Israel Discount Bank Ltd.

Investor Presentation • Nov 24, 2020

3Q 20 REVIEW

FINANCIAL AND STRATEGIC HIGHLIGHTS

Investor Relations

November 24, 2020

Disclaimer:

This document has been prepared by Israel Discount Bank Ltd. (the "Bank") solely for use by the Bank in its presentation of its Q3 2020 report, as well as in strategic updates referred to in the Bank's reports.

This presentation is not a substitute for the Bank's third quarter 2020 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 slideshow. 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, forwardlooking 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.

WHAT WE ARE SEEING – MARKET TRENDS

	Growth in credit by segments, Banking sector (BOI data)		The change in credit card spending, vs. Jan '20
	Q2	Q3	30%
Total Credit	(0.5%)	0.3%	20% First lockdown 10%
Consumer	(2.8%)	(1.5%)	0%
Commercial	(3.0%)	(1.1%)	-10% -20%
SME	3.2%	0.7%	-30% -40%
Mortgages	1.9%	2.3%	Q2 -50% Feb-20 Mar-20 Apr-20
	Loans in deferral in the Banking sector (BOI data)		Balance of loans for which the deferral period ended, Banking sector as of September, (BOI data)
		Balance of loans in deferral /
		total loans	Total
Total Consumer		7.2% 5.5%	Consumer
Medium enterprises		2.9%	Medium enterprises
Corporate		2.5%	Corporate
SME		3.9%	SME

WHAT WE ARE SEEING – DISCOUNT GROUP

Corporate 722 47.7% 1.6%

SME 1,887 33.7% 5.1%

Mortgages 3,248 38.8% 8.0%

Balance of loans in deferral, in millions (Discount Bank and Mercantile Bank) 7,017 15,743 8,225 Mar-31 Jun-30 Sept-30

Balance of loans for which the deferral period ended, in millions (Discount Bank and Mercantile Bank)

	Balance as of Sept-30	% of total deferred	Of which: in arrears of 30 days or more
Total Credit	11,142	61.4%	124
Consumer	899	49.9%	11
Medium enterprises	611	70.4%	-
Corporate	791	52.3%	-
SME	3,718	66.3%	34
Mortgages	5,123	61.2%	79

* Calculated as the balance deferred/balance of credit according to regulatory segments

ROBUST CAPITAL AND LIQUIDITY POSITION SUPPORTING OUR GROWTH

3Q 2020 HIGHLIGHTS

• Adjusted ROE of 7.7%. The main adjustment was a NIS 168 m provision for a legal proceeding in Australia.
• Loan book growth of 1.9% QoQ, 8.2% YoY, driven by 3.7% growth in mortgages and 4.2% in corporate vs. 2Q20.
• Total income growth of 3.5% QoQ, driven by growth in NII, sale of VISA inc. shares, higher bond realization and fees.
• We continued to increase our reserves but at a slower pace than in 1H20, leading to lower loan loss provision.
• 540 employees signed the early retirement agreement so far, in one of the largest retirement plans ever across the group.

0 2	Net income	ROE	Cost-income ratio	Credit loss expenses ratio	0 2	Net income	ROE	Cost-income ratio	Credit loss expenses ratio
Q 3	NIS 258 m (2Q20: NIS 174 m)	5.5% (2Q20: 3.7%)	70.4% (2Q20: 66.0%)	0.70% (2Q20: 1.14%)	M 9	NIS 711 m (9M19: NIS 1,377 m)	5.0% (9M19: 10.4%)	64.9% (9M19: 64.0%)	1.08% (9M19: 0.33%)
d e st u dj A	NIS 357 m (2Q20: NIS 226 m)	7.7% (2Q20: 4.8%)	63.3% (2Q20: 62.7%)		d e st u dj A	NIS 866 m (9M19: NIS1,417 m)	6.1% (9M19: 10.7%)	61.4% (9M19: 63.2%)

SOLID GROWTH IN OUR FOCUS SEGMENTS

Micro & small enterprises Medium enterprises Corporate

(8.1%) (3.0%)

