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Tax woes weigh on Bank Hapoalim's Q4'16 profit

Bank Hapoalim BM's net profit in the 2016 fourth quarter dropped year over year, dragged down by a provision relating to a U.S. tax evasion probe and a decrease in the corporate tax rate.

The Israeli bank posted net profit attributed to shareholders of 138 million Israeli shekels for the fourth quarter of 2016, down from 586 million shekels in the same period in 2015. EPS for the quarter was 10 agorot, compared to the year-ago 44 agorot.

Excluding the provision of roughly 528 million shekels related to a U.S. investigation into whether Bank Hapoalim helped American clients evade taxes, as well as a tax expense of about 271 million shekels related to the reduction in the corporate tax rate, net profit for the fourth quarter of 2016 totaled 937 million shekels.

Fourth-quarter 2016 net interest income rose year over year to 2.03 billion shekels from 1.95 billion shekels, while fees income fell to 1.28 billion shekels from 1.31 billion shekels.

The bank also booked provision for credit losses of 469 million shekels in the quarter, up from 147 million shekels in the same period in 2015.

For full year 2016, net profit attributed to shareholders of the bank was 2.63 billion shekels, down from 3.08 billion shekels earned in 2015. EPS dropped to 1.97 shekels from the year-ago 2.31 shekels.

ROE was 7.7% in 2016, compared to 9.6% in 2015. Excluding the provision for the U.S. investigation and the tax expense, ROE reached 10.1% in 2016.

The bank said it exceeded its capital adequacy targets, with its common equity Tier 1 capital ratio standing at 11.01% at the end of 2016, compared with 9.63% at the end of 2015.

Bank Hapoalim will pay shareholders a dividend of 3.1045 agorot per share of par value of 1 shekel for the fourth quarter of 2016. The board set the record date at April 10 and payment date at April 18.

As of March 29, US$1 was equivalent to 3.63 Israeli shekels.