Mizrahi Tefahot Bank : 23 05 2024financial reports 1st quarter 2024

CONDENSED CONSOLIDATED 1

FINANCIAL REPORTS

AS OF 31.03.2024

People first and foremost

This report does not constitute a Periodic Report pursuant to the Securities Regulations (Periodic and Immediate Reports), 1970. The periodic report (including details about members of the board of directors and executive management, required by the Bank Of Israel), the actuarial assessment regarding employee rights at the Bank, a detailed risk management report and information regarding supervisory capital instruments issued by the Bank, are available on the Israel Securities Authority's MAGNA website: www.magna.isa.gov.il and on the Bank website at www.mizrahi-tefahot.co.il/en financial reports.

Bank Mizrahi Tefahot

Condensed quarterly financial statements As of March 31, 2024

This translation of the financial statement is for convenience purposes only. The only binding version of the financial statement is the Hebrew version.

|

1

2 |

Report of the Board of Directors and Management

As of March 31, 2024

Primary table of contents

Condensed Report of the Board of Directors and Management	10
Overview, objectives and strategy	11
Explanation and analysis of results and business standing	19
Risks overview	49
Policies and critical accounting estimates, controls and procedures	77
Certifications with regard to disclosure in condensed financial statements	78
Independent Auditor's review report	80
Condensed Financial Statements	81
Corporate governance, Audit, Additional details about the Bank and its management	175
Appendixes to condensed quarterly financial statements	177
Glossary	187

• 3

4 |

Bank Mizrahi Tefahot

Report of the Board of Directors and Management

|

5

6 |

Report of the Board of Directors and Management

As of March 31, 2024

Table of Contents

Introduction	10
Forward-looking information	10
Overview, objectives and strategy	11
Condensed financial information and key performance indicators for the Bank Group	11
Key risks	14
Business goals and strategy	14
Developments in capital structure	14
Developments in financing sources	14
Issuance of obligatory notes, bonds and complex capital notes	14
Significant developments in management of business operations	15
Significant developments in human resources and administration	18
Other matters	18
Explanation and analysis of results and business standing	19
Trends, phenomena and material changes	19
General environment and impact of external factors on the Bank Group	19
Developments in the Israeli and global economy in 2024	19
Global economy	21
Major and emerging risks	22
Events after the balance sheet date	22
Material developments in revenues, expenses and other comprehensive income	23
Analysis of developments in revenues, expenses and other comprehensive income	23
Analysis of developments in assets, liabilities, equity and capital adequacy	28
Assets and liabilities	28
Capital, capital adequacy and leverage	34
Capital adequacy	34
Capital planning at the Bank	35
Other off-balance sheet activity	38
Financial information by operating segment	39
Principal investee companies	48
Risks overview	49
Risk development and management	49
Risk factor severity	50
Credit risk	54
Operational Risk	72
Market risk and interest risk	72
Liquidity and financing risk	75
Other risks	76
Policies and critical accounting estimates, controls and procedures	77
Policies and critical accounting estimates	77
Controls and Procedures	77

|

7

Report of the Board of Directors and Management

As of March 31, 2024

List of tables included in the condensed report of the Board of Directors and management

