Israel Discount Bank (TASE: DSCT), headed by Lilach Asher-Topilsky, is making an equity offering in the hundreds of millions of shekels today. The bank's board of directors approved the move yesterday. This is the first equity offering by the bank for fifteen years.
The aim is to accelerate the bank's growth, chiefly its credit portfolio, and to improve its capital adequacy ratio. Discount Bank's stock is traded at the lowest equity multiple of all Israel's major banks, 0.54, because of the bank's low profitability and weak efficiency ratio. At the same time, the bank has been traded at this multiple for several years, so no change in the share price level is to be expected in the near future.
Discount Bank has a market cap of NIS 7.5 billion. It has no controlling core, which makes the decision to raise equity capital, which dilutes the holdings of current shareholders, easier.
The bank recently announced another important step, namely a streamlining program to cut 1,000 jobs over the next five years. Under the program, 300 employees are due to leave voluntarily by the end of this year.
Discount Bank has seen its share of the bank credit market shrink in recent years, a result of the shortage of capital from which it has suffered. After it reached the desired capital adequacy level, the trend started to change, and in the first half of this year it switched to growth in its credit portfolio. The bank now seeks to accelerate this growth by raising capital. The offering is being led by Tzahi Sultan and Tal Rubinstein's Discount Underwriting and Investment.
In the announcement of the offering, Discount Bank provided an update into the investigation into its 72%-owned credit card unit Cal Israel Credit Cards Ltd. in the pornography and gambling clearing affair. The bank says that it is at an advanced stage of negotiations with the State Prosecutor's Office on a settlement and that it will increase its provision relating to the affair by a further NIS 45 million. The bank also stated that it was in negotiations on a new wage agreement to replace the one that will expire at the end of this year. It said that it had requested the workers committee to introduce changes into the agreement as a condition for extending it, and that it had not yet received a response.
Published by Globes [online], Israel business news - www.globes-online.com - on September 26, 2016
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