Ladies and gentlemen, thank you for standing by. Welcome to the Israel Discount Bank first quarter 2021 result conference call. All participants are present in a listen-only mode. Following management's formal presentation, instructions will be given for the question and answer session. For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded May 25th, 2021. If you have not done so, please access the presentation on the bank's website at investors.discountbank.co.il. I would like to remind everyone that forward-looking statements for the respective company's business, financial condition, and results of its operations are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated. Such forward-looking statements include, but are not limited to, product demand, pricing, market acceptance, changing economic conditions, risks in product and technology development, and the effect of the company's accounting policies, as well as certain other risk factors, which are detailed from time to time in the company's filings with the various security authorities. Mr. Nardi, would you like to begin, please? Yeah, thank you. Good afternoon, everyone. I hope you're all well. Today, we reported record results on both an adjusted and unadjusted basis. Robust net income, ROE, and credit growth were driven by executing on our strategy and further supported by an improving economy as seen by our negative LLP. We also reached two milestones, passing ILS 300 billion in assets and ILS 20 billion in equity. On slide five, we show that health and macro trends continue to improve, with positive COVID cases near zero, unemployment trends improving, credit growth on the rise, and deferrals related to the pandemic almost entirely behind us. At the same time, we remain cautious, monitoring all indicators like the recent GDP numbers, which may signal that we are not entirely in the clear yet. Slide six lays out the major highlights of the quarter, including adjusted ROE of 16.2%, quarterly net income of ILS 662 million, and negative LLP of 0.3%. The higher NII, up 3.4%, and the tight expense control, down 3.2%, led to an adjusted cost-to-income ratio of 60.6% and a positive growth ratio of 8.3% in Q1 2021. This quarter also includes the final stage of the early retirement program that began in Q3 of 2020 and ended early in January of this year. Moving to slide seven, you can see our strong credit growth, especially in targeted segments. Our overall credit grew by 5.7% year-over-year and 2.3% from the beginning of this year. Mortgages, which is one of the key pillars of our strategy, grew by 15.7% year-over-year and 4% from the beginning of this year, continuously increasing its market share. Another key pillar, corporate lending, grew 12.5% year-over-year and 1.8% quarter-over-quarter. We are also seeing some slight improvement in the medium-sized business portfolio. As we move further out of the crisis, we expect to see the consumer lending pick up. Slide eight, you can see that our credit growth and strong non-interest financing income drove the growth in total income versus the last quarter. This continues to be held back somewhat by the low interest and inflation environment. CPI, however, seems to be back on the rise with March and April CPI at +0.9%, which generally has a positive impact on NII. On slide nine, you can see that the tight expense control and the efficiency program led to an improved adjusted cost-income ratio. Salary and related costs are 4% down versus the previous quarter, beginning to reflecting the impact of the 754 employees that participated in our early retirement plan and those that reached natural retirement. Clearly, the strong ROE results will result in higher bonuses as well. Overall, our expenses are under control and the coming quarters will give a better picture of the impact full of the retirement plan. The clearest example of the strong underlying macroeconomic situation is in slide number 10. The negative LLP was driven mostly by a release of provisions on the balance sheet that were made during the crisis. Even with this release, we still maintain a reserve ratio of 1.83%, higher than pre-COVID. Continuing the trend we have seen throughout the crisis, customer deferral trend downwards, write-offs are not increasing, and our customers continue to work to pay down their loans. Please notice in this slide that there is a small mistake in the graph color that got switched. Moving on to our subsidiaries, starting with Mercantile on slide 11. Strong credit growth, the valuation gain on shares of ZIM Shipping, and the negative LLP were significant drivers of Mercantile's record ILS 150 million net income and 20% ROE results. Mercantile continues to perform well and achieve strong results as it focuses on its growth strategy. Presented on slide 12, we continue to see demand for credit growing, while the net income continues to be impacted by qualitative factors adjustments for COVID. On slide 13, we present another record quarter, this time for CAL, with net income of ILS 60 million and 12.9% ROE. Significant growth in transaction turnover and sustained growth in active cards are the underlying factors that drive the business for CAL. CAL continues to be negatively impacted by the reduction in air travel and tourism, which we hope may begin to change later in this year. Lastly, on slides 14 and 15, just a few words on our strategy. As we laid out in detail in March on the call with you, we are fully focused on being the best financial institution for our customers and delivering superior value for our shareholders over time. Our strategy has three main pillars. First, to accelerate the evolution of traditional banking. Second, to lead the revolution in banking through disruptive innovation. Third, to maximize group value. We are tenaciously executing on our strategic plan. On slide 15, we highlight a number of achievements that we hit during the quarter, including completing our early retirement program, maintain high loan growth in targeted sectors, receiving recognition for innovation in retail banking, and lastly, preparation for launching the tokenization of credit cards in our leading digital wallet, PayBox, along with our partner, Shufersal, the largest retailer in Israel. Q1 was a great start to 2021, and we look forward to more positive updates as the world's economy continues to