS billion NIS 204.7 billion at the end of 2009. However, deposits from the public fell to NIS 244.6 billion from NIS 250.4 billion over the same period.

Bank Leumi's capital adequacy ratio under Basel II -- The New Basel Capital Accord of the Basel Committee on Banking Supervision rose to 14.87 percent for the first quarter from 14.09 percent for the preceding quarter. Tier-1 capital adequacy ratio rose to 8.43 percent from 8.33 percent.

Bank Leumi ended the first quarter with the highest exposure to PIGS economies -- Portugal, Ireland, Greece, and Spain -- in Israel's banking system, reporting NIS 1.1 billion in total exposure to those troubled markets. Leumi had NIS 749 million in exposure to Spain, most of it to Spanish bank Santander. Leumi had NIS 305 million in exposure to Ireland, mostly through government debt.

However, the bank pointed out that between the end of the first quarter and May 20th, it reduced its exposure to that region, and currently has NIS 778 million in exposure to those countries, of which NIS 553 million is to Spain and NIS 225 million is to Ireland.

Bank Leumi's share price rose 2.3 percent by midday to NIS 16.17.

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