Israel Discount Bank (TASE: DSCT) today completed the raising of NIS 605 million in Tier-2 capital. The bank raised NIS 451 million from institutional investors and the rest from the public. The money will boost the bank's capital adequacy ratio by 0.45 percentage points next year, to help it meet the Bank of Israel mandated 12% threshold, which comes into effect at the end of the year, in accordance with Basel II - The New Basel Capital Accord of the Basel Committee on Banking Supervision.
When Discount Bank published its financial report for the second quarter of 2009, president and CEO Giora Ofer told "Globes", "As far as I am concerned, complying with the regulator's capital adequacy ratio is the minimum."
Discount Bank originally planned to raise NIS 200 million, but increased the amount because of strong demand from institutional investors. The bank will recognize part of the capital raised in its financial report for the fourth quarter of 2009, and will only recognize the full amount next year, because the bank has more Tier-2 capital than is permitted.
Discount Bank raised the capital in two bond series. It raised NIS 365 million in a Consumer Price Index (CPI) linked bond at 4.24% annual interest and a duration of 6.9 years. The interest rate is 2.24% higher than the interest on the corresponding government bond. The bank raised NIS 240 million in a bond with a variable interest rate with a spread of 2% above the yield of one-year short-term deposits. The interest rate is 1.95% higher than the interest on the corresponding government Gilon bond.
Standard & Poor's Maalot Ltd. rated the bonds A, with a "Negative" outlook.
Discount Bank's Tier-1 capital adequacy ratio was 6.92% at the end of June, and its general capital adequacy ratio was 11.49%. Its capital adequacy ratio rose to 12.08% after the capital raised in July and August. The bank has raised NIS 2.2 billion, including the current amount, of which NIS 648 million was raised in private bond placements and the rest in marketable bonds.
Discount Bank's share rose 0.1% by mid-afternoon to NIS 7.48.
Published by Globes [online], Israel business news - www.globes-online.com - on October 20, 2009
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