First International Bank of Israel Ltd. - FIBI

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GDP Rate of Growth (%) 5.2

4.4

5.3

5.1

4.3

1.7

-0.8

* Forecast 2002 2003 2004 2005 2006 2007 2008* * Forecast

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* Forecast Rate of Inflation (%), Bank of Israel Interest Rate (%) - average 9.3% 6.8% 6.8% 6.5% 7.5% 4.2% 5.2% 3.7% 2.4% 3.9% 3.4% 3.6% 3.3% 1.4% 1.2% 0.0% -0.1% 2000 2001 2002 -1.9% 2003 2004 2005 2006 2007 2008* Bank of Israel interest rate Rate of inflation

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Exchange Rate ($/NIS) - average 4.49

4.46

4.11

3.41

2005 2006 2007 2008*

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Foreign investments in Israel* (US$ Millions) 24,883 *In the private sector excluding Banking 14,354 9,667 9,154 3,920 3,164 2,651 2,136 46 377 546 341 2002 2003 2004 2005 2006 2007 In 2006 :1. Capital issue by “Teva” 2. Acquisition of “Iscar” by Berkshire-Hathaway 4,011 700 2,660 981 Q1/2007 Q1/2008 Total Investments in Israel of this: inTel-Aviv Stock Exchange

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Israeli investments Abroad* (US$ Millions) *In the private sector excluding Banking 14,843 6,848 4,454 2,878 808 2,004 2002 2003 2004 In 2006 : Acquisition by “Teva” 2005 2006 2007 1,818 1,018 Q1/2007 Q1/2008

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Tel-Aviv Stock Exchange (TA100)

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Bank Deposits - LT Bank Deposits - ST Outlook Country Rating M oody's

A1 P -1 Stable

Fitch

A F-1 Stable

S&P

A A -1 Positive 8

First International Bank of Israel Ltd. - FIBI Overview March 31, 2008

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Ownership Structure As of 25.5.2008

Bino-Liberman Group The Public The Public E. 19.19% V. 16.31% E. 25.95% V. 0% E. 17.735% V. 12.84% E. 56.315% V. 87.16% FIBI Holding Company Ltd.

E. 100% V.100% E. 54.33% V. 72.59% The First International Bank of Israel Ltd.

E. 26.48% V. 11.1% Fibi Investment House Ltd.

Israel Discount Bank E. 68% V.66% Otsar Hahayal E. 75% V. 25%

The First Int ’l & Co.

Underwriting and Investments Ltd.

E. 68.68% V.68.68% PAGI Poalei Agudat Israel Bank Ltd.

E. 51% V.51% Bank Masad E.50% V. 60% E. 100% V.100% FIBI Bank (UK) Plc London Modus-Selective Investments Portfolio Ltd. E. 100% V.100% UBank Ltd.

(Formerly: Investec Bank (Israel) Ltd.) E. 100% V.100% FIBI Bank (Suisse) Ltd. Zurich E. 100% V.100% Kidma – Provident Funds Management Ltd.

E. Percentage of equity share capital ownership V. Percentage of voting power exercised at any general meeting

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First International Bank Group FIBI



Corporate + middle market banking



Private + affluent banking



85 branches Retail bank cluster UBank Ltd.

(Formerly: Investec Bank (Israel) Ltd.) Bank Masad PAGI Poalei Agudat Israel Bank Ltd.

Focus: Branches: Since: retail 15 2008 retail/commercial 20 1977 Key audience: teachers ultra-orthodox Otsar Hahayal



Capital markets



Trust and custody



Private and affluent banking retail/commercial 46 2006 defense + military (acquisition 2004)



5 branches (unique affluent banking branches) FIBI UK (London)



Business banking



Private banking International FIBI Switzerland (Zurich)



Private banking

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Shareholders 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.

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.

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First International Bank of Israel - FIBI • •

Universal bank with strong niche position in capital markets, foreign exchange and foreign trade Domestic subsidiaries target focused audiences: affluent banking (U-bank), defense sector - retail banking (Otsar Hahayal), ultra-orthodox Jews (PAGI), and teachers (Masad)

•

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

•

Branches: 171 (including subsidiaries)

•

Employees: 4,690

•

Equity: NIS 5.5 Billion (US$ 1.6B)

•

5th largest bank in Israel 13

Bank rating Bank Deposits - LT Financial Strength Bank Deposits - ST Outlook M oody's

A1

Fitch

BBB +

S&P

BBB (pi) C P - 1 Stable F - 2 Stable 14

Strategy - Main Focus

• • •

CORE CAPABILITIES:

Distinctive professional standards in: global capital markets, structured products, foreign trade and currency exchange Strong traditional position in corporate and private banking Top class reputation in private banking services, especially dealing room, specialized investment advice centre and TESE futures and operations index, where FIBI leads the market

CLIENTS:

