International credit rating agency Fitch Ratings has upgraded its operating environment score for Israel's banks from 'a-' to 'a' with a stable trend. The agency says that the change in the score reflects Israel's rising GDP per capita, which it estimate at $45,300 in 2019. This is one of two core metrics Fitch uses to derive a banking system's OE score. The criterion in Fitch's assessment is Israel's placing in the 82th percentile ranking under the World Bank's Ease of Doing Business index (based on May 2019 data).
"We also consider a banking system's qualitative aspects including the size and structure of the economy, level and growth of credit, financial market development and the regulatory and legal framework. Israel's banking system is fairly concentrated with the largest five banks accounting for over 95% of system assets. The overall size of the banks' assets amounted to about 120% of the country's GDP at end-2018.
"The system is well-capitalized with low non-performing loans and sound liquidity. Efficiency in the system is improving following cost-cutting measures introduced to cope with increased digital competition. The Israeli banks' profitability is adequate, with a system return on equity for 2018 of about 8.5%," Fitch's announcement said.
Fitch rates Bank Leumi (TASE: LUMI) A/Stable/F1+ and Bank Hapoalim (TASE: POLI) A/Stable/F1+. These are Israel's two largest banks. It has recently assigned a long-term rating of 'BBB' to Leumi's inaugural international subordinated debt issue.
Published by Globes, Israel business news - en.globes.co.il - on January 30, 2020
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