Israel Discount Bank chairman Arie Mientkavich, CEO Gideon Ofer, and the rest of the bank's management are considering a number of alternatives for selling the bank’s assets in order to increase its assets-risks ratio.
Among other things, they are examining the possibility of selling Discount Bank’s 26.4% share in The First International Bank, as well as the sale of assets such as parts of Mercantile Discount Bank and Discount Mortgage Bank. Discount Bank is not considering the sale of its stable and profitable holding in Discount New York. As of now, Discount Bank’s board of directors has not reached a decision and has conducted no negotiations, as far as is known.
The Safra family, which owns a controlling interest in The First International Bank, has first refusal rights for the purchase of Discount Bank’s stake. At the same time, sources close to the family believe that for strategic reasons, the family has no plans to enlarge its holdings in The First International Bank and is satisfied with its controlling interest. Discount Bank’s holdings in The First International Bank have a market value of NIS 700 million.
Its lack of non-financial assets, combined with the extensive credit granted for unsuccessful real estate transactions in 1995-1996, have reduced Discount Bank’s capital adequacy ratio to 9.3%, very close to the 9% minimum established by the Supervisor of Banks. Under orders from Supervisor of Banks Yitzhak Tal, the bank must therefore quickly increase its capital.
A few months ago, the management of state-owned Discount Bank approached State of Israel Properties and asked permission to issue shares in order to boost the bank’s equity by $100 million. State of Israel Properties’ discussion of the issue has continued for a long time and is likely to conclude with permission for only a $50 million issue. The chances of such an issue’s success are poor, in view of the market situation and the state of Discount Bank.
As reported in “Globes," State of Israel Properties will not approve an issue that will dilute the State’s holdings below 50.1%, since it wishes to keep its ability to sell a controlling interest in the bank. Sale of the controlling interest is likely to follow sale of its controlling interest in Bank Leumi.
Published by Israel's Business Arena on July 22, 2001