Israel Discount Bank Ltd.

Investor Presentation • Aug 16, 2021

2Q 2021 REVIEW

FINANCIAL AND STRATEGIC HIGHLIGHTS

Investor Relations

August 16, 2021

Disclaimer:

This document has been prepared by Israel Discount Bank Ltd. (the "Bank") solely for use by the Bank in its presentation of its 2021 Second quarter report, as well as in strategic updates referred to in the Bank's reports.

This presentation is not a substitute for the Bank's 2021 second quarter financial statements which include the full financial information including forward-looking Information. The English version of the financial statements are available on the Bank's investor relations website at www.investors.discountbank.co.il

This presentation includes forward-looking information, as defined in the Israeli Securities Law, 5728 - 1968. Such information includes, among other things, projections, objectives, estimates and assessments of the Bank, which relate to future events or issues, the occurrence of which is not certain and is outside the control of the Bank. Forward-looking information does not constitute proven, factual information, and is based solely on the viewpoint of the Bank's management, which is based, among other things, on analysis of general information that is known to the Bank's management as of the date of this presentation. Forward-looking information, by definition, is subject to the substantial risk of not coming to fruition, and such information is not definite and cannot be estimated in advance and is at times even beyond the Bank's control. The fulfillment of forward-looking information is impacted by risk factors that are characteristic of the Bank's activities and also by developments in the general environment and external factors that affect the Bank's operations, which cannot be estimated in advance and that by their nature are beyond the control of the Bank. Therefore, readers of this presentation are hereby warned that the results and achievements of the Bank in the future may be significantly different than those presented in the forward-looking information included in this presentation. Similarly, forward-looking projections and estimations are based on assumptions and information in the possession of the Bank as of the time of the presentation, and the Bank shall not be required to update or revise any such projection or estimation in order to reflect events or conditions that transpire after the date of the presentation.

Disclaimer regarding unsponsored American Depository Receipt (ADR):

U.S. depository institutions or banks may establish ADR programs in respect of the shares of certain non-U.S. issuers without the consent or participation of such issuers (the so called "Unsponsored ADRs"(. An ADR or American Depositary Receipt, which is issued by a U.S. bank or depository to evidence a share of a non-U.S. issuer that has been deposited with the U.S. bank or depository. An Unsponsored ADR program is set up without the cooperation of the non-U.S. issuer or even without its consent. Israel Discount Bank does not support or encourage the creation of Unsponsored ADR programs in respect of its securities and, in any event, disclaims any liability in connection with an Unsponsored ADR.

Israel Discount Bank makes no representation regarding its compliance with Rule 12g3-2(b) of the U.S. Securities Exchange Act of 1934, as amended.

Financial and Strategic Review

Barak Nardi, CFO

RECORD NET INCOME AND ROBUST PERFORMANCE HIGHLIGHT UNDERLYING POTENTIAL OF THE BANK

2Q21 NET INCOME

M

1Q21: NIS 662m 1Q20: NIS 174m

Normalized* 2Q21 ROE: 10.1% 2Q20: 3.7%

CREDIT GROWTH (GROSS) %YoY

5.1% YTD 2.7% QoQ

TOTAL EQUITY

FY20: NIS 19.7bn

4

TOTAL CREDIT (GROSS) FY 2020: NIS 192bn

LLP

FY 2020: 0.91%

* Normalized ROE = Replaces current credit loss expense ratio of (-0.56%)with the average credit loss expense ratio for the years 2016-2019 of 0.37% and is adjusted for retirement costs and expenses related to the move IDBNY's headquarter location.

2Q and 1H 2021 HIGHLIGHTS

• Record ROE of 18.3% in 2Q21 and 16.1% in 1H21 (up from 14.5% in 1Q21; 3.7% in 2Q20 and 4.8% in 1H20) driven by: Strong NII (up 12.0% vs 1Q21; 15.2% vs 2Q20 and 9.3% vs 1H20) generated by core banking growth and CPI Negative LLP of -0.82% driven by low levels of write-offs, high collections and a release of provisions Lower salary expenses excluding bonuses as early retirement plans of 2020 make an impact
• Solid execution at all subsidiaries drives robust Group performance
• Strong Asset Quality with total problematic debt down 9.5% vs 1Q21 and NPL ratio of 0.72%
• Discount expects to reintroduce a 20% dividend on ongoing profits once the BoI removes its current limitation and presuming that no further limitations will be set in respect of future profits.

