The Bank of Israel has rejected Bank Leumi's (TASE:LUMI) request to acquire Bank of Jerusalem (TASE:JBNK). A Bank of Israel spokesman declined to comment about the report, saying he could not divulge information about specific banks.
In March 2003, Bank Leumi initiated negotiations with Bank of Jerusalem's controlling shareholder, Export Investment Co. Ltd (TASE:EXPO), controlled by the Shoval family, to acquire the controlling interest.
In April 2003, Bank Leumi submitted a request to the Bank of Israel to acquire the controlling interest in Bank of Jerusalem. The application was filed after Bank Hapoalim (LSE:BKHD; TASE:POLI) received permission to acquire Maritime Bank of Israel, which has since been merged into Bank Hapoalim.
Bank Leumi believed that Supervisor of Bank Yoav Lehman would approve the deal, even though Bank of Jerusalem is considerably larger than Maritime Bank.
The Bank of Israel initiated Bank Hapoalim's acquisition of Maritime Bank. In the aftermath of the Trade Bank embezzlement, the Bank of Israel sought to shut down very small banks, out of concern for their stability.
Lehman rejected Bank Leumi's application because Bank of Jerusalem is a significant competitor in Israel's banking system, with niche activities, such as mortgages and banking for foreign residents.
Bank of Jerusalem published its 2003 financial report on Tuesday. The bank's profit fell 11% to NIS 25.5 million, reflecting a return on capital of 8%.
Published by Globes [online] - www.globes.co.il - on February 26, 2004