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US tax probe provision dents Bank Hapoalim's Q4'18 net profit

Bank Hapoalim BM's attributable fourth-quarter 2018 net profit declined year over year, weighed down by an increase in provision related to a U.S. probe into its alleged involvement in tax evasion by clients.

The Israeli lender reported net profit attributed to shareholders of 97 million Israeli shekels in the fourth quarter of 2018, down from 612 million shekels a year earlier.

"The bank is still coping with the burden of the U.S. investigations. These investigations led to significant expenses this year, and demanded valuable management attention and resources, and in the fourth quarter, we added a total of 922 million shekels to the provision for penalties," Chairman Oded Eran said.

Excluding extraordinary items, such as expenses in respect of the provision for the U.S. investigation and the discontinuation of the activity in Switzerland, the bank's attributable profit totaled 991 million shekels, compared to 908 million shekels in the fourth quarter of 2017.

EPS from continued operations for the quarter amounted to 1 agora, compared to the year-ago 42 agorot. Net interest income rose on a yearly basis to 2.29 billion shekels from 2.16 billion shekels.

The bank booked a total provision for credit losses of 189 million shekels, compared to income for credit losses of 11 million in the fourth quarter of 2017.

For full year 2018, Hapoalim's attributable profit fell on a yearly basis to 2.60 billion shekels from 2.66 billion shekels. EPS from continued operations was 1.67 shekels, compared to 1.75 shekels a year ago.

Excluding extraordinary items, full-year 2018 attributable profit was 3.58 billion shekels, up from 3.35 billion shekels a year earlier.

The lender booked provision for credit losses of 613 million shekels, compared to 202 million shekels in 2017.

Return of net profit on equity attributed to shareholders stood at 7.06% in 2018, compared to 7.50% in 2017. The bank's common equity Tier 1 ratio stood at 11.16% at the end of 2018, compared to 11.26% at 2017-end.

The lender noted that comparative figures were accordingly restated to exclude data from Isracard Group, which constitute a discontinued operation.

The bank's investment in Isracard Group amounted to 3.43 billion shekels as of Dec. 31, 2018, compared to 3.06 billion at the end of 2017. Hapoalim is preparing to separate from Isracard to comply with the provisions of Israel's law for increasing competition and reducing concentration in the banking market.

As of March 15, US$1 was equivalent to 3.60 Israeli shekels.