Israel Discount Bank (TASE: DSCT) is the least efficient among Israel’s top five banks, according to the Bank of Israel Banking Supervision Department annual report for 2006, released last week.
The report found that the efficiency of the other four banks - Bank Hapoalim (LSE: BKHD; TASE: POLI), Bank Leumi (TASE: LUMI), Mizrahi Tefahot Bank (TASE:MZTF), and First International Bank of Israel (TASE: FTIN1;FTIN5) - were broadly similar, Discount Bank, under CEO Giora Ofer, consistently lagged far behind.
The Banking Supervision Department measures efficiency along a number of variables. One variable is the cost/output ratio per officeholder, in which output was defined as the bank’s total balance sheet assets plus the value of off-balance sheet credit. Discount Bank lagged the other four banks on this variable; it had an output of NIS 20 million per officeholder in 2006, compared with NIS 26-28 million per officeholder at the other banks.
Discount Bank’s average cost per officeholder of NIS 350,000 in 2006 was around the average for the banking system as a whole. This finding was the same in 2005.
A second variable is the efficiency ratio, calculated as the ratio between total revenue (operating revenue and financing profit) and expenditures. Bank Hapoalim had the best efficiency ratio at 1.7 in 2006; it also scored the highest on this variable in 2005. First International Bank was in second place, with an efficiency ratio of 1.59; followed by Mizrahi Tefahot Bank, with 1.51; Bank Leumi, at 1.49; and, in last place, Discount Bank, with 1.22. The average ratio was 1.51. In 2005, Discount Bank had an efficiency ratio of 1.29, compared with the banking system average of 1.62, and in 2004, its efficiency ratio was 1.29 compared with the banking system average of 1.65.
The banks’ financial reports for the first half of 2007 show the same efficiency ratios. The banking system average was 1.62: Bank Leumi had the highest ratio, at 1.74; followed by Bank Hapoalim, at 1.72; Mizrahi Tefahot Bank, at 1.69; First International Bank, at 1.51; and Discount Bank, at 1.36.
Published by Globes [online], Israel business news - www.globes.co.il - on September 10, 2007
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