Mizrahi Tefahot Bank (TASE:MZTF) has been able to leverage its mortgage business to expand its retail banking activity. Maalot The Israel Rating Company Ltd. says that 25-30% of the bank’s new customers are also mortgage customers, and that the bank’s share of the mortgage market rose to 31%, including through Adanim Mortgage Bank.
Foreign analysts estimate that Mizrahi Tefahot Bank recruited 31,000 new customers with monthly salaries greater than NIS 7,000 during 2006, and recruited an additional 14,000 customers in January-April 2007. The bank does not disclose figures about its customer recruitment, but when the bank published its financial report for the first quarter of 2007, CEO Eli Yones said, “Our business plan is working and we’re meeting our targets.”
Maalot analyst Michal Gur said that one way that Mizrahi Tefahot Bank leverages its mortgage activity is to provide consumer credit via its new credit card, launched in March 2006. This credit card enables bank customers to increase their current credit, secured by assets (their homes) on which the bank has a lien. Gur says that credit through this card bears lower interest rates than other consumer credit or credit extended through credit frameworks on current bank accounts.
Gur analyzes the battle that is expected to erupt between Mizrahi Tefahot Bank and Israel Discount Bank (TASE: DSCT) after Discount won a tender to provide banking services to civil servants, while Mizrahi Tefahot Bank acquired control of Bank Yahav for Government Employees Ltd. She believes that the two banks will soon intensely compete for civil service customers, but that Bank Yahav has the edge. “Bank Yahav’s specialization in government employees has given it a long-term relationship with these customers and their financial needs, and enables it to build a leading brand among these customers, with the strategic vision of Mizrahi Tefahot Bank helping Bank Yahav compete against Discount Bank.”
Gur believes that the acquisition of Bank Yahav will strengthen Mizrahi Tefahot Bank’s business profile and give it a return on equity of 11%.
Published by Globes [online], Israel business news - www.globes.co.il - on June 12, 2007
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