Statement of profit and loss - key items	11
Balance sheet - key items	11
Key financial ratios (in percent)	13
The economic cost of benefits provided by the Bank to address the Iron Swords War	17
More information about activities to benefit borrowers in addressing the War	17
Information about official exchange rates and changes thereto	20
Changes to major stock indices in Israel (in percent)	21
Changes to major bond indices in Israel (in percent)	21
Changes to major stock indices overseas (in percent)	21
Analysis of development of financing revenues from current operations	23
Details of financing revenues by supervisory operating segments	24
Average balances of interest-bearingon-balance sheet assets attributed to activity in Israel, in various linkage
segments	24
Interest spreads (the difference between interest revenue rate for assets and interest expense rate
for liabilities) based on average balances, attributed to activity in Israel, in the various linkage segments	24
Details of development of expenses with respect to credit losses	25
Details of expenses (revenues) with respect to credit losses by supervisory operating segments of the Group	25
Cost-Income Ratio data	27
Development of Group return on equity and ratio of Tier I equity to risk components liquidity coverage ratio and
leverage ratio at the end of the quarter	27
Earnings and dividends per share	27
Development of key balance sheet items of the Bank Group	28
Data about loans to the public, net by linkage basis	28
Data about loans to the public, net by supervisory operating segment	28
Details of problematic credit risk and non-performing assets before provision for credit losses, in accordance with
provisions for measurement and disclosure of non-accruing debts, credit risk and provision for credit losses	29
Benchmarks for analysis of quality of loans to the public, expenses and provision for credit losses (in percent)	30
Development of key balance sheet items of the Bank Group	31
Composition of Group securities by portfolio	31
Composition of Group securities portfolio by linkage segment	32
Composition of Group securities portfolio by issuer type	32
Composition of deposits from the public by linkage segment	33
Data about composition of deposits from the public by supervisory operating segment	33
Development of composition of deposits from the public by depositor size for the Group	33
Composition of shareholder equity	34
Data about supervisory capital and risk assets	35
Development of ratio of capital to risk assets for the Group	36
Composition of risk assets and capital requirements with respect to credit risk by exposure group	36
Risk assets and capital requirements with respect to credit market risk, CVA risk and operational risk	36
the Bank's leverage ratiothe	37
Information about dividend distributions by the Bank since 2022 (in reported amounts)	37
Development of off balance sheet monetary assets held on behalf of Bank Group customers,
for which the Bank Group provides management, operating and/or custodial services	38
Summary financial results of supervisory operating segments	39
Operating results in the household segment	40
Operating results in the private banking segment	41
Operating results in the small and micro business segment	42
Operating results of medium business segment	43
Operating results of large business segment	44
Operating results of institutional investors segment	45
Operating results of financial management segment	46
Operating results overseas	47
mapping of risk factors, their potential impact on the Bank and executives appointed Risk Owners for each risk	51

8 |

Report of the Board of Directors and Management

As of March 31, 2024

Sector composition of the top 6 borrowers for the Group	54
Credit for equity transactions	55
Credit to leveraged companies	55

Summary of overall problematic credit risk and non-performing assets before provision for credit losses, in accordance

with provisions for measurement and disclosure of non-accruing debts, credit risk and provision for credit loss	56
Major risk benchmarks related to credit quality	56
Analysis of movement in non-accruing debts and non-accruing debt under restructuring	56
Analysis of movement in balance of provision for credit losses	56
Major risk benchmarks related to provision for credit losses	57
Information about credit risk to individuals - balances and various risk attributes	58
Composition by size of borrower indebtedness	58
Composition of on-balance sheet credit by fixed income in account	58
Composition of on-balance sheet credit by remaining term to maturity	59
Information about problematic credit risk for individuals before provision for credit losses	59
Expense rate with respect to credit losses to individuals	59
Information about credit risk in the construction and real estate economic sector in Israel,
by real estate collateral type	61
Information about credit risk in the construction and real estate economic sector in Israel, by asset status	62
Information about credit risk in the construction and real estate economic sector in Israel, by debt classification	62
Credit risk by economic sector	63
Exposure to foreign countries	66
Bank exposure to foreign financial institutions	67
Volume of mortgages granted by the Household segment	69
Details of various risk attributes of the residential mortgage portfolio	70
VAR for the Bank Group	73
Effect of a parallel shift of the curve by 2% on the economic value of the Bank's portfolio in EVE terms	73
Net adjusted fair value of financial instruments of the Bank and its subsidiaries	74
Impact of change scenarios in interest rates on net adjusted fair value of the Bank and its subsidiaries	74
Impact of change scenarios in interest rates on net interest revenues and non-interest financing revenues	74
Analysis of the sensitivity of Bank Group capital to changes in major exchange rates and in the CPI	75

|

9