recover. With that, let's open it up for your questions. Thank you. Ladies and gentlemen, at this time, we will begin the question-and-answer session. If you have a question, please press star one. If you wish to cancel your request, please press star two. If you are using speaker equipment, kindly lift the headset before pressing the numbers. Your questions will be polled in the order they are received. Please stand by while we poll for your questions. The first question is from Tavy Rosner of Barclays. Please go ahead. Hi. Good afternoon. Thanks for taking my questions. I was wondering if you could comment a little bit about the NIM trajectory that we've seen over the past couple of quarters. Can you repeat the question, Tavy? Yeah. Could you comment on the NIM trajectory, net interest margins? I think they've been declining for the past couple of quarters. Sure. I think the NIM going down is a combination of few things. First of all, we do see a change of the mixture. When mortgages are up and consumer loans are down, as a result, you see the NIM as a percentage going lower. This is one impact. The second element is we do see in some segments, a stronger competition around price, especially in the areas where there is still low demand for credit, like consumer and small businesses. We do expect that when the demand is going to increase, especially around consumers and small businesses, we will start seeing an opposite trend. Okay, that's helpful. Just talking about the growth in mortgages, is that a result of your strategic plan to grow among your existing customer, or are you competing on price? What's driving the growth? As part of our strategy, we announced and we decided that mortgages is one of the top three pillars of our strategy. We identified huge potential over there. Currently, we are below our natural market share, and mortgages, of course, is not limited to the natural market share because every customer that takes mortgages usually checks more than one bank. We have huge potential over there, and we see a substantial demand. We were able to increase our market share during the last four quarters, but the good news, that there is huge potential to continue growing, and the story is not around price. The demand is huge, and currently our challenge is a capacity challenge and to answer all the demand. We are working to improve our platform. We just introduced a digital mortgage, and we are optimistic that with the steps we are taking, we'll be able to answer all the demand and to continue growing our market share and the size of the business without the need to reduce prices. All right. Got it. Thank you very much. The next question is from Micha Goldberg of Excellence. Please go ahead. Hi. First of all, congratulations on a very strong quarter. A couple of questions. It seems to me that your balance sheet is starting to balloon with deposits and cash and low-yielding securities. It's almost 32%, I think, of your total balance sheet, which is like, I don't know, 7% or 8% more than it was just last year. Is there any way you can deploy those low-yielding assets in a different way to support your margins or increase yield? First of all, we are not sure. It's something that will be stable like this. Some of it is temporarily, the increase of deposits. We do believe that with the market, the overall economic environment in Israel is changing. We will see these line items will go down, and people will invest more. We don't think it's ongoing. Always, we are looking for smart ways where we should invest the money and do with the money. When there are opportunities, we are taking them. This is a general answer. Is 30% of your assets in no yielding or low yielding, is that something that's reasonable over time? Is there a target that you think that number should be at? We didn't declare on specific numbers. We are working to work on a better mix. I can't share with you a specific target we are having. Okay. Another question which I think is related to the same trend. Loan to deposits have come down again to 80% after, I think, a couple of years of hard work of getting it rightly up. That too obviously will pressure something on margins. Is that something, deposits went up significantly in this quarter, and the crisis seems to be pretty much behind us? Is there any policy in place on trying to see that number doesn't grow too fast? What are you guys thinking about that? First of all, the best solution is to continue increasing the loans. As you can see in Q1 results, we are growing, and we have substantial growth in terms of loans this quarter. According to the banks that published until now, we are growing faster than our peers. Regarding deposits, as I mentioned before, we do expect deposits to start going down. I do expect the ratio of loans to deposits ratio will get higher further this year. You realize that deposits are growing almost at triple the rate that your credit is growing, right? Yeah. This was happened in 2020 and in the first quarter. We do expect to see this trend changing. Okay. Another question about your non-performing loans or non-accruals. It's a little different than the other two banks that reported so far. You guys seen a 20% increase in this quarter over last quarter, yet the other two banks that published have seen either flat or a decline. Are you seeing something different or the rapid loan growth that over the last couple of years Discount has achieved in managing starting to hurt you on the NPL side? Where is that coming from, and how should we look at that? Regarding NPL, when you look versus Q4, you're right, it's growing. When you're looking versus quarters before pre-COVID, for example, Q1 2020, it's declining. We think overall our number is reasonable, even when you compare the percentage of NPL out of total credit versus other banks. It seems very reasonable. Overall, we do expect that as part of this crisis, which we accrued a lot, and the LLP was very high in 2020. Some of it, by the end of the day, will hit NPL, will hit write off. For us, it's something we are expecting, and it's not surprising us. As you can see, we still have a very high coverage ratio, although we had a negative LLP. We do feel very comfortable with the reserve ratio, with the overall reserve we have at this stage. Okay. Thank you. Another small question. On OCIs, it looks like