Banks include their salary costs in the "human capital" item of their financial reports, which is no wonder considering the extensive capital involved in running them. The aggregate salary cost in the banking system reached NIS 15.2 billion in 2008, and bank employees are traditionally among the best paid workers in the economy. The financial reports explain why.
An examination by "Globes" found, that after five years of continuous growth in the average salary cost at the banks, it actually declined in 2008. The average salary cost of the 48,761 banking system employees was NIS 25,400 last year, down from NIS 26,700 in 2007, not including privatization bonuses and severance packages. The reason for the 5% drop was because most banks did not pay bonuses for 2008 performance.
After the banks' aggregate net profit plummeted 97% in 2008 from the year before, only Mizrahi Tefahot Bank (TASE:MZTF) and Israel Discount Bank (TASE: DSCT) distributed employee bonuses. The result was a decline in the banks' average salary cost. The banks' average salary cost rose 15% between 2003 and the 2007 peak, but it is now back to the level of 2005.
For the seventh straight year, Bank Hapoalim (TASE: POLI; LSE:80OA), the country's largest bank, topped the average salary cost table at NIS 28,000 in 2008, down from NIS 28,600 in 2007. The financial crisis has hit the bank's employees in their pockets. Whereas the bank distributed fat employee bonuses in past years - NIS 39,000 per employee in 2007, NIS 56,000 in 2006, and NIS 64,000 in 2005 - in 2008, it distributed no bonuses after posting a net loss of NIS 895 million for the year. The loss was mitigated by the new salary contract, which included a 3.5% pay hike.
Discount Bank, Israel's third largest bank, was in second place, for the sixth straight year, with an average salary cost of NIS 26,833 in 2008, 0.3% more than the average salary cost of NIS 26,700 in 2007. The bank distributed a 2008 bonus equivalent to half a monthly salary.
Union Bank of Israel (TASE: UNON), the country's sixth largest bank, was in third place, with an average salary cost of NIS 26,083 in 2008, 2% more than in 2007.
First International Bank of Israel (TASE: FTIN1;FTIN5), the country's fifth largest bank, is in fourth place, with an average salary cost of NIS 25,167 in 2008, unchanged from the year before.
Bank of Jerusalem (TASE: JBNK), the country's seventh largest bank, is in fifth place, with an average salary cost of NIS 24,250 in 2008.
Mizrahi Tefahot Bank (TASE:MZTF), the country's fourth largest bank, was in sixth place, with an average salary cost of NIS 22,917 in 2008. The 5% drop in the average salary cost compared with 2007 was due to the acquisition of Bank Yahav for Government Employees Ltd.
Bank Leumi (TASE: LUMI), one of the country's largest banks, was in seventh place, with an average salary cost of NIS 22,417 in 2008.
Employment at the banks and their subsidiaries at the end of 2008 was as follows:
- Bank Hapoalim and its subsidiaries - 13,884 employees.
- Bank Leumi and its subsidiaries - 13,108 employees.
- Discount Bank and its subsidiaries - 10,426 employees.
- First International Bank and its subsidiaries - 4,789 employees.
- Mizrahi Tefahot Bank and its subsidiaries - 4,627 employees.
- Union Bank - 1,161 employees.
- Bank of Jerusalem - 352 employees.
The total number of bank employees rose to 48,761 at the end of 2008 from 47,755 a year earlier. The average number of bank employees in 2008 was 48,303. The number of bank employees has risen 21% since 2004, mostly in 2008 when the personnel agencies law came into effect, and which mandated that the banks take on agency employees as regular staff.
In contrast to other companies, which have sought to evade the law, the banks have complied with it in an exemplary manner. Bank Hapoalim hired 900 employees, Bank Leumi hired 550 employees, and Discount Bank hired 300.
Published by Globes [online], Israel business news - www.globes-online.com - on April 13, 2009
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