Bank Leumi (TASE: LUMI) is cutting back its overseas presence. Sources inform "Globes" that the bank, managed by Rakefet Russak-Aminoach, plans to close four of its representative offices: in Australia; Toronto, Canada; Chile; and France. Bank Leumi declined to comment on the report.
The decision to close the four representative offices came after a general review of its overseas activity that Bank Leumi carried out over the past year, which reached the conclusion that out of considerations of efficiency the offices should be closed. On the other hand, three months ago the bank opened a representative office in Shanghai, after receiving the requisite permits from the local regulator. Nine months ago, "Globes" reported that the bank had decided to withdraw gradually from its activity in Panama, and to close its branch there, a process that as far as is known has not yet been completed.
The representative offices that the bank has decided to close are small, and mainly engage in private banking. Leumi still has representative offices in Mexico, Germany, China and Hong Kong, and branches in the US, the UK, Uruguay, Romania, Switzerland and Luxembourg. Although it plans to close the representative office in Toronto, it will still have an office in Canada, in Montreal.
Leumi's overseas activity made a profit of just $9.5 million in the first nine months of 2013, compared with $40.3 million in the corresponding period of 2012. The sharp drop was mainly because of provisions that the bank made against its activity in London.
In the past, Israeli banks sought opportunities to expand abroad, but today the trend is mainly to cut back this activity. In many places the activity is barely profitable, and sometimes even loss-making. Another reason is tight banking regulation in many places, and, particularly for US citizens, tough tax evasion legislation. As a result, private banking around the world is no longer as profitable as it was, and many banks are reducing their activity in this area.
Moreover, the different rules, the heavy penalties imposed by overseas authorities, and the fact that the overseas unit is managed from a distance, have several times caused some banks to become embroiled in investigations. Bank Leumi, for example, is the subject of an investigation by the US authorities on suspicion of aiding customers to evade US taxation. The bank has provided more than NIS 500 million against the outcome of this investigation.
Published by Globes [online], Israel business news - www.globes-online.com - on December 16, 2013
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