1 First International Bank of Israel Ltd. - FIBI.

1

First International Bank of First International Bank of Israel Ltd. - FIBI Israel Ltd. - FIBI

2

GDP Rate of GrowthGDP Rate of Growth)%( )%(

*Forecast

* Forecast

4.75.35.15.2

4.4

1.7

-0.8

2008*200720062005200420032002

3

Rate of Inflation )%(, Rate of Inflation )%(, Bank of Israel Interest Rate )%( Bank of Israel Interest Rate )%(

averageaverage

*Forecast

Bank of Israel interest rate Rate of inflation

3.7%3.6%3.9%3.4%

5.2%

-0.1%

3.7%

2.4%

4.2%

1.2%

7.5%

-1.9%

6.8%6.5%

6.8%

1.4%

9.3%

0.0%

2008*20072006200520042003200220012000

4

Exchange Rate )$/NIS( - averageExchange Rate )$/NIS( - average

* Forecast

3.60

4.114.464.49

2008*200720062005

5

Foreign Investments in Israel* )US$ Millions(Foreign Investments in Israel* )US$ Millions(*In the private sector

excluding banking

In 2006 :1. Capital issue by “Teva”

2. Acquisition of “Iscar” by Berkshire-Hathaway

11,570

14,861

24,802

9,667

1-6/08 On anannual basis

200720062005

6

Israeli Investments Abroad* )US$ Millions(Israeli Investments Abroad* )US$ Millions(*In the private sector

excluding banking

In 2006 : Acquisition by “Teva”

10,4169,745

21,611

9,308

1-6/08 On anannual basis

200720062005

7

Country RatingsCountry Ratings

Moody's Fitch S&PBank Deposits - LT A1 A A

Bank Deposits - ST P -1 F-1 A -1

Outlook Stable Stable Stable

Country Rating

8

First International Bank of Israel Ltd. - FIBIFirst International Bank of Israel Ltd. - FIBIOverviewOverview

September 30, 2008September 30, 2008

9

Ownership StructureBino-Liberman Group

FIBI Holding Company Ltd.

The Public

Israel Discount Bank

The First International Bank of Israel Ltd.

The Public

PAGIPoalei Agudat Israel

Bank Ltd.

Modus-Selective

Investments

Portfolio Ltd.

FIBI Bank

)UK( Plc

London

FIBI Bank

)Suisse(

Ltd. Zurich

Kidma – Provident Funds

Management Ltd.

E. 58.545%

V. 88.768%

E. Percentage of equity share capital ownership

V. Percentage of voting power exercised at any general meeting

E. 15.505%

V. 11.232%

E. 19.19%

V. 16.31%

E. 54.33%

V. 72.59%

E. 68.68%

V.68.68%

E.50%

V. 60%

E. 100%

V.100%

E. 100%

V.100%

E. 100%

V.100%

UBank Ltd.

)Formerly: Investec

Bank

)Israel( Ltd.(

E. 100%

V.100%

FIBI Investment House Ltd.

E. 26.48%

V. 11.1%

E. 25.95%

V. 0%

E. 100%

V.100%

As of 23.7.2008

Otsar

Hahayal

E. 68%

V.66%

Bank

Massad

The First Int’l

& Co.

Underwriting and

Investments Ltd.

E. 75%

V. 25%

E. 51%

V.51%

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Since: 2008 20061977

20 48

retail/commercial

FIBI

Retail bank

cluster

FIBI UK

)London(

FIBI

Switzerland

)Zurich(

UBank Ltd.

)Formerly: Investec

Bank

)Israel( Ltd.(

Otsar

HahayalBank

Massad

Corporate + middle market banking Private + affluent banking 85 branches

PAGIPoalei Agudat

Israel

Bank Ltd.

