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del.icio.us Digg It!  new Bank Hapoalim to write off hundreds of millions By Ram Dagan tags: credit, loss, Hapoalim, Bank Senior banking officials and analysts fear that the a worsening of the world credit crunch and the continued subprime mortgage crisis in the U.S. will cost Bank Hapoalim hundreds of millions of shekels in losses. Hapoalim has a bond portfolio with American mortgage-backed securities valued at about $3.5 billion. So far the crisis has cost the bank $120 million. For the second quarter, Hapoalim had reported only a $35 million loss, but in an immediate announcement to the stock market yesterday evening in response to a demand from the Israel Securities Authority (ISA), the bank said that figure was now much higher. The bank will account for the losses by reducing its shareholder equity. However, this is not a major blow that will affect the bank's stability. Advertisement In the future, the problem may become worse if one of the international rating agencies lowers the rating on these bonds, or one of the major foreign banks also holding these securities writes them down further. If one of these scenarios occurs, then estimates are that Bank Hapoalim will need to mark down its holdings by 5-10 percent, which would translate into a loss of NIS 700 million to NIS 1.4 billion. Hapoalim shares lost 1.7 percent yesterday on heavy trading. The bank published the value of its mortgage portfolio in its second quarter financial reports, according to the general requirements imposed by the ISA. Hapoalim emphasizes that it does not hold subprime mortgage securities, but only AAA bonds, the highest rated. The bank also announced that it did not expect the value of its holdings to drop significantly. The ISA has asked the bank to clarify its position and Hapoalim is expected to make a further, immediate disclosure that will basically repeat its general statements from its second-quarter statements. However, such a statement will not satisfy investors, even if it does meet the regulator's demands. Yesterday, analysts complained that the bank had not revealed all the necessary information. "Israel Discount Bank also has a mortgage portfolio of $2.3 billion, but the bank reported that these are bonds of U.S. government agencies, and even revealed their names, which reduces the risk to a minimum," said one analyst yesterday. "In Hapoalim's case, we know these are private agencies, which are riskier, but no one knows what securities exactly are involved," said the analyst. However, the bank did announce that the agencies are not on a ratings watch list. The bank also revealed that it has a $365 million investment in other financial instruments affected by the U.S. mortgage crisis, and that this investment has already cost the bank $61 million in losses. The bank will also take a $12 million loss from financing activities in its next reports. Bookmark to del.icio.us Remembering Yasser PA Chair Mahmoud Abbas unveils a $1.75 million mausoleum for Yasser Arafat. Spiritual spat U.S. synagogue ties with 'women priests' draws ire of Catholic church.

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