1 2 Q 2	Net income	ROE	Cost-income ratio	Credit loss expenses ratio	1 2 H 1	Net income	ROE	Cost-income ratio	Credit loss expenses ratio
	NIS 860m 1Q21: NIS 662 m; 2Q20: NIS 174 m	18.3% 1Q21: 14.5%; 2Q20: 3.7%	62.9% 1Q21: 65.1%; 2Q20: 66.0%	(0.82%) 1Q21: (0.30%) 2Q20: 1.14%		NIS 1,522m 1H20: NIS 453 m	16.1% 1H20: 4.8%	64.0% 1H20: 62.2%	(0.56%) 1H21: 1.28%
d e st u dj A	NIS 878 m 1Q21: NIS 738 m; 2Q20: NIS 226 m	18.7% 1Q21: 16.2%; 2Q20: 4.8%	61.9% 1Q21: 60.6%; 2Q20: 62.7%		d e st u dj A	NIS 1,616m 1H20: NIS 509 m	17.1% 1H20: 5.4%	61.3% 1H20: 60.5%
5	* See slide 20 for details on adjustments

STRONG TOTAL CREDIT GROWTH ACROSS ALL SEGMENTS AS DEMAND IMPROVES

* Regulatory segments, in Israel

** Balance of household credit excluding mortgages and credit cards

SIGNIFICANT GROWTH IN CORE BANKING DRIVEN BY STRONG CONUSMER SPENDING AND CREDIT DEMAND

UNDERLYING COSTS ARE STABLE AS SUCCESS OF EARLY RETIREMENT PLAN IMPACTS RESULTS

HIGH QUALITY LOANS AND CONSERVATIVE UNDERWRITING REFLECTED IN CREDIT METRICS

9

ROBUST INCOME GROWTH DELIVERS RECORD LEVEL NET INCOME AND ROE

• Mercantile's record net income of NIS 201m and ROE of 26.2% was driven by strong NII growth of 12.0% YoY, an increase in non-interest income of 13.7%, lower LLP and tight cost controls.
• Total loan book expanded 7.9% YoY driven by robust growth of 29.4% in mortgages.
• An improving economy, customer strength and conservative underwriting led to a release of allowance of provisions and significant recoveries and negative credit loss expenses.
• Cost-income ratio of 50.6%, vs. 52.7% in 1Q21 and 55.6% in 2Q20.

PROFITS AND LOANS ARE TRENDING HIGHER AS RISK DECLINES

• Net income of \$25m and ROE of 8.7% increased significantly up YoY and QoQ. The increase was generated by solid execution across all business lines as well as a release of credit expenses.
• Loan growth of 3.2% QoQ an 14.3% YoY saw strong continuing demand. Both C&I and CRE saw increasing demand up 2.3% and 5.5% respectively QoQ and 16.2% and 18.7% in the past 12 months.
• NIM improved to 2.38% in 2Q21 relative to 2.30% in 1Q21. Yields on loans were stable while the yield on deposits compressed improving our overall net interest income spreads.

STRONG CONSUMER SPENDING AND NEGATIVE LLP DRIVES RECORD PROFITABILITY

• Record ROE and net income of 16.7% and NIS 79m.
• CAL produced strong performance across all key business drivers including transaction turnover up 16.2% QoQ and 30.9% YoY, consumer credit up 4.6% QoQ while down 3.9% YoY and active cards up 2.8% vs. 1Q21 and 7.4% YoY.
• Negative credit expense ratio driven by a reversal of provisions as consumer credit quality improves
• The performance highlights the strength of the activity in the local economy as international travel, a key part of CAL's business is still below pre-COVID highs.