• • • Client centric vs. product oriented banking Corporate finance: increase penetration of middle market Private banking: extend presence in mass affluent segment Retail banking: broaden overall footprint (e.g., acquired Bank Otsar Hahayal and Masad) 15

Strategy - Main Focus

• •

CREDIT:

Improved mix of credit portfolio through diversification including middle market Upgraded Scoring model and processes in anticipation of Basel II, including development of advanced credit scoring models for risk based pricing • • •

OTHER:

Leveraging competitive strengths, realize synergies from acquisitions Outsourcing: first Israeli bank to outsource its computer infrastructure Development of pension planning advice offering 16

Pension advisory services

Accumulated sum (NIS) - 521,718,730 Meetings – 1,624 Applications – 15,213 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.

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Retail Banking - as of 5/2008 Total number of accounts (thousands) Number of accounts with direct wage deposits (thousands) Total balance of credit to the public (Billion NIS) Total balance of deposits (Billion NIS) Change compared with 12/2006 12/2006 12/2007 5/2008

2.04% 323.3

326.6

329.9

7.47% 12.09% -2.19% 75.0

1.456

9.688

77.7

1.650

9.794

80.6

1.632

9.476

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121 10.5% Net Earnings (NIS millions) 186 173 15.1% 14.8% 107 8.1% 89 6.6% Net ROE I /07 I I /07 I I I /07 I V/07 I /08

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Adjusted* Net Earnings (NIS millions) 174 Net ROE 158 15.4% 11.9% I /07 I /08 * Not including the effect of accounting distortions and non-recurring wage costs

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Credit to borrowers over 5% of bank ’s equity to total credit 22.1% 18.9% 18.4% 12.5% 11.6% 7.3% 7.8% 12/2003 12/2004 12/2005 12/2006 12/2007 03/2007 03/2008

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Ratio of Provision for Doubtful Debts to Credit to the Public 1.75% 4 other major banks FIBI 1.28% 1.34% 1.10% 0.99% 0.28% 0.79% 0.65% 0.54% 0.53% 0.34% 0.27% 0.22% 0.27% 0.91% 0.85% 0.99% 0.92% 0.72% 0.62% 0.53% 0.42% 0.33% 0.28% 0.28% 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 I/2 00 8 -0.06%

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19 96 Ratio of Provision for Doubtful Debts to Earnings from Financing Operations 69.5% 4 other major banks Fibi 44.0% 40.1% 22.6% 7.9% 19.0% 10.1% 18.1% 9.4% 15.1% 8.3% 15.7% 9.6% 34.8% 26.3% 30.7% 30.5% 24.3% 18.5% 16.5% 13.6% 12.0% 8.8% 7.7% 26.2% 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 I/2 00 8 -1.7%

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Ratio of Provision for doubtful debts to Credit to the public (compared to 5 major banks) 31.3.2008

0.49% 0.36% 0.22% 0.06% Leumi Discount Mizrahi Poalim -0.06% Fibi

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Ratio of Credit to the public to total Assets (%) – 31.3.2008

67.7% 66.0% 60.9% 64.3% 60.3% 66.7% 60.1% 61.1% 2005 2006 4 other major banks 2007 FIBI Q1/ 2008

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Total Credit Risk in Respect of Problematic Debts (NIS millions) Total problematic debt (without debt subject to special supervision)

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

Debt subject to special supervision Change compared with 31.12.07

31.12.04 31.12.05 31.12.06 31.12.07 31.03.08

-337 2,855 1,947 1,623 1,115 778 -126 -11 1,454 406 1,188 345 114 2,744 3,305

Total credit risk relating to problematic borrowers -234 6,005 5,597 * Securities, financial derivatives, non-utilization of credit lines

815 291 2,349

4,263

662 258 1,696

3,069

536 247 1,810

2,835

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Total Assets (NIS Millions) 92,516 86,538 90,822 72,745 2005 2006 2007 Q1/2008

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Credit to the Public (NIS Millions) 55,594 55,477 52,198 44,270 2005 2006 2007 Q1/2008

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Deposits from the Public (NIS Millions) 75,787 72,240 73,339 61,585 2005 2006 2007 Q1/2008

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Changes in Shareholders ’ Equity (NIS millions) 5,511 5,486 4,740 4,181 2005 2006 2007 Q1/2008

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Capital adequacy Second Tier Capital Ratio Capital Adequacy Ratio (%) 11.7% 10.1% 11.4% 11.6% 2.7

3.6

2.8

2.7

8.9

8.1

8.6

7.4

First Tier Capital Ratio 2005 2006 2007 Q1/2008

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Capital Adequacy Ratio compared to 5 major banks (%) 31.3.2008

