(Refiles to correct typo in headline)
* Q2 net profit 86 million shekels vs 140 million year ago
* Provisions for doubtful debt fall 65.7 percent
* Aims to pay half of net profit as dividend
TEL AVIV, Aug 31 (Reuters) - First International Bank of Israel (FIBI), the country's fifth-largest bank, posted lower second-quarter net profit due to higher salary expenses, accounting factors and capital market losses.
FIBI said on Tuesday its quarterly net profit fell to 86 million shekels ($22.5 million) from 140 million a year ago.
Earnings from financing operations before provisions for doubtful debt fell 0.7 percent to 519 million shekels due to writing down the value of derivatives.
Provisions for doubtful debt fell 65.7 percent to 23 million shekels as Israel's economy improved.
The bank reiterated it would pay an 800 million shekel dividend, the first such payment since 2003.
The dividend, one of the components included in an agreement for separating the ownership of Israel Discount Bank from FIBI, will be distributed on Sept. 6.
FIBI said its board decided to adopt a policy of paying 50 percent of distributable net earnings as dividends every year, provided that the ratio of capital to risk assets does not fall below target.
Its capital adequacy ratio in accordance with Basel II directives was 12.87 percent after dividends on June 30. (Reporting by Tova Cohen; Editing by Michael Shields) ($1 = 3.82 shekels)