Compagnie Financiere Edmond de Rothschild chairman Michel Cicorel arrived in Israel to escort the bank’s owner, Baron Benjamin de Rothschild, during his visit here. But the Baron, the grandson of the benefactor of Palestine's 19th century Jewish community, Edmond de Rothschild, cancelled his scheduled visit to Israel at the last moment. Cicorel, an ardent Jew himself, who heads a bank that manages $40 billion worth of investments, decided to come. Not even the cancellation of his Air France flight in the aftermath of Friday’s terrorist attack in Tel Aviv could deter him. He got an alternative ticket on El Al, arriving, as scheduled, at the beginning of the week, accompanied by an entourage of six bank directors.
“Globes”: Were you afraid of coming, like other businessmen, because of the escalating terrorism?
Cicorel: “No. I visit Israel at least twice a year since we started preparing to open a branch here two years ago. I love visiting Israel; I spent my honeymoon here 20 years ago. This isn't really the best of times here, but there has always been terrorism in Israel. I don't think we should be afraid of terrorism any more than by what happens on Israel’s roads. Everyone drives like maniacs here. Statistically, Israel’s roads are deadlier than the terrorism.”
Not all foreign investors think like you do.
“Terrorism isn't a problem for investors. London has IRA terrorism, and there have been times when Algerians planted bombs in Paris’s streets. I personally was once less than 200 meters from a bombing in the center of Paris. Terrorism is a tragedy and a serious problem for Israelis, but it 's in no way an economic problem.”
Nevertheless, foreign investors and their money have been leaving Israel.
“The reason investors aren't coming is neither the political or security situation, but the condition of Israeli technology on world markets, especially Nasdaq. Israel is known as the second Silicon Valley, but there has been a plunge in the value of many technology companies. Nevertheless, our group believes in technology, and believes that Israel will be a place where technology will flourish, and be a leader for a long time to come."
“A friend of mine, one of Italy’s leading industrialists, likes to say that when you drill in Texas, you find oil, and when you drill in Israel, you find intelligence. This epigram reflects the world’s impression of Israel. We're currently having a difficult time in technology, but the Rothschild group doesn't invest for the short term, but for the medium and long terms. I believe this strategy pays off.”
The recently published growth forecasts for Israel aren't exactly rosy.
“I 'm no expert in economics, and I don't base my investments on specific forecasts of one kind or another. I invest because someone named Rothschild should invest in Israel.”
In other words, Rothschild’s investments in Israel are a historical and emotional matter.
“Emotion is a part of the reason, but it's also logical. The Rothschild name in Israel is like Buddha in China. We therefore have to be here. There's no choice. It would be stupid not to be here. There's no Credit Suisse Boulevard or HBSC Avenue in Tel Aviv, but there's a Rothschild Boulevard, and we have to be here.”
The result is that two years after Benjamin Rothschild sold his holdings in Bank Clali, the Baron reentered the Israeli banking scene. 18 months ago, the Compagnie Financiere Edmond de Rothschild opened an Israeli branch. The branch, managed by CEO Jimmy Pinto, focuses on investment banking for institutional investors, mutual funds, and investing in international assets and venture capital, mostly at the seed stage. The bank has raised and invested $30 million to date in start-ups, and it manages $200 million in mutual funds.
Are you satisfied with your activities in Israel?
“Yes. We have an excellent team that has succeeded in a short period. In just over a year, the bank has $200 million in managed investments. This is quite an achievement that has allowed us to reach the break-even point within a short time . This usually take 3-5 years. We expect to post a profit soon.”
You entered Israel at the market peak, and then got hit by the slowdown.
“True, but short term volatility is unimportant for us. We’re not here for the short term.”
Are you planning to expand your Israeli operations?
“Yes. We'll continue investing in seed stage start-ups, which provides concrete evidence of our long-term plans. We're not interested in creating hype, cashing in, and pulling out. We've raised and invested $30 million in venture capital to date, and plan to raise another $10-20 million by the end of the year. We also plan to expand our investment and mutual funds business, even though we know it's currently easier to sell foreign shares to Israeli investors than sell Israeli shares to foreign investors, but that's temporary."
“We've also decided to set up a subsidiary that will handle investment banking for corporations. This will mostly consist of mergers and acquisitions of medium and large-sized Israeli companies with European companies. Our European team will utilize its knowledge and connections in cooperation with the Israeli team now being established, and we'll appoint a CEO for the Israeli team shortly. The decision was taken after we received several offers for such deals that we were forced to reject because we had no suitable team in Israel.”
Are you interested in Israeli privatizations?
“Not at this stage. We'll focus on the middle market, like we do in Europe. We might also handle large deals later.”
What do your European banking colleagues think about the Israeli market?
“Regrettably, their knowledge about Israel is shallow, based on newspapers and French television, which is even worse than CNN. They think Israel is like Sarajevo and act accordingly. What concerns me about Israel is that we're living in an era in which wars are not won by soldiers, but by public opinion. At the moment, the Palestinians are winning, and the State of Israel must improve its image in the world.”
In mid-2000, there were reports that France’s biggest bank, Credit Agricole, would open a branch in Israel and had even rented office space in Tel Aviv. It didn’t happen. Is it logical for a bank of that size to withdraw because of the situation in Israel?
“I don’t know if it’s true, but it 's certainly logical. Until a year ago, technology was very fashionable in France, and regrettably most banks, especially in France, are victims of fashion. Everyone thinks alike at the same time. Technology was once in fashion and now it isn’t, so the banks aren’t coming. Technology will be back in fashion in a year or two, and they’ll all be back. We don't work like this. The Rothschild family has a saying: 'Performance is measured over time'. This is our credo."
“I believe that high-tech, Internet, and cellular Internet will constitute a deeper and greater economic revolution, which will benefit Israel. Israel still has a magic triumvirate: The IDF, the new Russian immigrants who are talented in the sciences, and Israel’s strength in the US capital market. The market insanity of past high prices becoming today’s low prices has no bearing on this.”
What kind of chances do the foreign banks that are opening branches in Israel have?
“They'll succeed only if they stick with it. I've seen (that) US banks, not necessarily those that have opened branches here, tend to call it quits after 18 months. But there's a very special relationship between Israel and the US, and I therefore don't expect them to leave in a hurry.”
What potential do you see for private banking in Israel?
“There's a market, but it's saturated. We're trying to concentrate on being a niche player in sectors that aren't saturated yet, providing innovative and special services.”
Has Israel’s image in the world as a money launderer improved following the passing of the Prohibition of Money Laundering Law – 2000?
“Israel’s image in this area is very bad, and there has been no improvement. Even though there's a law, it's necessary to prove it effectiveness, and Israel is keeping its image as a money launderer in the meantime. I think Israel's poor image on the subject is due to the Law of Return, under which all kinds of Jewish crooks and criminals came to Israel, bringing their illegal money with them. There's also the problem of the Russian mafia. It's very important that Israel deal with the matter thoroughly, because the world at large and the banking world in particular, attach considerable importance to the matter.”
How do you handle suitcases of cash?
“We've never accepted money of unknown origin. We have very clear and strict regulations on the matter. While it's true one can never be absolutely certain, we're very careful and we're aware of the problem.”
Published by Israel's Business Arena on 7 June 2001