First International Bank of Israel (TASE: FTIN), controlled by Zadik Bino, is in negotiations to sell its business in Switzerland. The bank today announced that it was negotiating to sell its FIBI Switzerland private banking branch. If the agreement goes through, it will complete the final liquidation of the First International Bank group's international activity. The group will henceforth operate exclusively in Israel, making it the only one of Israel's five largest banks operating solely in the local market.
First International Bank began cutting back on its overseas business when it sold FIBI London two years ago for the nominal sum of £6 million. It appears that FIBI Switzerland's business is on a downtrend. It manages assets amounting to 876 million Swiss francs ($886 million), compared with 916 million Swiss francs ($906 million at the end of 2015, a 4% drop this year.
The bank's loss on its Swiss business grew over the past year, totaling 630,000 Swiss francs in the first nine months of the year, compared with a 62,000 franc loss during the corresponding period last year. In contrast to other Israeli banks active in Switzerland, FIBI Switzerland did not face investigation by the US authorities on suspicion of complicity in tax evasion. Nevertheless, the bank suffered from diseconomies of scale that made its business there unprofitable.
Expenses grew significantly
Following changes in banking regulations in general, and in private banking in Switzerland in particular, First International Bank's expenses from its Swiss activity grew significantly, making economies of scale a major factor. On the other hand, the advantage of confidentiality in Swiss banking has been eroded; banks frequently find no substantial added value to offer their customers.
In view of this situation, concerns have been abandoning their business in Switzerland. Israel has seen Bank Leumi (TASE: LUMI) and Israel Discount Bank (TASE: DSCT) sell their business there in recent years, and now First International Bank is following suit.
For the bank, managed by CEO Smadar Barber-Tsadik, its deal was also motivated by various streamlining measures it must complete in order to improve its poor efficiency ratio. One of the main such measures the bank is expected to undertake is the offer of early retirement to 650 employees in the coming years. The plan is projected to cost NIS 200 million.
Published by Globes [online], Israel business news - www.globes-online.com - on November 23, 2016
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