Bank Leumi (TASE: LUMI) and Mizrahi Tefahot Bank (TASE:MZTF) are the most efficient Israeli banks according to the 2007 annual survey of the Israeli banking sector published by Supervisor of Banks Rony Hizkiyahu last month. Israel Discount Bank (TASE: DSCT) lags far behind.
the Bank of Israel examined banks' efficiency along a number of variables. The first is salary cost versus output, which is defined as a bank's total balance sheet assets plus the value of the bank's credit. Mizrahi Bank ranked first on this variable with an output of NIS 29 million per employee. The bank's average annual salary cost of NIS 290,000 was the lowest among the banks. Bank Leumi was in second place, with an output of NIS 28 million per employee and average annual salary cost of NIS 335,000.
Discount Bank ranked last with an output of NIS 20 million per employee compared with NIS 24-29 million at the other banks. Discount Bank's average salary cost of NIS 310,000 per year is about the average for the industry. The 2007 results were largely unchanged from both 2005 and 2006.
The second variable is the efficiency ratio, which is the ratio between a bank's total revenue (operating revenue plus financing profit) and its expenses. Bank Leumi ousted Bank Hapoalim (TASE: POLI; LSE:80OA) from the number one ranking on this variable with an efficiency ratio of 1.71. Mizrahi Bank was in second place with an efficiency ratio of 1.66. Bank Hapoalim had the best efficiency ratio in 2005 and 2006.
The average efficiency ratio was 1.55. Hapoalim's ratio was 1.53, followed by First International Bank of Israel (TASE: FTIN1;FTIN5) with 1.49, and Discount Bank in last place with 1.34.
Published by Globes [online], Israel business news - www.globes-online.com - on August 3, 2008
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