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"First of all, Bank Leumi (TASE: LUMI)." That is how Alon Glazer, banks analyst at Leader Capital Markets, begins his review of Israel's banks, moments before they release their second-quarter reports.

His favorite is Bank Leumi. Based on the company's holdings in non-banking companies, income from the sale of its provident and mutual funds, and steps he believes the bank's new owners will take, he believes the bank is trading at 40% below its true value.

He likes Bank Hapoalim (TASE: POLI) a little less, but thinks it too is trading at an attractive share price and rates it too a Buy.

Bank Discount is cheap, but there are reasons for that, Glazer things. The company is trading deep below its true value, but he foresees weak results in the near run, and notes the question marks hovering over its New York branch, which raises its risk factor.

Among the five biggest banks, Glazer least likes First International (Beinleumi) and Mizrahi-Tefahot: both are simply less cheap than the big banks, he writes.

But he upgraded Mizrahi to Market Perform and set its target at NIS 27.50, which is 8% above its Sunday opening level on the Tel Aviv Stock Exchange.

He predicts combined profit of NIS 1.451 million billion for the five big banks in the second quarter, with Hapoalim at the top, as usual, with earnings of NIS 540 million and 15.2% return on equity.

For Bank Leumi he predicts NIS 351 million earnings and return on equity of 9.8%.

Discount will have netted netting NIS 196 million and achieved return on equity of 13.1%, in the second quarter of 2006, Glazer projects.

For FIBI he foresees NIS 132 million earnings and 12.7% return on equity, while selling assets should lift Mizrahi's net to NIS 234 million and its return on equity of 24.5%.