The banking system believes that the Bank of Israel will capitulate and not force Bank Hapoalim (LSE:BKHD; TASE:POLI) to meet the December 31, 2005, deadline for selling Bank Otsar Hahayal. The Bank of Israel is expected to grant Bank Hapoalim an extension until mid-2006 to sell Bank Otsar Hahayal, after heavy pressure was applied by Bank Hapoalim executives.
Bank Hapoalim declined to comment. The Bank of Israel also declined to comment, or to respond to a question about whether Governor of the Bank of Israel Prof. Stanley Fischer had granted Bank Hapoalim a postponement.
Over 12 years ago, in May 1993, the government decided that small banks would be separated from large ones. Bank Leumi (TASE:LUMI) obeyed the decision, and sold Union Bank of Israel (TASE: UNON), but Bank Hapoalim has not sold Bank Otsar Hahayal. Bank Hapoalim has delayed the sale of Bank Otsar Hahayal for years, repeatedly obtaining postponements of the deadline for selling its holding in the bank, and actually obtained permission to increase its stake.
The Bachar capital market reform committee recommendations explicitly state that Bank Hapoalim should not receive another postponement to sell Bank Otsar Hahayal.
Israel’s three medium-sized banks - Israel Discount Bank (TASE: DSCT), Mizrahi Tefahot Bank (TASE:MZTF) and First International Bank of Israel (TASE: FTIN1 ;FTIN5) - all want to buy Bank Otsar Hahayal, which has performed well. Bank Otsar Hahayal posted a profit of NIS 52 million in January-September 2005, with a return on equity of 12.16%, compared with 10.86% for 2004 as a whole. Its shareholders’ equity is NIS 634.5 million, which means it will probably be sold for NIS 600-800 million.
Published by Globes [online], Israel business news - www.globes.co.il - on December 11, 2005