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Leader Capital Markets has raised its 12-month price target for Bank Leumi (TASE: LUMI)  to NIS 20.

Banks analyst Alon Glazer sees a 23% upside to Leumi stock versus its opening share price on Tuesday morning on the Tel Aviv Stock Exchange. His investment rating for Leumi, Israel's second biggest bank, remains Outperform.

Leumi is generating return on equity of at least 13% on its banking operations, Glazer writes, which means it's trading far below its fair value.

Although the banks' loans portfolios are barely growing (in part because the business sector has learned to tap institutional investors for loans instead), their retail business, capital markets and credit card businesses are growing nicely.

Also, Israel's economic condition and that of its companies is improving, although a lot of real estate companies remain in trouble, Glazer said. The result is that the banks can cancel a lot of the charges they'd booked, which had dragged on net profit.

It also means that their provision for doubtful debt will be low in the years to come, he adds.

Part of his optimism about Bank Leumi has to do with its investments, for its own portfolio. It was highly unfortunate that it chose to sell its shares in Africa Israel, which has done magnificently since then:

Africa Israel stock: Leumi missed the boat by a mile

But it also owns holdings in The Israel Corporation, Migdal, Paz Oil, Africa Israel Properties, Cellcom, and others.

One reason the market is underpricing Leumi is the fog of uncertainty surrounding the controlling interest. Will Gabriel-Cerberus be allowed to buy it? Not be allowed? Who might? Could a control battle ensue? We shall see, Glazer says.