* Regulatory segments, in Israel

** Balance of household credit excluding mortgages and credit cards

INCOME GROWTH SUPPORTED BY INCREASED ACTIVITY ACROSS ALL OPERATIONS AND STABLE NIM

COST RESTRAINT LED TO AN IMROVED COST-INCOME RATIO

DECLINE IN LOAN LOSS PROVISION WHILE INCREASING THE RESERVE; WRITE-OFFS ARE STILL STABLE

CREDIT DEFFERALS IMPACTED PROBLEMTIC CREDIT RISK; NPL STILL LOW

SUBSIDIARIES

DEMAND FOR CREDIT RECOVERED IN THE QUARTER

• Demand for credit is starting to recover as IDBNY's loan book grew 5.0% compared to the second quarter and 4.0% on a comparable year over year basis.
• Despite strong loan book growth and lower cost of deposits, we continued to experience pressure on NIM that led to a 8.1% decline in net interest income.
• Provisions for loan losses increased due to continued reserve build primarily on account of qualitative factor adjustments for COVID and, to a lesser extent, growth in loans.
• Cost-income ratio of 62.0% in 3Q20 vs. 61.6% in 2Q20.

SOLID PROFITABILITY DESPITE HIGH CREDIT LOSS EXPENSES DUE TO COVID

• Credit growth of 1.3% QoQ and 21.0% YoY, driven mainly by mortgages and corporate credit.
• Growth of 1.0% in net interest income and 9.9% in fees, vs. 2Q20, was mitigated by a reduction in trading gains.
• Loan loss provision was to 0.94% of total credit, slightly lower than the previous quarter's 1.23%, due to reserve build on account of COVID.
• Cost-income ratio of 57.9%, vs. 55.6% in 2Q20 and 58.4% in 3Q19.

14

WINNING SHARE IN A COMPETITIVE MARKET

• CAL continues to take market share, with transaction turnover returning to growth, of 1.1% in the nine months period compared to the corresponding period. Active cards grew 3.3% relative to last year.
• Significant events in the quarter including the sale of shares of VISA Inc. and the early retirement program as well as lower LLP resulted in an ROE of 16.1%.
• Adjusted net income is NIS 51 m and the adjusted ROE is 11.3%.
• Cost-income ratio of 79.0% in 9M20 vs. 76.7% in 9M19.

STRATEGY

FOCUS ON ACHIEVING OUR POTENTIAL

ONE OF THE LARGEST EVER EARLY RETIREMENT PLAN ACROSS THE GROUP

Out of the potential 640 employees included in the early retirement plans across the group, so far

540 have already signed the agreement and are expected to leave by the end of 2020.

• -50 Additional 150 employees to naturally retire by 2021.
• The plan increased the liabilities to employees by NIS 545 m (will be added to OCI).
• Expected impact on P&L NIS 344 m before tax in 4Q20.

INTRODUCING INNOVATION TO OUR CUSTOMERS BY PARTNERING OUR API STORE WITH FINTECH

• One of the most promising start-ups in Israel
• Provides retail customers with a cash flow optimization tool to manage their financials
• Real time predictive budget
• Simple and actionable WhatsApp messages
• Top tier investors: Sir Ronald Cohen, Aleph VC

• A leading company in Israel for cash flow systems
• Specializes in cash flow management solutions for small and medium businesses.
• Developed a variety of external interfaces for collecting banking and accounting information
• Serves over 6,000 customers

APPENDICES

PROFIT & LOSS AND SELECTED RATIOS

NIS m	3Q20	2Q20	3Q19	Vs. 2Q20	Vs. 3Q19	9M20	9M19	Change
Net interest income	1,476	1,463	1,398	0.9%	5.6%	4,394	4,414	(0.5%)
Credit loss expenses	330	532	152	(38.0%)	117.1%	1,518	429	253.8%
Non-interest financing income	301	276	195	9.1%	54.4%	994	597	66.5%
Commissions	698	650	765	7.4%	(8.8%)	2,087	2,204	(5.3%)
Other income	7	8	10	(12.5%)	(30.0%)	15	19	(21.1%)
Total non-interest income	1,006	934	970	7.7%	3.7%	3,096	2,820	9.8%
Total income	2,482	2,397	2,368	3.5%	4.8%	7,490	7,234	3.5%
Salaries and related expenses	830	794	824	4.5%	0.7%	2,448	2,528	(3.2%)
Maintenance & depreciation	289	274	272	5.5%	6.3%	848	804	5.5%
Other expenses	628	515	437	21.9%	43.7%	1,565	1,301	20.3%
Total operating and other expenses	1,747	1,583	1,533	10.4%	14.0%	4,861	4,633	4.9%
Income before taxes	405	282	683	43.6%	(40.7%)	1,111	2,172	(48.8%)
Provision for taxes on income	134	105	240	27.6%	(44.2%)	390	764	(49.0%)
Income after taxes	271	177	443	53.1%	(38.8%)	721	1,408	(48.8%)
Net income attributable to shareholders	258	174	427	48.3%	(39.6%)	711	1,377	(48.4%)
ROE	5.5%	3.7%	9.7%			5.0%	10.4%
Cost income ratio	70.4%	66.0%	64.7%			64.9%	64.0%
CET-1 ratio	10.10%	10.08%	10.41%			10.10%	10.41%
NIM	2.35%	2.35%	2.55%			2.38%	2.71%
Rate of credit loss expenses	0.70%	1.14%	0.35%			1.08%	0.33%
NPL ratio	0.59%	0.77%	0.60%			0.59%	0.60%
Dividend per share (in Agurot)*	-	-	5.5			4.19	9.39

