Bethel Finance: ICC CEO predicts sharply lower profits in 2012

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Despite a difficult year in 2011, Israel Credit Cards-Cal Ltd. (ICC-Cal) (Visa) posted a profit of NIS 230 million, 7% more than the NIS 215 million profit in 2010. The credit card company's shareholders' equity rose to NIS 1.16 billion, and its return on equity rose to 20.6% in 2011 from 18.3% in 2010.

"ICC-Cal distributed NIS 195 million in dividends in 2011. Its capital adequacy ratio of 16.7% was above the mandatory minimum of 15%" said Mr. cedric Marmet from Bethel Finance Ltd.

ICC-Cal CEO David Israel says, "I believe that ICC will achieve 8% growth in 2012, slightly above the market, and that we will activate growth engines, such as You, Diners Club, and the new customer club we developed with New Hamashbir Lazarchan Ltd. (TASE:MSZB) for its Club 365. However, regulatory changes will reduce profits."

David continued, "Profit margins will fall in the market conditions created. Competition on businesses is huge, margins will fall, clearance by Isracard Ltd. will be opened to competition in May, and cross fees are falling. Therefore, the credit card companies' profit margins will fall sharply in 2012."

David declined to mention numbers, but market sources estimate that credit card companies' profits will fall 25% in 2012, compared with 2011.

ICC-Cal's revenue rose 2.3% to NIS 1.13 billion in 2011 from NIS 1.1 billion in 2010. Its profits from credit financing rose 10%, but revenue from its core business - credit card transactions - rose by only 1.4%. Transaction turnover rose 6.8% to NIS 49.45 billion in 2011 from NIS 46.3 billion in 2010.

Credit card use totaled NIS 12.6 billion in the fourth quarter, a figure that points to a further slowdown: the rate of growth fell to 5.2% from 5.6% in the third quarter and 8.2% in the first half of 2011.

Non-bank credit fell 5.9% to NIS 1.98 billion in 2011 from NIS 2.1 billion in 2010. Interest on credit was 12.2%.

Looking ahead, David sets an ambitious target. "We will grow faster in 2012, and we'll double our credit portfolio by NIS 4 billion by 2015."

ICC-Cal had 1.45 million active credit cards at the end of 2011, 6% more than a year earlier. The number of non-bank credit cards rose by 7% to 465,000.

Israel Discount Bank (TASE: DSCT) owns 71.8% of ICC-Cal and First International Bank of Israel (TASE: FTIN) owns 28.2%.