International

Branches:

Capital markets Trust and custody Private and

affluent banking 6 branches (unique

affluent banking

branches)

Business

banking Private

banking

Private

banking

Focus:

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retail/commercialretail

Key audience: defense + militaryteachers ultra-orthodox

First International Bank GroupFirst International Bank Group

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Mr. Zadik Bino has served in several senior positions in the Israeli banking industry in 25 years of activity in this field, among them as CEO of Leumi Bank and CEO as well as Chairman of First International Bank of Israel. He also served for many years as a public representative in the Advisory Committee and the Committee for Banking Matters of the Bank of Israel.In 1989 Mr. Bino founded Bino Holdings Ltd., and devoted himself to his private business affairs. Bino Holdings Ltd. is a private company, fully controlled and owned by Mr. Bino, which engages in the execution, development and nurturing of investments. Bino Holdings main investment, along with FIBI, is in Paz oil company. Since July 2006 Bino acquired, via Paz, Ashdod Refineries. Bino has various other investments in industrial sectors. It should be noted that his investment in FIBI was made from his own resources without requiring bank loans.On 2/2008 Mr. Zadik Bino transferred 47.5% of his holdings in Binohon Ltd., in equal shares and without consideration, to his 3 children.

The Liberman family has enjoyed sustained success in both Australia and Israel for over 50 years. Jack Liberman, an astute Australian businessman and entrepreneur, along with his children, built a large and diversified investment company (JGL Investments PTY Ltd.) The family, together with Zadik Bino, in a long-term partnership, hold a controlling interest in both FIBI Holdings and Paz Oil Company Ltd. (“Paz”), Israel’s leading petrol player.

ShareholdersShareholders

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•Universal bank with strong niche position in capital markets, foreign exchange and foreign trade

•Domestic subsidiaries target focused audiences: affluent banking (UBank), defense sector - retail banking (Otsar Hahayal), ultra-orthodox Jews (PAGI), and teachers (Massad)

•Foreign subsidiaries in London (commercial banking) and Zurich (private banking)

•Branches: 178 (including subsidiaries and foreign subsidiaries)

•Employees: 5,055

•Equity: NIS 5.5Billion (US$ 1.6B)

•5th largest banking group in Israel

First International Bank of Israel - FIBIFirst International Bank of Israel - FIBI

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Bank RatingsBank Ratings

Moody's FitchBank Deposits - LT A1 BBB +

Financial Strength C -

Bank Deposits - ST P - 1 F - 2

Outlook Stable Stable

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CORE CAPABILITIES:

• Top class reputation in private banking services, especially dealing room, specialized investment advice center and TASE futures and operations index, where FIBI is a market leader

• Distinctive professional standards in: global capital markets, currency exchange, structured products and foreign trade

• Strong traditional position in corporate banking

CLIENTS:

Client-centric vs. product oriented banking

• Corporate finance: increase penetration of middle market

• Private banking: extend presence in affluent segment

• Retail banking: broaden overall footprint (e.g., acquired Bank OtsarHahayal and Massad)

Strategy - Main FocusStrategy - Main Focus

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GROUP CONSOLIDATION:

Realize synergies from three bank acquisitions:

• Implement shared-services model, including IT systems

• Cross-sell products (mortgages, structured products, advisory services)

• Create streamlined and effective branch network

NEW PRODUCTS:

State-of-the-art pension-planning advice offering

OTHER:

• Upgraded scoring model and processes in anticipation of Basel II, including development of advanced credit-scoring models for risk-based pricing

• Outsourcing: first Israeli bank to outsource its computer infrastructure

• Large but conservatively-managed foreign proprietary trading book

Strategy - Main FocusStrategy - Main Focus

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Pension Advisory ServicesPension Advisory Services

At the beginning of 2008, the bank launched its pension advisory services, which have the potential to attract new customers and increase the bank’s retail activity.