* Dividend in respect of the relevant period

ADJUSTED PROFIT & LOSS AND SELECTED RATIOS

NIS m	3Q20	2Q20	3Q19	Vs. 2Q20	Vs. 3Q19	9M20	9M19	Change
Net interest income	1,476	1,463	1,398	0.9%	5.6%	4,394	4,414	(0.5%)
Credit loss expenses	330	532	152	(38.0%)	117.1%	1,518	429	253.8%
Non-interest financing income	213	276	195	(22.8%)	9.2%	906	597	51.8%
Commissions	698	650	765	7.4%	(8.8%)	2,087	2,204	(5.3%)
Other income	7	8	10	(12.5%)	(30.0%)	15	19	(21.1%)
Total non-interest income	918	934	970	(1.7%)	(5.4%)	3,008	2,820	6.7%
Total income	2,394	2,397	2,368	(0.1%)	1.1%	7,402	7,234	2.3%
Salaries and related expenses	792	794	824	(0.3%)	(3.9%)	2,410	2,528	(4.7%)
Maintenance & depreciation	289	274	272	5.5%	6.3%	848	804	5.5%
Other expenses	435	435	419	0.0%	3.8%	1,286	1,239	3.8%
Total operating and other expenses	1,516	1,503	1,515	0.9%	0.1%	4,544	4,571	(0.6%)
Income before taxes	548	362	701	51.4%	(21.8%)	1,340	2,234	(40.0%)
Provision for taxes on income	185	133	246	39.1%	(24.8%)	450	786	(42.7%)
Income after taxes	363	229	455	58.5%	(20.2%)	890	1,448	(38.5%)
Net income attributable to shareholders	357	226	439	58.0%	(18.7%)	866	1,417	(38.9%)
ROE	7.7%	4.8%	9.9%			6.1%	10.7%
Cost income ratio	63.3%	62.7%	64.0%			61.4%	63.2%
CET-1 ratio	10.10%	10.08%	10.41%			10.10%	10.41%
NIM	2.35%	2.35%	2.55%			2.38%	2.71%
Rate of credit loss expenses	0.70%	1.14%	0.35%			1.08%	0.33%
NPL ratio	0.59%	0.77%	0.60%			0.59%	0.60%
Dividend per share (in Agurot)*	-	-	5.5			4.19	9.39

* Dividend in respect of the relevant period

ADJUSTMENTS TO PROFIT & LOSS

	Gross			Net				Gross		Net
NIS m	Q320	Q220	Q319	Q320	Q220	Q319		9M20	9M19	9M20	9M19
Income from the sale of Visa Inc. shares	(88)	0	0	(44)	0	0		(88)	0	(44)	0
Early retirement at CAL	38	0	0	18	0	0		38	0	18	0
Early retirement at Discount Bank and Mercantile	25	9	18	16	6	12		40	40	26	26
Legal Provision for the case in Australia	168	71	0	109	46	0		239	22	155	14
Total	143	80	18	99	52	12		229	62	155	40

SELECTED BALANCE SHEET ITEMS

NIS m	30.9.20	30.6.20	30.9.19
Cash and deposits with banks	40,469	39,608	21,746
Securities	41,431	40,037	37,303
Credit to the public	190,300	186,841	175,810
Provision for credit loss	(3,644)	(3,405)	(2,373)
Credit to the public, net	186,656	183,436	173,437
Credit to governments	4,276	4,219	3,478
Investment in investee companies	269	154	172
Buildings and equipment	2,805	2,648	2,496
Intangible assets and goodwill	164	164	160
Assets in respect of derivative instruments	5,451	5,856	5,601
Other assets	5,478	5,146	3,921
Total Assets	287,678	282,100	248,778
Deposits from the public	225,108	222,048	194,462
Deposits from banks	9,384	7,717	5,980
Bonds and subordinated debt notes	11,314	11,377	8,131
Liabilities in respect of derivative instruments	5,586	6,064	6,079
Other liabilities	16,361	14,965	13,486
Total liabilities	267,979	262,577	229,805
Equity capital attributed to the Bank's shareholders	19,160	19,004	18,457
Non-controlling rights in consolidated companies	539	519	516
Total equity	19,699	19,523	18,973
Total Liabilities and Equity	287,678	282,100	248,778

