In Israel Discount Bank (TASE: DSCT) bank's announcement of the impending departure of CEO Reuven Spiegel, after just three years in the post, it was stated that Spiegel was leaving for personal and family reasons. Sources inform "Globes" however that the main reason is differences of opinion with Discount Bank chairman Yossi Bachar, and that the main bone of contention is Discount Bank of New York.
Bachar supports the idea of selling the US bank. After receiving the board's approval, he appointed two investment banks, one of which was Morgan Stanley, to find a buyer for the bank, and an information room was even opened for interested buyers. Discount Bank has shareholders' equity of $850 million, and the aim was to sell it for $1 billion.
It is believed that Spiegel was not keen on selling Discount New York, which he managed in the past. The reason for this is that Discount New York represents an important profit center for Israel Discount Bank. In 2012, it made a profit of $43 million. Spiegel sees it as a good asset, and would rather not sell.
In November last year, "Globes" revealed that Discount Bank had put Discount Bank of New York up for sale. The idea of selling it stemmed from regulatory requirements concerning capital adequacy. The banks must reach a capital adequacy ratio of 9% by the end of 2014. Discount Bank's capital adequacy ratio is 8.9%, but, because of the switch to the Basel 3 rules, it will fall by more than 1%.
Selling one of the bank's assets (Discount Bank of New York, Mercantile Discount Bank, or CAL Israel Credit Cards Ltd.) should improve its capital adequacy ratio substantially. Here arises the dilemma: whether to sell an important asset to reach the capital level required, allowing the bank to expand its credit portfolio, but losing it an important source of profit. Another possibility is to rely on greater efficiency at the bank and regular profits to reach the target set by the Bank of Israel, but then the pursuit of the target will continue for a long time.
Since the report in "Globes" of the intention of selling Discount Bank of New York, not much has happened. Bank Hapoalim (TASE: POLI) put out feelers, but nothing came of it. Recently however Bachar decided to expedite the matter, which Spiegel did not like. The CEO debated with himself over the past few weeks whether he should leave, and yesterday officially notified the board of his decision.
Published by Globes [online], Israel business news - www.globes-online.com - on August 22, 2013
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