OUR 5-YEAR STRATEGIC PLAN AIMED AT TAKING LEADERSHIP

TO BE THE BEST FINANCIAL INSTITUTION FOR ITS CUSTOMERS, DELIVERING SUPERIOR VALUE FOR SHAREHOLDERS, OVER TIME

Increase the Group's competitiveness, market share and profitability

Lead Revolution in Banking Through Disruptive Innovation

Establish new non-bank initiatives through collaboration with third party partners and fintech

Accelerate The Evolution Maximize Group Value

Maximize the underlying, stand-alone value of our subsidiaries, leverage synergies and increase the Group's economic value

TRADITIONAL BANKING – ACCELERATED MORTGAGE GROWTH AS WE CONTINUE TO TAKE MARKET SHARE

What have we done?

• Launched digital mortgages
• Introduce new call center staffed with mortgage specialist
• Streamlined processes
• Increased staff to meet demand
• Intensified direct marketing focused on mortgage brokers

BANKING INNOVATION – BUILDING USER ENGAGEMENT THROUGH PAYBOX

What we have done: Tap to pay

What have we done?

• Reached over 2 million downloads
• Launched tap-to-pay in July
• Integrated Israeli leading gift card on PayBox
• More to come as we increase user engagement and build towards Phase II including the launch of a financial supermarket

Q&A

Barak Nardi, CFO Yossi Beressi, Chief Accountant

APPENDICES

PROFIT & LOSS AND SELECTED RATIOS

NIS m	2Q21	1Q21	2Q20	Vs. 1Q21	Vs. 2Q20	1H21	1H20	Change
Net interest income	1,685	1,504	1,463	12.0%	15.2%	3,189	2,918	9.3%
Credit loss expenses	(410)	(147)	532	n/a	n/a	(557)	1,188	(146.9%)
Non-interest financing income	89	298	276	(70.1%)	(67.8%)	387	693	(44.2%)
Commissions	785	724	650	8.4%	20.8%	1,509	1,389	8.6%
Other income	1	11	8	(90.9%)	(87.5%)	12	8	50.0%
Total non-interest income	875	1,033	934	(15.3%)	(6.3%)	1,908	2,090	(8.7%)
Total income	2,560	2,537	2,397	0.9%	6.8%	5,097	5,008	1.8%
Salaries and related expenses	830	801	794	3.6%	4.5%	1,631	1,618	0.8%
Maintenance & depreciation	308	294	274	4.8%	12.4%	602	559	7.7%
Other expenses	473	557	515	(15.1%)	(8.2%)	1,030	937	9.9%
Total operating and other expenses	1,611	1,652	1,583	(2.5%)	1.8%	3,263	3,114	4.8%
Income before taxes	1,359	1,032	282	31.7%	381.9%	2,391	706	238.7%
Provision for taxes on income	493	353	105	39.7%	369.5%	846	256	230.5%
Income after taxes	866	679	177	27.5%	389.3%	1,545	450	243.3%
Net income attributable to shareholders	860	662	174	29.9%	394.3%	1,522	453	236.0%
ROE	18.3%	14.5%	3.7%			16.1%	4.8%
Cost income ratio	62.9%	65.1%	66.0%			64.0%	62.2%
CET-1 ratio	10.28%	10.20%	10.08%			10.28%	10.08%
NIM	2.48%	2.26%	2.35%			2.36%	2.40%
Rate of credit loss expenses	(0.82%)	(0.30%)	1.14%			(0.56%)	1.28%
NPL ratio	0.72%	0.84%	0.77%			0.72%	0.77%
Dividend per share (in Agurot)*	-	-	-			-	4.19