FINANCIAL PERFORMANCE

Main P&L and Balance Sheet metrics and selected ratios

USD m	3Q20	2Q20	3Q19	Vs. 2Q20	Vs. 3Q19	9M-20	9M-19	Change
Net interest income	57	62	62	(8.1%)	(8.1%)	178	189	(5.8%)
Credit loss expenses	9	3	4	200%	125%	27	8	237.5%
Non-interest income	14	11	25	27.3%	(44.0%)	57	58	(1.7%)
Total income	71	73	87	(2.7%)	(18.4%)	235	247	(4.9%)
Operating & other expenses	44	45	47	(2.2%)	(6.4%)	136	139	(2.2%)
Net income	14	21	30	(33.3%)	(53.3%)	57	79	(27.8%)
Return on equity	4.6%	7.6%	11.2%			6.7%	10.5%
Cost-income ratio	62.0%	61.6%	54.0%			57.9%	56.3%
Rate of credit loss expenses	0.58%	0.15%	0.25%			0.53%	0.16%
NIM	2.37%	2.59%	2.70%			2.47%	2.79%
Total assets	10,669	10,336	9,702	3.2%	10.0%
Loans, net	6,963	6,639	6,718	4.9%	3.6%
Securities	2,676	2,637	2,432	1.5%	10.0%

Deposits from the public 8,774 8,661 7,905 1.3% 11.0% Total equity 1,149 1,132 1,061 1.5% 8.3%

FINANCIAL PERFORMANCE

Main P&L and Balance Sheet metrics and selected ratios

NIS m	3Q20	2Q20	3Q19	Vs. 2Q20	Vs. 3Q19	9M-20	9M-19	Change
Net interest income	302	299	305	1.0%	(1.0%)	918	888	3.4%
Credit loss expenses	77	99	39	(22.2%)	97.4%	274	130	110.8%
Non-interest income	114	124	82	(8.1%)	39.0%	336	270	24.4%
Total income	416	423	387	(1.7%)	7.5%	1,254	1,158	8.3%
Operating & other expenses	241	235	226	2.6%	6.6%	717	680	5.4%
Net income	64	58	79	10.3%	(19.0%)	171	228	(25.0%)
Return on equity	8.2%	7.5%	11.1%			7.3%	10.8%
Cost-income ratio	57.9%	55.6%	58.4%			57.2%	58.7%
Rate of credit loss expenses	0.94%	1.23%	0.57%			1.13%	0.65%
NIM	2.71%	2.81%	3.57%			2.81%	3.46%
Total assets	49,498	47,133	37,383	5.0%	32.4%
Credit to the public, net	32,839	32,464	27,250	1.2%	20.5%
Securities	5,850	4,437	4,809	31.8%	21.6%
Deposits from the public	39,529	38,036	31,465	3.9%	25.6%
Total equity	3,199	3,181	2,996	0.6%	6.8%

FINANCIAL PERFORMANCE

Main P&L and Balance Sheet metrics and selected ratios

NIS m	3Q20	2Q20	3Q19	Vs. 2Q20	Vs. 3Q19	9M-20	9M-19	Change
Income from credit card transactions	315	286	358	10.1%	(12.0%)	931	1,004	(7.3%)
Net interest income	134	133	125	0.8%	7.2%	402	375	7.2%
Credit loss expenses	25	59	54	(57.6%)	(53.7%)	190	117	62.4%
Non-interest financing income	68	(2)	2	-	-	74	0	-
Total income	517	417	485	24.0%	6.6%	1,407	1,379	2.0%
Total expenses (excluding credit loss expenses)	405	328	354	23.5%	14.4%	1,111	1,058	5.0%
Net income	71	23	58	208.7%	22.4%	87	149	(41.6%)
Return on equity	16.1%	5.1%	13.5%			6.3%	11.0%
Cost-income ratio	78.3%	78.7%	73.0%			79.0%	76.7%
Total assets	18,431	17,885	18,837	3.1%	(2.2%)
Interest bearing credit	6,129	6,355	6,217	(3.6%)	(1.4%)
Consumer credit	5,332	5,477	5,238	(2.6%)	1.8%
Total equity	1,908	1,835	1,826	4.0%	4.5%