First Quarter 2011 Results Review May 31, 2011 Disclaimer This - PowerPoint PPT Presentation

Israel Discount Bank First Quarter 2011 Results Review May 31, 2011

Disclaimer • This document has been prepared by Israel Discount Bank solely for use of the company's presentation of its first quarter 2011 results as well as strategic updates at various investor forums. • The information contained herein is partial and may include information that has not been independently verified by any outside entity. It is further emphasized that this presentation does not constitute an offer or invitation to purchase any securities and/or investments whatsoever. • This presentation should not be relied upon in connection with any transaction, contract, commitment or investment. For full and complete overview of the Banks financial position and results of operations please view the Bank’s Annual Report for 2010. • Neither the Bank nor any of its employees or representatives shall have any liability whatsoever for any loss and/or damages howsoever arising, directly or indirectly, from any use of this presentation. • It is hereby emphasized that no representation or warranty whatsoever is given as to the achievement or fulfillment of any forecasts about the future prospects of the Bank and the actual results of the Bank may differ materially from those contemplated taking into account the various risk factors, changing economic conditions and uncertainties which exist regarding the Banks business and the result of various operations. • For further details see Forward Looking Information section in the Banks financial statements. 2

Net Income & ROE (NIS mm) Lower quarterly provisions & expense levels lead to improved earnings 500 20% 15% 11.3% 10.8% 400 10% 6.3% 5.8% 5.1% 300 5% 200 0% 288 278 -5% 100 158 143 135 -10% 0 -15% -100 -20% Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Net income ROE 3

Income Statement Highlights (NIS mm) Q1 Q1 Q4 2011 2010 YoY 2010 QoQ Interest Income before provision for Loan Losses 1,289 1,115 15.6% 1,293 -0.3% Provision for Loan losses 112 117 -4.3% 274 -59.1% Interest Income net 1,177 998 17.9% 1,019 15.5% Operating & Other Income 653 640 2.0% 704 -7.2% Operating & Other Expenses 1,460 1,397 4.5% 1,560 -6.4% Net income 278 143 94.4% 135 105.9% ROE 10.8% 5.8% 5.1% 4

Key Trends of Q1 2011 • Net Income of NIS 278m compared to NIS 135m in Q4 Profitability • ROE was 10.8% compared with 5.1% in Q4 • Showing continued improvement due to closer Asset Quality management attention to retail and corporate credit • Core Tier-1 of 7.7% after accounting for Impaired Capital Debts brings us closer to our 8% upper target level • Growth in total revenues remains constrained by Revenues proactive management of risk weighted assets Operating & Other • Decreased over Q4 due mainly to a reduction in Other Expenses Expenses 5

Interest Income Before Provision for Loan Losses (NIS mm) Increase of 15.6% over Q1 ‘ 10; stable over Q4 ‘ 10 1,331 1,400 1,293 1,289 1,115 1,200 1,091 1,000 800 608 599 593 554 551 600 457 441 433 419 388 400 288 166 200 146 104 86 87 83 62 41 13 0 Retail Corporate Private Banking Finance Total Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 6

Asset Quality (NIS mm) Better management attention to loans leads to improved Asset Quality Metrics 350 Provision for Loan Losses Non Performing Assets 2.80% 8,000 0.88% 0.90% 2.69% 2.70% 7,000 Other 300 2.60% 6,000 2.57% 0.80% 2.50% 5,000 3,395 2.40% Non 4,000 3,103 250 0.70% 36 49 2.30% Performing 3,000 Loans 2.20% 2,000 0.60% 3,359 3,054 200 NPL/Loans 2.10% 1,000 0.39% 0.50% 2.00% - 0.38% 31.12.10 31.03.11 150 0.40% 274 Criticized Commercial Debts 0.30% 100 8,500 0.20% 117 7,500 112 50 6,500 0.10% 5,500 8,707 4,500 7,839 0 0.00% 3,500 2,500 Q1 10 Q4 10 Q1 11 1,500 Total provisions 500 Provision for Loan Losses/ Total Loans 31.12.10 31.03.11 Terminology on this slide is based on a convenience translation from the Hebrew, as prescribed by the Bank of Israel 7 Impaired debt reporting figures are not comparable with previous year data

Operating & Other Income (NIS mm) Current high levels of commissions inhibited by constraints on loan growth 704 800 659 658 653 640 700 519 518 510 600 501 488 500 400 300 134 128 120 117 200 91 70 70 60 58 38 19 6 100 0 -46 -100 -64 -23 Retail Corporate Private Banking Finance Total -200 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 900 800 704 658 659 653 640 700 58 26 24 18 6 600 500 Other Income 400 646 634 635 635 632 Commmisions 300 200 100 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 8

Operating & Other Expenses (NIS mm) Difference between Corresponding Quarters explained mainly by profit/loss on employee severance fund 1,810 1,560 1,610 1,460 1,397 1,358 1,316 1,410 387 277 277 1,210 337 292 279 324 1,010 271 Other* 267 286 Maintenance & Depreciation 810 Salary & Related 610 904 849 849 410 754 738 210 10 Q1 10 Q2 10 Q3 10 Q410 Q1 11 * Including depreciation & decline in value of intangibles 9

