UPDATE 2-Israel's Bank Hapoalim hopeful on dividends in 2021

(Recasts, adds CFO/analyst comments)

JERUSALEM, May 13 (Reuters) - Bank Hapoalim, Israel’s largest lender, said on Thursday it hoped to receive regulatory approval to resume dividend payments in the second half of the year after reporting a spike in quarterly profit to pre-pandemic levels.

Dividend payments and share buybacks were suspended in 2020 to ensure banks had sufficient credit to lend to businesses during the COVID-19 pandemic

“If we’ll get approvals, we’ll be able to be back in routine dividend payments and we hope to do what we call a catch up in dividend payments,” Hapoalim chief financial officer Ram Gev told Reuters.

He said he hoped dividends could resume in the second half and that the bank has enough reserves for payouts of at least 40% of net profit.

Hapoalim, the first of Israel’s banks to issue quarterly earnings, earned 1.354 billion shekels ($412 million) in the January-March period, compared with a 192 million shekel profit in the first quarter of 2020 and a profit of 898 million shekels forecast in a Reuters poll of analysts. It was 821 million shekels in the first three months of 2019.

Profit was boosted by posting income for credit losses of 508 million shekels after marking provisions for loan losses of 809 million in the first three months of 2020.

Hapoalim in 2020 provisioned some 1.6 billion shekels in 2020 because of the pandemic and Gev said a rapidly recovering economy after a quick vaccine rollout should allow the bank to continue freeing up the provision’s funds.

“We still have high reserves,” Gev said. “As long as the economy keeps improving and we’ll see the portfolio quality is good, there is room for release in the next quarters.”

Net interest income in the quarter gained to 2.23 billion shekels from 2.19 billion a year earlier.

In 2020, customers deferred 42.5 billion shekels of loans but that narrowed to 5.1 billion as of March 31, 1.6% of total credit to the public, from 11.2 billion at the end of January.

At the outset of the pandemic, Israel’s banking regulator gave banks permission to allow loan deferments as lockdowns forced businesses to close temporarily or permanently and led to a spike in unemployment.

Hapoalim said it approved 6 billion shekels in loans as part of the state-backed loan fund for businesses hurt by the crisis and a loan fund for high-risk businesses.

The bank’s shares rose slightly, outperforming a slightly negative broader market.

$1 = 3.2874 shekels Reporting by Steven Scheer; Editing by Jacqueline Wong, Subhranshu Sahu and Barbara Lewis