your fair value adjustment for fixed income and other relevant debentures is over ILS -400 million. Where is that coming from? Can you repeat the question please? Sorry. Yeah, on the OCI, the other comprehensive income. There's a net loss around ILS 400 something million due to securities. I'm just wondering, where is that coming from? Market seems to be pretty strong, I'm just wondering. On the one side, you're recording a significant amount of gain, and the other one you seem to have accumulated losses. I'm just wondering where it's coming from. We'll check and we'll get back to you. Okay. Thank you. Two more small questions. I saw that risk-weighted assets grew quite nicely over the quarter. I think the loan part of the risk went up by over ILS 5 billion. I'm just wondering because loans didn't grow that quarter so much. Is that because NPLs grew and they're more than 100% of risk-weighted assets? Why are risk-weighted assets under loan risk growing faster than your loan growth? Assuming that, as you said, mortgages are the main part of that, I think there's something like 35% or 45% risk weight on that. In theory, the number should be lower. How come it's higher? Overall, there is a very strong correlation between the credit growth and the risk-weighted asset growth. For most, specifically why they grow a little bit more, we can provide you later on the details. Okay, thanks. Thank you very much for that. The next question is from Borja Ramirez of Citi. Please go ahead. Hello, good afternoon. Thank you very much for your time. I have a couple of quick questions. The firstly is regarding the volume growth. It grows quite strong in the first quarter. I would like to check if you could provide some color for the rest of the year, if we could see this strong volume growth or if it could potentially slow down. My second question is regarding the early retirement plan, if it could be possible to provide some details on the potential cost savings going forward. Thank you. I'll start with the early retirement plan. As I mentioned, this was the last quarter with the negative impact of the plan. Overall, in this plan, which we launched in Q3 2020 and just now finished, more than 750 employees left the Bank, around 100 of them by natural retirement and the rest as part of the early retirement program. Overall, I think we can start when you're looking at our salary cost, especially when you are deducting the bonus element, you can see the decrease in salary cost versus 2020. We do expect to continue seeing the positive impact later on in 2021. Of course, as I mentioned before, I think the two key or two major elements of our strategic plan, one was around cost-cutting, and the second is coming from revenue growth, especially in mortgages. We do see very good results in both aspects. Regarding the deposit growth you asked about, we did see in Q1 a substantial increase in deposit growth. It mainly came from corporate and not from consumer. We do expect that not continue seeing this trend at the rest of 2021. Thank you. Sorry, my question when I also, or m ore towards the loan side, if you could kindly provide details on loan volumes going forward? Sure. Overall, we had a very strong Q1 growth in terms of loans. We do expect that around mortgages and corporate and mid-size business, we'll continue to see a substantial growth, especially in mortgages. There is a very big demand in the overall market, and we're continuously gaining market share. We expect this trend to continue. We do expect at areas where we had, and not only us, the entire market, had negative growth, so not growth at all, like consumers and small businesses. With the recovery of the economy, we do expect that those sectors will start growing, start back growing, unlike what we have seen in the last 12 months. It's something we are expecting to see industry-wise, not only in Discount Bank, in the next few quarters. Very clear. Thank you very much. If there are any additional questions, please press star one. If you wish to cancel your request, please press star two. Please stand by while we poll for more questions. The next question is from Micha Goldberg of Excellence. Please go ahead. Hi. Thank you. Just one more question, if I may. You just pretty much wrapped up around the 600 early retirement plan FTEs, and it's not showing up that much in your staff costs. What should we be expecting going forward? First of all, when you look at the staff cost, you need to eliminate the bonus amount, because in 2020, the bonus accrual was very minimal. In 2021, it's based on the existing ROE or the ROE expectation is higher. When you look at the numbers without salary cost, without the bonus component, you do see, when you look at Q1 versus quarterly average of 2020, you can see the reduction. For example, versus Q1 2020, you will see 4% reduction. Overall, it is a very positive sign. Overall, in 2021, we do expect that salary cost will show a very good trend versus 2020. Of course, we cannot share specific focus or specific numbers. Okay. In general, now that the early retirement scheme is completed in Q1, we should be, or we should anticipate that staff costs should be going down. Is that a reasonable anticipation or assumption? No, there are different elements. For example, there is the annual salary increase that you take into consideration, and it's something which will be seen later this year. On the other end, in some cases, we are recruiting. I think what we already see in Q1 is very positive trend. I cannot comment versus Q2 to Q4 numbers are going to be at the same level or a bit higher, a bit lower. Overall, I think the trend in the picture is very positive. As I mentioned earlier, the people cost or the salary cost is the main cost pillar. We do see in Q1 an adjusted cost income ratio of 60.6%. Overall, we are very optimistic and very happy with the cost situation. Of course, we will always continue to see how we can improve and continue reduce costs. Thank you very much, Barak. There are no further questions at this time. Mr. Nardi, would you like to make your concluding statement? I would like only to thank everyone for participating, and see you all in the next quarter. Thank you. This concludes the Israel Discount Bank first quarter 2021 results conference call. Thank you for your participation. You may go ahead and disconnect.