Bank Hapoalim, Israel’s largest lender, reported a 26 percent increase in quarterly profits, though the positive report was clouded by an ongoing tax case in the U.S.
Net profit was 1.117 billion shekels, up from 886 million during the same quarter last year. The increase was attributed mainly to a decrease in provisions for credit losses and from one-time gains from the sale of “Visa Europe” shares and sale of loans.
Negotiations with U.S. tax authorities cut into profits, as Hapoalim spent as much as 80 million shekels ($21 million) in the second quarter on legal fees for its defense against allegations that it helped American clients evade U.S. taxes at its Swiss unit.
Hapoalim, has denied the allegations, hopes to start a dialogue with those authorities soon in order to finalize the situation, it told Reuters.
It is optimistic the case could be closed by the end of the year. Its main domestic rival Leumi paid $400 million in fines in late 2014 to settle two separate investigations into whether it helped U.S. clients evade taxes.
“We believe the main catalyst for (Hapoalim’s) shares will be the settlement of the ongoing investigation,” said Barclays analyst Tavy Rosner. “This would pave the way to a dividend payout increase from the current 20 percent to 50 percent.”
Hapoalim will pay a quarterly cash dividend of 223 million shekels, or 0.168 shekel per share, to reflect 20 percent of net profit.
Its shares were up 1 percent in afternoon trading in Tel Aviv on Thursday. So far in 2016, Hapoalim is up just 0.5 percent, compared with 5.3 percent for Leumi and 2.8 percent for the Tel Aviv banking index.