Bank Leumi (TASE: LUMI) subsidiary Leumi Mortgage Bank Ltd. published a profit warning last night. The bank expects to post a loss of NIS 11 million for the first quarter of 2006, because of a one-time NIS 63 million expense caused by changing the calculation for the bank’s provision for doubtful debts on housing loans in accordance with a Bank of Israel circular. Leumi Mortgage Bank will publish its financial report for the first quarter on May 7. Leumi Mortgage Bank’s CEO is Reuven Sabag.
The provision is mostly due to smaller provisions made in the past for assets that were sold, the proceeds of which were reported after the date of financial reports; the clearance of loans in arrears after the date of financial reports, the anticipated sale of assets in the near term; and anticipated revenue from insurance indemnification. The Bank of Israel’s circular stipulated banned the use of these reductions.
In its financial report for 2005, Leumi Mortgage Bank said it would have to make this write-off, but the bank had hoped to spread it out over four quarters. The Bank of Israel yesterday denied Leumi Mortgage Bank’s request to do so, forcing the latter to make a single provision for the entire amount in the first quarter.
Leumi Mortgage Bank posted a profit of NIS 126 million in 2005. However, the bank’s provision for doubtful debts rose 17.6% to NIS 106 million. At the time, the bank attributed the increase to increased arrears of loans, while the calculation of the provision was based on the length of the arrears.
Published by Globes [online], Israel business news - www.globes.co.il - on April 25, 2006
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