11.77% 11.60% 11.28% 11.00% 9.74% Leumi FIBI Mizrahi Discount Poalim

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Development of FIBI ’s (bank only) Proprietary Trading Book (Securities only) NIS Millions (average) 8,161 7,792 7,723 6,090 6,622 5,819 4,829 4,462 5,310 5,323 3,795 3,065 2,046 1,587 2003 2004 2005 2006 2007 In Israel Q1/2007 Q1/2008 Abroad

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PAGI

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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Earnings from Financing Operations Provision for Doubtful Debts Operating and Other Income Operating and Other Expenses Net Earnings Net Return On Equity Total Assets Credit to the Public (including forex) Deposits from the Public (including forex)

PAGI NIS Millions I/2007 I/2008

25.1

29.6

0.6

20.8

1.7

22.3

32.6

6.9

37.0

8.0

9.1% 4,041 1,418 9.9% 3,832 1,844 3,342 3,348 35

UBANK

FIBI 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 below classic private banking) comprises distinctive branch design and hours of operation, along with many other attractive features. Three of these new branches have already been opened and more are scheduled for the coming years.

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Earnings from Financing Operations Provision for Doubtful Debts Operating and Other Income Operating and Other Expenses Net Earnings Net Return On Equity Total Assets Credit to the Public Deposits from the Public

UBANK NIS Millions I/2007 I/2008

31.7

35.2

-1.2

1.8

34.1

37.5

34.6

42.5

16.6

15.7% 6,645 1,621 5,445 17.8

17.9% 7,045 1,679 5,715 37

Otsar 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.

Otsar Hahayal has 30 branches, 16 mini branches and 890 employees to serve it ’s 220,000 customers.

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Earnings from Financing Operations Provision for Doubtful Debts Operating and Other Income Operating and Other Expenses Net Earnings Net ROE Total Assets Credit to the Public Deposits from the Public

Otsar Hahayal NIS Millions I/2007

92.1

1.5

48.8

100.9

21.6

14.8% 11,252 7,951 9,074

I/2008

94.7

0.6

49.3

109.8

19.7

11.2% 12,408 8,647 10,029 39

Operational and Other Expenses 638 (NIS millions) I/2008 576 *555 *592 I/2007 376 336 *315 *330 142 155 98 107 Total Other expenses** Premises and equipment * Excluding non-recurring wage costs ** Increase mainly related to IT and marketing expenses Salaries and related expenses

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Composition of Foreign Proprietary Trading Book Composition to 31.3.2008

Eurobonds Portfolio Mortgage Backed Bonds AAA rating -

no Sub-Prime exposure

State of Israel Bonds Structure Credit

Millions USD

1,691 253 140 100 Strucrure Producst + Hedge Funds

Total

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2,256 Eurobonds Portfolio Mortgage Backed Bonds AAA rating - no Sub-Prime exposure State of Israel Bonds Structure Credit Strucrure Producst + Hedge Funds 11% 6% 4% 3% 75%

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Distribution of Investments according to Rating AA A BBB AAA A - 2 A - 1

A - 1 A - 2 AAA AA A BBB

Foreign Risk

41% 653 5% 19% 21% 13% 1%

100%

80 308 345 207 21

1632

0

Isareli Risk

0%

Duration Rating

Yr 1 Up t A - 1 0 0 0 140 0

140

0% 0% 0% 100% Up to 1 Yr Up to 7 Yr Up to 5 Yr Up to 5 Yr A - 2 AAA AA A 0%

100%

Up to 3 Yr BBB

Total

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Adjustment to Fair value of available for sale Securities – Consolidated* After Balance Sheet day 15.5.08

98 NIS millions 123 31.03.08

NIS Millions MBS – Mortgage Backed Securities (all) 51 NIS Millions Others

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NIS Millions MBS – Mortgage Backed Securities (all) 73 NIS Millions Others 50 NIS Millions Total loss from the Bond portfolio is relatively low and presented in the Statement of Income Report * The influence on the Capital Account of the subsidiaries abroad and U-Bank is not substantial

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Income by Segments * 31.3.2008

3.7

% FI NANCI AL MANAGEMENT 18.5

% COMMERCI AL BANKI NG 21% 4% 3.3

% SMALL BUSI NESS 3% 33.1% CORPORATE 28% As of I/2007 3.7

% PRI VATE BANKI NG 14%

;

27.6

% HOUSEHOLD 30% * Includes all segments except “other”

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Planned Actions

•

Expansion of distinctive private banking offerings

- Further development of specialized private banking centers - Opening of new International Private Banking Centre - Expansion of unique affluent banking branches in U-bank •

Full realization of group-wide synergies

- Group management of shared services - Cross selling of mortgages, structured products and securities trading •

Expansion of direct banking channels

- Web sites (e.g., new site for Russian speakers) - Call centre (expanded facilities and increased support for branches) •

Non-financial investments

•

Increase in the Bank ’s share of credit card activity

•

Development of pension planning advice offering

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