Mizrahi Tefahot Bank (TASE: MZTF) posted a record profit for 2021, NIS 3.19 billion, double the profit for 2020 of NIS 1.6 billion. In the fourth quarter of 2021, the bank made a profit of NIS 679 million, which compares with NIS 506 million in the corresponding quarter of 2020, representing a rise of 34.2%.
The bank's return on equity in 2021 was 15.8%, which compares with 9.5% in 2020. One of the main factors that contributed to the growth in profit and ROI was the growth in the bank's credit portfolio, particularly mortgages. Among Israel's banks, Mizrahi Tefahot holds the largest market share in the mortgages market, at 30%.
In total, the bank awarded new and recycled loans in 2021 of NIS 46.2 billion, which compares with NIS 31.8 billion in 2020, a jump of 45%. The number of borrowers, including recycled loans, totaled more than 70,000, up 32.6% from 53,000 in 2020.
"2021 saw an exceptional peak in the execution of new mortgages, which totaled NIS 116 billion. The huge demand at the bank's branches and mortgage centers both from individual customers and from mortgage consultants created an operational challenge. The fact that Mizrahi Tefahot has the largest and most professional mortgage set-up in Israel enabled us to overcome the extraordinary workloads and provide the best possible response, adapted to the personal needs and characteristics of each customer, while maintaining our leading position in the industry," Mizrahi Tefahot chairperson Moshe Vidman writes in the annual report.
At the end of 2021, credit to the public totaled NIS 271.4 billion, 10.6% more than at the end of 2020. Deposits from the public totaled NIS 307.9 billion, 8.3% more than at the end of the previous year.
Alongside this, Mizrahi Tefahot carried out the merger with Union Bank of Israel. The deal was completed on September 30, 2020, and since then Union Bank has been a wholly owned subsidiary of Mizrahi Tefahot, but the main contribution of the takeover came in 2021. Union Bank contributed NIS 169 million to Mizrahi Tefahot's profit last year. In addition, Mizrahi Tefahot posted a net profit of NIS 216 million from a deferred credit balance arising from the acquisition of Union Bank. This balance is recognized in the group's profit and loss account and is being spread over five years, beginning from the fourth quarter of 2020.
Lower credit loss provision
The acquisition of Union Bank led to growth in the group's headcount, which was 7,646 last year, 61 more than at the end of 2020, and 1,115 more than at the end of 2019. Mizrahi Tefahot says that the number will fall as some Union Bank employees retire. The group had 225 branches at the end of 2021, seven fewer than at the end of 2020, but 27 more than at the end of 2019. At the end of the merger process, Mizrahi Tefahot will have 205 branches. A large proportion of Union Bank's branches was recently sold to real estate group Mivne.
Mizrahi Tefahot also reported a reduction in its credit loss provision. The outbreak of the coronavirus pandemic in the first quarter of 2020 led to credit loss provisions amounting to NIS 1.05 billion, including a large general provision, but thanks to the improvement in morbidity and the recovery in the economy, NIS 278 million income was recorded for this item in 2021.
In 2021, Mizrahi Tefahot set up a new arm for non-financial investments, with the aim of furthering one of the main goals of the bank's business plan, namely to turn the bank into a prominent player in corporate banking. The bank reports that investments amounting to hundreds of millions of shekels were made last year.
Mizrahi Tefahot will distribute a dividend of NIS 271.6 million to its shareholders, representing 40% of its fourth quarter profit. This is in addition to two dividends already distributed in 2021: NIS 483 million, representing 30% of the profit for 2020, and NIS 752.7 million, representing 30% of the profit for the first nine months of 2021.
Despite the excellent results, Mizrahi Tefahot Bank's share price is down 2.56% on the Tel Aviv Stock Exchange this morning, in line with steep declines in the share prices of all the banks.