Accumulated sum (NIS) - 1,257,728,765

Number of meetings held – 5,141

Number of applications received – 20,252

As of 14.12.2008

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Retail Banking Retail Banking )Bank only()Bank only( - as of 11/2008 - as of 11/2008

Change compared

withChange

compared with11/2008 12/2007 12/2006 12/2007 12/2006

Total number of accounts (thousands) 330.9 326.6 323.3 1.3% 2.4%

Number of accounts with direct wage deposits (thousands)

82.2 77.7 75.0 5.8% 9.6%

Total balance of credit to the public (Billion NIS)

1.731 1.650 1.456 4.9% 18.9%

Total balance of deposits (Billion NIS) 9.904 9.794 9.688 1.1% 2.2%

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55

9789107

186

III/08II/08I/08IV/07III/07

Net Earnings )NIS millions(Net Earnings )NIS millions(

6.6%

Net ROE

8.1%15.0%

7.0%

4.0%

19

241

509

1-9/20081-9/2007

Net EarningsNet Earnings((NIS millionsNIS millions))

13.9% 5.8%

Net ROE

20

384

509

1-9/081-9/07

Adjusted* Net EarningsAdjusted* Net Earnings((NIS millionsNIS millions))

13.9%

9.3%

Net ROE

* Not including the effect of accounting distortions and non-recurring costs

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Ratio of Provision for Doubtful Debts to Ratio of Provision for Doubtful Debts to Credit to the PublicCredit to the Public

* In II/2008 and III/2008 excluding Massad

0.82%

0.51%

0.28%

0.28%

0.53%

0.72%0.92%

1.10%

1.28%

0.85%

0.53%0.54%

0.65%

0.50%

0.14%

-0.06%

0.33%

0.42%

0.62%

0.99%

1.34%

1.75%

0.91%

0.27%0.22%

0.27%

4 other major banks

FIBI

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Ratio of Provision for Doubtful Debts to Ratio of Provision for Doubtful Debts to Earnings from Financing OperationsEarnings from Financing Operations

* In II/2008 and III/2008 excluding Massad

24.2%

13.7%

26.2%

7.7%

13.6%

18.5%24.3%

30.7%

40.1%

26.3%

15.7%15.1%18.1%

15.7%

4.1%

-1.7%

8.8%

12.0%16.5%

30.5%

44.0%

69.5%

34.8%

9.6%8.3%9.4%

4 other major banks

FIBI

;

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Ratio of Provision for Doubtful Debts to Credit Ratio of Provision for Doubtful Debts to Credit to the Publicto the Public

30.9.200830.9.2008 0.68%

0.49%0.47%

0.34%

0.21%

LeumiDiscountPoalimMizrahiFIBI

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4 other major banks FIBI

Ratio of Credit to the Public to Total Ratio of Credit to the Public to Total AssetsAssets )%( )%(

30.9.200830.9.2008

69.7%66.1%66.7%

60.1%64.3%

60.3%

66.0%

60.9%

30.9.0831.12.0731.12.0631.12.05

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Total Credit Risk in Respect ofTotal Credit Risk in Respect ofProblematic Debts )NIS millions(Problematic Debts )NIS millions(

* Securities, financial derivatives, non-utilization of credit lines

Change 30.9.08

compared with31.12.07 31.12.04 31.12.05 31.12.06 31.12.07 30.9.08

Total problematic debt (without debt subject to special supervision)

-249 2,855 1,947 1,623 1,115 866

out of which: Non-income bearing debt -92 1,454 1,188 815 662 570

Total off-balance-sheet credit in respect of problematic borrowers *

68 406 345 291 269 337

Debt subject to special supervision 530 2,744 3,305 2,349 1,696 2,226

Total credit risk relating to problematic borrowers

349 6,005 5,597 4,263 3,080 3,429

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Total Assets )NIS Millions(Total Assets )NIS Millions(

96,977

90,33992,516

86,538

72,745

30.9.0830.9.07200720062005

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Credit to the Public )NIS Millions(Credit to the Public )NIS Millions(

64,09354,156

55,594

52,198

44,270

30.9.0830.9.07200720062005

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Deposits from the Public )NIS Millions(Deposits from the Public )NIS Millions(

78,548

74,08575,78772,240

61,585

30.9.0830.9.07200720062005

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Changes in Shareholders’ EquityChanges in Shareholders’ Equity ((NIS millionsNIS millions))