* Dividend in respect of the relevant period

ADJUSTED PROFIT & LOSS & SELECTED RATIOS

NIS m	2Q21	1Q21	2Q20	Vs. 1Q21	Vs. 2Q20	1H21	1H20	Change
Net interest income	1,685	1,504	1,463	12.0%	15.2%	3,189	2,918	9.3%
Credit loss expenses	(410)	(147)	532	n/a	n/a	(557)	1,188	(146.9%)
Non-interest financing income	89	298	276	(70.1%)	(67.8%)	387	693	(44.2%)
Commissions	785	724	650	8.4%	20.8%	1,509	1,389	8.6%
Other income	1	11	8	(90.9%)	(87.5%)	12	8	50.0%
Total non-interest income	875	1,033	934	(15.3%)	(6.3%)	1,908	2,090	(8.7%)
Total income	2,560	2,537	2,397	0.9%	6.8%	5,097	5,008	1.8%
Salaries and related expenses	830	801	794	3.6%	4.5%	1,631	1,618	0.8%
Maintenance & depreciation	289	294	274	(1.7%)	5.5%	583	559	4.3%
Other expenses	466	442	435	5.4%	7.1%	908	851	6.7%
Total operating and other expenses	1,585	1,537	1,503	3.1%	5.5%	3,122	3,028	3.1%
Income before taxes	1,385	1,147	362	20.7%	282.6%	2,532	792	219.7%
Provision for taxes on income	501	392	133	27.8%	276.7%	893	286	212.2%
Income after taxes	884	755	229	17.1%	286.0%	1,639	506	223.9%
Net income attributable to shareholders	878	738	226	19.0%	288.5%	1,616	509	217.5%
ROE	18.7%	16.2%	4.8%			17.1%	5.4%
Cost income ratio	61.9%	60.6%	62.7%			61.3%	60.5%
CET-1 ratio	10.28%	10.20%	10.08%			10.28%	10.08%
NIM	2.48%	2.26%	2.35%			2.36%	2.40%
Rate of credit loss expenses	(0.82%)	(0.30%)	1.14%			(0.56%)	1.28%
NPL ratio	0.72%	0.84%	0.77%			0.72%	0.77%
Dividend per share (in Agurot)*	-	-	-			-	4.19

* Dividend in respect of the relevant period

ADJUSTMENTS TO PROFIT & LOSS

	Gross			Net				Gross	Net
NIS m	2Q21	1Q21	2Q20	2Q21	1Q21	2Q20	1H21	1H20	1H21	1H20
Early retirement at Discount Bank and Mercantile	7	115	9	5	76	6	122	15	81	10
Legal provision, net of insurance payment			71			46		71		46
Cost associated with IDBNY change of headquarters location	19			13			19		13
Income from the sale of Visa Inc. shares			-					-
Early retirement at CAL			-					-
Total	26	115	80	18	76	52	141	86	94	56

SELECTED BALANCE SHEET ITEMS

NIS m	30.06.21	31.03.21	30.06.20
Cash and deposits with banks	47,405	50,307	39,608
Securities*	48,226	44,212	40,869
Credit to the public	202,258	196,901	186,841
Provision for credit loss	(3,272)	(3,609)	(3,405)
Credit to the public, net	198,986	193,292	183,436
Credit to governments	3,217	3,520	4,219
Investment in investee companies	345	355	154
Buildings and equipment	3,117	3,012	2,648
Intangible assets and goodwill	164	164	164
Assets in respect of derivative instruments	4,670	5,099	5,856
Other assets	4,604	5,046	5,146
Total Assets	310,734	306,142	282,100
Deposits from the public	240,691	240,787	222,048
Deposits from banks**	15,578	12,534	7,949
Securities lent or sold under agreements to repurchase	-	-	174
Bonds and subordinated debt notes	11,203	10,136	11,377
Liabilities in respect of derivative instruments	4,876	4,919	6,064
Other liabilities	17,040	17,368	14,965
Total liabilities	289,388	285,744	262,577
Equity capital attributed to the Bank's shareholders	20,704	19,836	19,004
Non-controlling rights in consolidated companies	642	562	519
Total equity	21,346	20,398	19,523
Total Liabilities and Equity	310,734	306,142	282,100

21

FINANCIAL PERFORMANCE

Main P&L and Balance Sheet metrics and selected ratios

NIS m	2Q21	1Q21	2Q20	Vs. 1Q21	Vs. 2Q20	1H21	1H20	Change
Net interest income	335	306	299	9.5%	12.0%	641	616	4.1%
Credit loss expenses	(73)	(9)	99	n/a	n/a	(82)	197	(141.6%)
Non-interest income	141	155	124	(9.0%)	13.7%	296	222	33.3%
Total income	476	461	423	3.3%	12.5%	937	838	11.8%
Operating & other expenses	241	243	235	(0.8%)	2.6%	484	476	1.7%
Net income	201	150	58	34.0%	246.6%	351	107	228.0%
Net income excluding non-recurring items	172	117	54	47.0%	218.5%	289	103	180.6%

