The bank's profit margin was low in the second quarter, with a net profit of $4.9 million.
Israel Discount Bank (TASE: DSCT) US subsidiary Israel Discount Bank of New York is continuing to be affected by the money laundering scandal it was embroiled in last year. The bank posted a net profit of just $4.9 million in the second quarter of 2007, half of its net profit in the preceding quarter. The low profit margin stems from the many expenses the bank has incurred while conducting audits and introducing the necessary changes in order to conform to regulatory requirements. The bank is committed to carrying out this process as part of the settlement it reached with the authorities, in the wake of the revelations of the money laundering at the bank during 2005.
Between 2000-2005, $2.2 billion from South America was laundered through Discount Bank New York. The bank was also found to have a number of failings in its auditing and money laundering reporting procedures. As a result of the exposure of the money laundering at the bank, general manger Arie Sheer stepped down and was replaced by by Discount Bank executive VP banking division Reuven Spiegel. This was followed in 2006 by the replacement of the entire management team and most of the members of the bank's board.
Discount Bank New York has undergone a costly process since the scandal broke, an expenditure that is now proving to be higher than expected. The total cost of the bank's settlement for the years 2005-2007 now stands at $45 million. Discount Bank believes that 2007 is a lost cause and that Discount Bank New York will only return to profitability in 2008.
Published by Globes [online], Israel business news - www.globes.co.il - on August 12, 2007
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