Market fears Moshe Kahlon's planned bank reforms

Moshe Kahlon
Moshe Kahlon

With Kahlon likely to be the next Minister of Finance, the market fears he will do to the banks what he did to the mobile carriers.

The Tel Aviv 25 index is at a peak, but the bank shares are falling today, as investors begin to take Moshe Kahlon's appointment as Minister of Finance in the next government into account. According to the polls, Kahlon will have the power to tip the scales between the two blocs, and his chances of being appointed Minister of Finance - the job he marked in his election campaign - are very good. This morning, Prime Minister Benjamin Netanyahu promised that if he forms the next government, Kahlon will be his Minister of Finance.

Kahlon is promising substantial reforms in the Israeli banking system, especially the opening of the sector to competition, as he did in the cellular market. The stock exchange is listening to him, and in view of the likelihood that he will be appointed Minister of Finance, investors are sending the banks shares, such as Bank Hapoalim (TASE: POLI), Bank Leumi (TASE: LUMI), Israel Discount Bank (TASE: DSCT), and Mizrahi Tefahot Bank (TASE:MZTF), southward.

After Kahlon's reform in the cellular market took effect, the cellular shares plunged, and the consequences of the reform are being felt to this day. For example, "Globes" revealed today that Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR) is postponing its payments to suppliers.

Opinions in the capital market about the future of the banks if Kahlon heads the Ministry of Finance are divided. Halman-Aldubi investment house economists write, "Today's falls in the bank shares are due to Netanyahu's statement that he will appoint Moshe Kahlon as Minister of Finance, whose party platform includes measures aimed at lowering fees in the banking system, a fact that is expected to have a negative impact on the banks' profits. The Prime Minister's statement paves Kahlon's road to the Ministry of Finance. It can be assumed that despite the comfortable pricing in the Israeli banking system, the lack of regulatory certainty will continue to threaten the sector in the near future."

On the other hand, there are also analysts who are in no hurry to make analogies between the cellular sector and the banks. "Despite the threat to the banks posed by Kahlon, the market also realizes that reform involved is not of the same scope, and it will therefore take time before the sector feels Kahlon's hand as Minister of Finance, if it ever does," explains Barak Investment House analyst Lior Kedar. "It is reasonable to assume that even Kahlon, should he become Minister of Finance, will have more urgent matter to attend to during his first year. Therefore, despite today's drop in the bank shares, no long-term trend is involved. If anything, a buying opportunity has been created here, which should be exploited before things get back to normal."

Published by Globes [online], Israel business news - www.globes-online.com - on March 15, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

Moshe Kahlon
Moshe Kahlon
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