5,5305,486

4,740

4,181

30.9.08200720062005

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8.4

3.0

8.6

2.8

7.4

2.7

8.1

3.6

30.9.0831.12.0731.12.0631.12.05

Capital AdequacyCapital

Adequacy11.7%11.7%

10.1%10.1%

11.4%11.4%

Capital Adequacy RatioCapital Adequacy Ratio)%( )%(

Second Tier Capital RatioSecond Tier Capital Ratio

First TierCapital RatioFirst TierCapital Ratio

11.4%11.4%

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Capital Adequacy RatioCapital Adequacy Ratio 30.9.200830.9.2008

11.51%

10.60%

11.43%11.38%

12.08%

PoalimDiscountMizrahiFIBILeumi

32

966

1083

303352430

512

1699

1947

Salaries andrelated expenses

Premises andequipment

Other expensesTotal

1-9/2008

1-9/2007

Operational and Other ExpensesOperational and Other Expenses((NIS millionsNIS millions))

* Excluding Massad

1022*

*

338*484*

1844*

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* Not including the effect of accounting distortions and non-recurring income and wage costs

Cost to Income Ratio - ConsolidatedCost to Income Ratio - Consolidated

166.2%

197.2%

166.4%

197.8%

173.2%

189.8%

Cost to cost Incomeexcluding Massad

Cost to Income ratioincluding Massad excludinggrant following the sale of

the bank

"adjusted" Cost f to"adjusted" Income ratio*

1-9/2008

1-9/2007

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Composition of Foreign ProprietaryComposition of Foreign ProprietaryTrading Book – Bank onlyTrading Book – Bank only

4%

67%

16%

7%

2%2%2%

Eurobonds Portfolio

Mortgage BackedBonds AAA rating -No Sub-PrimeexposureState of IsraelBonds

Teva 's loans

Strucrure Producst

Structure Credit

Hedge Funds

Composition to 30.9.2008 Millions USDEurobonds Portfolio 980

of it: Banks 813

States 12

Companies 155Mortgage Backed Bonds AAA rating - 236

of it: Governmental security (GNMA) 52

Agencies (FNMA, FREDDIE MAC) 70

ALT-A 52

PRIME 62

State of Israel Bonds 99

Teva's loans 27

Strucrure Producst 27

Structure Credit 62.0

Hedge Funds 23.0

Total 1,454

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* The influence on the Capital Account of the subsidiaries abroad, UBank, Otsar Hahayal and Massad is not substantial

MBS – MBS – MortgageMortgage Backed Securities )all(Backed Securities )all(

((2121 ) )NIS MillionsNIS Millions

OthersOthers)42( )42( NIS Millions NIS Millions

MBSMBS – – MortgageMortgage Backed Securities )all(Backed Securities )all(

((4343 ) )NIS MillionsNIS Millions

OthersOthers )105()105(NIS MillionsNIS Millions

30.06.0830.06.08)63()63( NIS millions NIS millions

30.09.0830.09.08 NIS MillionsNIS Millions)148()148(

Adjustment to Fair value of Available for Sale Securities – Adjustment to Fair value of Available for Sale Securities – ConsolidatedConsolidated**

MBSMBS – – Mortgage Mortgage Backed Securities )all(Backed Securities )all(

NIS MillionsNIS Millions)88()88(

OthersOthers NIS MillionsNIS Millions )176( )176(

After balance sheetAfter balance sheet 31.10.0831.10.08

)264( NIS millions)264( NIS millions

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due todue to

33 ALT-A MBSALT-A MBS

8080 NIS MillionsNIS Millions

99 NIS millions99 NIS millions

Provisions in III/2008 Provisions in III/2008 )Bank only()Bank only(

due to permanent depreciationdue to permanent depreciation

due todue to

investment in 2investment in 2 hedge fundshedge funds

2.72.7 NIS MillionsNIS Millions

due todue to investment in 3investment in 3

hedge funds inhedge funds in FIBI Suisse portfolioFIBI Suisse portfolio

0.90.9 NIS MillionsNIS Millions

Other securitiesOther securities 1515 NIS MillionsNIS Millions

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PRIVATE BANKING

12.7% HOUSEHOLD

31.9%

CORPORATE

27.7%

FINANCIAL MANAGEMENT

3.6%

SMALL BUSINESS

3.2%COMMERCIAL BANKING

20.9%

;

