The investment house retained its NIS 17 target price for the share.
An expected drop in revenue, and the share’s recent strong performance, were the main reasons why Excellence Nessuah said that it downgraded its recommendation for Bank Leumi (TASE: LUMI) from “Buy” to “Neutral”. “With a NIS 568 million profit from financing activity and a 14.6% return on equity in the third quarter, Bank Leumi continued to surprise us,” wrote Excellence Nessuah banking analyst Micha Goldberg. The investment house retained its NIS 17 target price for the share.
Goldberg added that the sales of the bank’s provident and mutual funds were expected to affect its profit line, and push its return on equity below 14% in the coming years.
Goldberg believes that completion of the sale of the state’s holding in the bank will increase its market cap, but only by 5% above the current price on the Tel Aviv Stock Exchange. He further stated that the sale of the bank’s assets would be reflected in 2006 in a NIS 1.7 billion rise in its profit line. On the other hand, he predicted that sale of the bank’s funds would reduce the bottom line in Bank Leumi’s report for next year by NIS 530 million.
On the positive side, Goldberg expects the bank to increase its future dividends, in view of the impending completion of the state’s holding in the bank.
Published by Globes [online] - www.globes.co.il - on December 11, 2005