"If you ask me whether I'm bothered about Minister of Finance Moshe Kahlon, I'm not, and I'm not worried about reform. If you ask me what does bother me, it's the public discourse, which is emotional, superficial, and full of hate," Bank Leumi (TASE: LUMI) chairman David Brodet said today at the beginning of his remarks to a panel on the state and trends of Israeli capital market at the Israel Capital Market Conference jointly held by "Globes" and the BDO Ziv Haft accounting firm.
"I read what's happening on the social networks. I also hear from the bank employees at our branches that if some politician takes a cheap shot at us, they feel it at their branch. So if there's anything keeping me awake at night, it's the provocative public discourse we've recently experienced," Brodet declared.
"Globes" editor Hagai Golan: How much effect did Kahlon's election campaign have on the banks?
Brodet: "I don't know. There's a difference between not liking the banks and violence and hatred towards them. I'm disturbed about it now, and I hope that serious, fair, and professional discussion will lead to a situation in which both the public and economy benefit."
Would you agree with the statement that there is no competition between the banks?
"I completely disagree. There's growing competition. One example is credit for large businesses. In 2014, financial institutions accounted for 53% of all business credit in Israel, and the banks only 47%. Five-six years ago, the banks accounted for 95% of this credit, so there has been an enormous change. The same is true about consumer matters and mortgages. Every newspaper says that the banks are in cutthroat competition against each other in the mortgage interest rate spread in order to attract consumers."
What about the interest rates and small businesses?
"First of all, competition is fierce and becoming more intense. Furthermore, an OECD survey found that the consumer spread in Israel is in the bottom part of the OECD scale, and the cost of commissions is also at the bottom of the scale. The Zaken Committee report also commissioned an opinion comparing banking, and Israel had the third from the lowest commissions. In other words, there's a gap between the actual data as they are and how the public sees and feels about it. In recent years, since the reform, the level of commissions has dropped 30%. Today, an ordinary person pays NIS 12 a month in bank charges."
How much are the banks affected by a certain public atmosphere that can sometimes contradict the bank's business interests?
"In the end, the bank makes its decision in the most professional way. There's risk management, assessments, etc. You can't manage a bank according to the public's mood. The situation sometimes makes things tough, that's true. You can't make decisions about NIS 250 billion according to the public's perception. We certainly listen to the public, and understand what's happening, but in the end, the decisions are extremely business-like."
What's happening with the introduction of technology into your sector? Will the introduction of some kind of Internet activity generate more competition in the system? Will it bring about a dramatic change?
"There's no doubt that technological tools have also come to our industry, and we have to adapt ourselves to the new reality. We don't want to be like Kodak, which failed to take notice of the digital camera, and which no longer exists. We also have to understand the changes taking place, and therefore, like a national bank, we're the first to announce a digital banking department , and we'll implement it already this coming year. That will create a new reality. This is a difficult situation, because the public is divided into two groups: one that likes to go to a bank clerk, and one that wants to do transactions online - the smartphone is now the bank. This situation is happening in Israel, and we're among the most advanced banks in the world in this aspect. At the same time, keep in mind that if you want to conduct serious banking, you need capital, capital adequacy, and so forth. Technology can't replace capital; it can only serve the customer experience."
Published by Globes [online], Israel business news - www.globes-online.com - on June 2, 2015
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