Israel Discount Bank Q1 profit dips, boosts dividend

JERUSALEM, May 20 (Reuters) - Israel Discount Bank reported a drop in quarterly profit on lower financing income and pushed its dividend payout back up to 30% of quarterly net income.

Discount, Israel's fourth largest bank, said on Monday it earned 1.05 billion shekels ($284 million) in the first quarter, down 2.1% from a year earlier.

Following a January Bank of Israel rate reduction and easing inflation, net interest income fell 7.4% to 2.54 billion shekels.

Its credit loss expense slid 60% to 82 million shekels, as it said the economy was adjusting well to "operating amidst armed conflict." Credit grew an annual 5.2%.

Israel's war against Hamas began on Oct. 7 following the Palestinian Islamic group's attack on Israel, and the banking regulator told banks to hold off on large payouts during the conflict to be able to provide sufficient credit.

Discount had cut its dividend to a payout of 15% of net profit in the third quarter. It raised it to 20% for the fourth quarter and 30% for the first quarter of 2024.

"Given the solid financial results and confidence in the resilience of the core business, we have decided to reinstate the dividend payout to 30% of net income," the bank said. "This decision reflects our long-term commitment to enhancing shareholders' value."

Discount's Tier-1 capital ratio rose to 10.90% as of the end of March 2024, from 10.22% at the end of March 2023.

Discount and its peers will have to pay as much as 2.5 billion shekels in extra taxes over the next two years as lawmakers look for new ways to boost state coffers heavily depleted by war expenses.

Banks will pay an additional 6% of the profit generated from their activities in Israel in 2024 and 2025 under a tax amendment approved by parliament's finance committee after the panel criticised them for making huge profits as interest rates spiked to sharply boost mortgages and other loans.

Earlier, larger rival Hapoalim also reported lower first quarter profit due to lower financing income, while it raised its dividend payout back to pre-war levels. ($1=3.6995 shekels) (Reporting by Steven Scheer; Editing by Clarence Fernandez)