Israel Discount Bank (TASE: DSCT) yesterday submitted to the Bank of Israel a detailed plan to reach the mandated minimum capital adequacy ratio of 12% at the end of 2009. Supervisor of Banks Rony Hizkiyahu ordered to the bank to submit the plan, a copy of which "Globes" has obtained.
Discount Bank's capital adequacy ratio was 10.42% at the end of March. The plan states that the bank's capital adequacy ratio was 11.3% at the end June. The bank plans to raises its Tier-1 capital adequacy ratio from its current 6.5%, and will raise its capital adequacy ratio to 11.8% at the end of September and to at least 12% at the end of the year.
The bank intends to maintain a future capital adequacy ratio in excess of 12%, because on the basis of Basel II - The New Basel Capital Accord of the Basel Committee on Banking Supervision, which come into effect at the end of the year, its capital adequacy ratio will fall to 11-11.3%.
Discount Bank's plan does not include a rights issue or capital injections from its shareholders. The plan to raise its capital adequacy ratio relies on four legs. The first is to raise NIS 1.6 billion hybrid capital (upper Tier-1 and upper Tier-2 capital). The second is a massive selloff of risk assets, and was the reason for the sale of its stake in Harel Insurance Investments and Financial Services Ltd. (TASE: HARL).
The third leg is the sale of corporate bonds, and the fourth leg is the bank's current profits, which increases its Tier-1 capital.
Yesterday, Discount Bank raised NIS 100 million in a private placement at 6.04% with Altshuler Shaham Ltd.. Altshuler Shaham CEO Gilad Altshuler said, "This is a good investment at a reasonable margin." Each NIS 100 million raised boosts Discount Bank's capital adequacy ratio by 0.07%.
Published by Globes [online], Israel business news - www.globes-online.com - on July 30, 2009
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