Israel Discount Bank Balance Sheet Highlights 10

Balance Sheet Highlights (NIS mm) 31.03.11 31.12.10 Change Securities 34,257 37,176 -7.9% Net Loans 116,670 118,666 -1.7% Deposits 136,088 138,011 -1.4% Loan Deposit Ratio 85.7% 86.0% Total Shareholders' Equity 10,814 11,569 -6.5% Total Assets 183,956 185,814 -1.0% Total Equity to Total Assets 5.9% 6.2% 11

Capital Ratios and Total Shareholders Equity (NIS mm) Strong progress made in Q1 toward reaching upper level CT-1 target of 8% Core Tier-1 Capital target for 31.12.11: Risk Weighted Assets 7.5% - 8.0% Capital Adequacy Ratio: =>13% 13.7 13.4 25,000 12.1 12.0 20,000 Core Tier -1 8.5 8.3 7.6 15,000 8.0 141,654 138,863 8.0 7.7 7.1 Tier -1 10,000 Capital 4.0 11,569 10,814 10,292 5,000 Capital 0.0 0 Adequacy 31.12.10 31.03.11 31.12.09 31.12.10 31.03.11 Ratio 12

Evolution of Loans & Deposits (NIS mm) Net Loans down 1.7%; Households & middle market were strongest performers 140,000 Loans 118,666 114,426 116,670 120,000 100,000 64,540 63,916 62,747 80,000 51,088 51,460 46,976 60,000 40,000 3,662 2,910 20,000 2,463 - Retail (Household & SME) Corporate & Commercial Private Banking Total 31.12.09 31.12.10 31.03.11 141,825 160,000 Deposits 138,011 136,088 140,000 120,000 100,000 73,097 71,188 71,522 80,000 60,000 39,001 37,395 36,302 31,636 29,094 26,689 40,000 20,000 - Retail (Household & SME) Corporate & Commercial Private Banking Total 13

Israel Discount Bank Sector and Subsidiary Highlights 14

Discount Bancorp. (USD mm) Continues to post consistently strong quarterly earnings 790 Shareholders Equity Deposits 7,000 780 770 6,000 760 5,000 750 4,000 783 740 6,112 767 5,958 5,966 766 5,839 5,747 3,000 730 747 2,000 720 733 710 1,000 700 - Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Net Income & ROE Credit & Loan/ Deposit Ratio 8.6% 10% 7.6% 7.6% 67.2% 50 9% 80% 63.1% 7.0% 62.1% 61.7% 6,000 58.8% 8% 40 7% 60% 4.6% 6% 4,000 30 5% 40% 4% 20 3,921 3% 3,858 3,680 2,000 3,570 3,501 20% 2% 10 15 14 14 13 9 1% - 0% 0 0% Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 15

Israel Credit Cards (NIS mm) Focus will remain on increasing card issuance, transaction volumes & consumer finance Israel Credit Cards 50% 600 44.5% 40% 500 26.3% 26.1% 25.8% 30% 400 18.3% 20% 300 10% 200 279 249 215 0% 100 64 64 -10% - 2008 2009 2010 Q1 2010 Q1 2011 Net Income ROE 16

Mercantile Discount Bank (NIS mm) Net Income & ROE Credit & Loan/ Deposit Ratio 84.1% 80.5% 78.8% 76.2% 11.1% 20,000 100% 300 10.6% 12% 18,000 90% 10.3% 16,000 80% 14,000 70% 12,000 60% 250 10% 10,000 50% 8.2% 15,082 15,018 14,326 8,000 13,848 40% 6,000 30% 7.3% 4,000 20% 200 8% 2,000 10% - 0% 150 2008 2009 2010 Q1 '11 6% 100 4% 180 148 147 Deposits 20,000 50 2% 19,500 43 19,000 30 18,500 - 0% 18,000 2008 2009 2010 Q1 10Q1 11 17,500 19,047 18,736 17,000 18,178 16,500 17,037 16,000 Net Income 15,500 ROE 2008 2009 2010 Q1 '11 17

Management Focus & Operative Measures • Core Tier-1 Target of 7.5% - 8% by Year End 2011 • Core Tier-1 will be supplemented by internal profit generation & Capital realizing assets • Internal Capital Allocation based on profitability considerations • Provide long-term sustainable solution Efficiency • Initial focus on the bank; group companies thereafter • Focus on profitability and Return on Equity Profitability • Structural and managerial changes will facilitate improved execution 18

Appendix 19

About Discount Bank Profile  Branches across the country…  Discount Bank : 147 Branches throughout Israel  Mercantile Discount Bank: 77 branches Main Shareholders  Domestic emphasis on Retail & Corporate Banking  Emphasis outside of Israel on Commercial and Private Banking Controlling Shareholders  Large Float & Trading Liquidity 25% Public Float  Market Cap NIS 6.8 bln ~ $1.9 bln (TASE: DSCT) 75%  Average Daily Trading Volume: ~ NIS 32 mm  Key overseas operations in U.S., Switzerland and London with representative offices throughout Latin America 20