Return on equity	26.2%	19.9%	7.5%
Return on equity excluding non-recurring items	22.1%	8.3%	7.3%
Cost-income ratio	50.6%	52.7%	55.6%
Cost-income ratio excluding non-recurring items	55.8%	63.2%	55.6%
Rate of credit loss expenses	(0.84%)	(0.10%)	1.23%
NIM	2.75%	2.54%	2.81%

22.4%	6.9%
18.3%	6.7%
51.7%	56.8%
57.4%	56.8%
(0.48%)	1.22%
2.64%	2.89%

Total assets	52,952	51,363	47,133	3.1%	12.3%
Credit to the public, net	35,083	34,022	32,464	3.1%	8.1%
Securities	6,566	5,733	4,437	14.5%	48.0%
Deposits from the public	41,575	41,476	38,036	0.2%	9.3%
Total equity	3,539	3,337	3,181	6.1%	11.3%

FINANCIAL PERFORMANCE

Main P&L and Balance Sheet metrics and selected ratios

USD m	2Q21	1Q21	2Q20	Vs. 1Q21	Vs. 2Q20	1H21	1H20	Change
Net interest income	63	59	62	6.8%	1.6%	122	121	0.8%
Credit loss expenses	(8)	17	3	n/a	n/a	9	18	(50.0%)
Non-interest income	21	23	11	(8.7%)	90.9%	44	43	2.3%
Total income	84	82	73	2.4%	15.1%	166	165	0.6%
Operating & other expenses	59	52	45	13.5%	31.1%	111	92	20.7%
Net income	25	10	21	150.0%	19.0%	35	43	(18.6%)
Net income excluding non-recurring items	29	10	21	190.0%	38.1%	39	43	(9.3%)

Return on equity	8.7%	3.4%	7.6%
Return on equity excluding non-recurring items	10.3%	3.4%	7.6%
Cost-income ratio	70.2%	63.4%	61.6%
Cost-income ratio excluding non-recurring items	62.8%	63.4%	61.6%
Rate of credit loss expenses	(0.46%)	0.96%	0.15%
NIM	2.38%	2.30%	2.59%

6.1%	7.9%
6.9%	7.9%
66.9%	56.1%
63.0%	56.1%
0.24%	0.51%
2.33%	2.54%

Total assets	11,431	11,667	10,336	(2.0%)	10.6%
Loans, net	7,586	7,354	6,639	3.2%	14.3%
Securities	2,827	2,966	2,637	(4.7%)	7.2%
Deposits from the public	9,812	9,928	8,661	(1.2%)	13.3%
Total equity	1,168	1,148	1,132	1.7%	3.2%

FINANCIAL PERFORMANCE

Main P&L and Balance Sheet metrics and selected ratios

NIS m	2Q21	1Q21	2Q20	Vs. 1Q21	Vs. 2Q20	1H21	1H20	Change
Income from credit card transactions	6		6	9.1%	21.0%	663	616	7.6%
Net interest income	133	129	133	3.1%	-	262	267	(1.9%)
Credit loss expenses	(15)	(4)	59	n/a	n/a	(19)	164	n/a
Non-interest financing income	(1)	1	(2)	n/a	n/a	-	6	n/a
Total income	478	447	417	6.9%	14.6%	925	889	4.0%
Total expenses (excluding credit loss expenses)	383	364	328	5.2%	16.8%	747	707	5.7%
Net income	79	60	23	31.7%	243.5%	139	16	768.8%
Net income excluding non-recurring items	79	60	23	31.7%	243.5%	139	16	768.8%

Return on equity	16.7%	12.9%	5.1%
Return on equity excluding non-recurring items	16.7%	12.9%	5.1%
Cost-income ratio	80.1%	81.4%	78.7%
Cost-income ratio excluding non-recurring items	80.1%	81.4%	78.7%

14.6%	1.8%
14.6%	1.8%
80.8%	79.5%
80.8%	79.5%

Total assets	19,501	19,385	17,885	0.6%	9.0%
Interest bearing credit	6,079	5,822	6,355	4.4%	(4.3%)
Consumer credit	5,261	5,030	5,477	4.6%	(3.9%)
Total equity	2,068	1,989	1,835	4.0%	12.7%