Leumi to record further write-down on Valley National

Bank Leumi branch credit: Eyal Izhar

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Leumi sees a decrease in the bank's net profit of about NIS 550 million in the second quarter as a result of the write-down.

Bank Leumi (TASE:LUMI) is paying dearly for its investment in US bank Valley National. Leumi, Israel's biggest bank, today notified the Tel Aviv Stock Exchange (TASE) that due to the fall in Valley Bank's share price it is examining a further write down on its investment. The bank said, "According to preliminary assessments and estimates, the bank believes that a write-down in value will be recorded, and that the total effect of the investment in Valley on the results of the second quarter for 2024 is a decrease in the bank's net profit of about NIS 550 million after the tax effect."

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Leumi added that this estimate will be re-examined before publishing the second quarter financial result, if there are indicators that the decrease in value is temporary. "According to preliminary estimates, this reduction in value is expected to reduce the bank's net profit for the second quarter by approximately 25%-30%. The aforementioned reduction in value is not expected to have a significant effect on the bank's regulatory capital adequacy." From this it can be concluded that the quarterly profit that the bank will present after the write-down will be about NIS 1.3 billion and maybe even more.

Leumi received its shares in Valley National Bank when it merged its US operations into the Us bank in September 2021. The merger was completed about six months later, in April 2022 in a deal in which 90% was paid to Leumi through the US bank's shares and the balance in cash. As a result of the merger, Bank Leumi became the largest shareholder in Valley National with a 14.2% stake, although it is not defined as a controlling shareholder, Leumi recorded a net tax profit of NIS 645 million in 2022 as a result of the merger.

Bank Leumi, managed by CEO Hanan Friedman, has a market cap of NIS 50 billion and has seen its share price rise 15% since the start of 2024 and 21% over the past year. The bank's share price is currently down 0.46% today.

Published by Globes, Israel business news - en.globes.co.il - on July 9, 2024.