* Includes all segments except “other”

28.9%

As of 30.9.2007

3.1%10.8%

18.9%

13.6%

27.9%

Income by Segments *- ConsolidatedIncome by Segments *- Consolidated30.9.200830.9.2008

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PAGIPAGI

PAGI, in which FIBI has a 68% equity holding is a commercial bank with 20 branches, and the majority of its clients belong to the ultra-orthodox and orthodox sectors. PAGI maintains a unique positioning as Israel’s only orthodox oriented bank and its share in its target segment has grown significantly. PAGI’s strategy is to aggressively grow its client base, while focusing on target segments with intensive financial activity in personal, business, and institutional banking.PAGI invested heavily in modernizing its branch network, while maintaining the conservative demeanor that attracts devout Jews.

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30.9.0830.9.07

89.479.4Earnings from Financing Operations

6.64.7Provision for Doubtful Debts

68.164.3Operating and Other Income

106.391.7Operating and Other Expenses

27.230.1Net Earnings

10.8%12.7%Net Return on Equity

2,7372,926Total Assets

1,6371,306Credit to the Public (including FOREX)

2,1972,320Deposits from the Public (including FOREX)

NIS Millions

PAGI

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UBANKUBANKFIBI acquired 100% of share capital of Investec Bank (Israel) Ltd. in December 2004. Investec Bank specialized primarily in capital markets, foreign currency, private banking and trusteeship. As of March 2005 the name of the bank was changed to UBANK. It is maintained as an independent subsidiary. The acquisition of UBANK significantly bolstered FIBI’s competitive position in private banking, capital markets and foreign currency trading.

In 2007 UBANK launched an innovation in Israeli banking – dedicated branches for affluent clients. This premium service (above retail and bellow classic private banking) comprises distinctive branch design and hours of operation, along with many other attractive features. Four of these new branches have already been opened and more are scheduled for the coming years.

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30.9.0830.9.07


-3.41.3Provision for Doubtful Debts




14.2%17.6%Net Return on Equity


2,2732,268Credit to the Public

6,7856,904Deposits from the Public

UBANK

NIS Millions

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Otsar HahayalOtsar Hahayal

FIBI acquired 68% of the share capital of Otsar Hahayal in August, 2006. Bank Otsar Hahayal specializes in retail and small to medium-sized businesses (SMEs) and has a high proportion of current and former Defence Industry personnel within its client base.

The inclusion of Bank Otsar Hahayal’s operations creates a banking group with a comprehensive and diverse range of activity and earning base. FIBI is currently in the process of integrating Otsar Hahayal’s IT systems and coordinating across headquarters support functions.

43

30.9.0830.9.07






8.7%14.8%Net ROE




Otsar Hahayal

NIS Millions

44

MassadMassadFIBI acquired 51% of the share capital of Massad in May 2008.

Massad, as a sectorial bank, specializes in teaching personnel as its client base.

With Massad, FIBI has completed its acquisition of three Israeli banks and has now become a multi-bank group with a wider network in the retail market, thereby enjoying both the privileges of a large banking group, and the advantages of each subsidiary's special field of expertise.

FIBI is currently in the process of integrating Massad’s IT System and coordinating across headquarters support functions.

Massad's identity as the “teachers' bank” also places it in an advantageous position in the Arab sector, and explains its success in this sector despite rising competition.

.

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30.9.0830.9.07





28.019.6*Net Earnings

4.6%13.9%Net Return On Equity




* Excluding grant following the sale of the bank

Massad

NIS Millions

1 First International Bank of Israel Ltd. - FIBI.

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Transcript of 1 First International Bank of Israel Ltd. - FIBI.