Sources in the banking system believe that Bank Leumi will distribute another dividend in April, its third on its 2010 profits. They believe that the bank will distribute NIS 400 million. In the past few months, the bank has distributed two NIS 500 million dividends, for a total of NIS 1 billion within a year.
Previously, Bank Leumi's dividend policy was the distribution "of at least 50% of the net profit", but no policy has been set for the coming year. The bank intends to set its dividend policy after the Bank of Israel completes its approval of the Internal Capital Adequacy Assessment Process (ICAAP). However, Bank Leumi can allow itself to distribute an ad hoc dividend, in view of its capital adequacy ratio, which is the highest in the banking system.
"We aim for our shareholders to share in our good results. We don’t yet have a declared dividend policy, and we won't set the policy until we receive approval from the Bank of Israel of the capital policy, but we will distribute an ad hoc dividend. As for another dividend on 2010, there was no discussion, but I don’t rule it out. We'll discuss the matter in March 2011," Bank Leumi senior deputy CEO Zeev Nahari told "Globes" in an interview in November, following the publication of the bank's financial report for the third quarter of 2009.
The Bank of Israel set for the banks a minimum Tier-1 capital adequacy ratio of 7.5%, but Bank Leumi set a stricter target for itself of 8-8.5%. This is the highest capital target in the banking system. The bank is currently above the target, with a Tier-1 capital adequacy ratio of 8.52% at the end of September, after the distribution of a dividend. Therefore, the bank can distribute another dividend on the basis of its fourth quarter profits without affecting its Tier-1 capital adequacy ratio and staying with the capital target range.
Tier-1 capital essentially includes core capital - total shareholders' equity plus accumulated earnings. Under amendments to Basel II - The New Basel Capital Accord of the Basel Committee on Banking Supervision, known as Basel III, the core Tier 1 capital adequacy ratio will turn into the primary capital adequacy figure that every bank, depending on regulations, will need to meet. In June 2010, the Bank of Israel published guidelines, setting the target minimum core Tier-1 capital adequacy ratio at 7.5%.
Published by Globes [online], Israel business news - www.globes-online.com - on January 17, 2011
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