Feuding Mizrahi owners decide to rotate top job
Families agree to give each side's man three years.
The feuding families controling Mizrahi Tefahot Bank have not been able to put aside their mutual distrust. But they had to appoint a new chairman after Jacob Perry quit last month, and the solution they hit on was to give each side three years with their man in the job.
Thus, Moshe Vidman, who was named the bank's next chairman on Sunday, will lead Mizrahi's board for the next three years as the candidate of the Ofer family. On November 30, 2015, he will step down and be replaced by a chairman nominated by the Wertheim family to serve the following three years.
When their turn comes three years from now, the Wertheims are likely to name either Yoni Kaplan or Yoav Nechustan, both now serving on the board.
The rotation agreement, recalling the power-sharing agreement between Labor and Likud in the 1980s, comes after the Bank of Israel slammed Mizrahi Tefahot's management for poor corporate governance that often came at the bank's expense. The rotation pact signals that the sides are still at odds, a situation likely to keep Mizrahi in the central bank's crosshairs.
The appointment of Vidman, who has sat on the bank's board as an Ofer representative since 2010, came as the bank reported disappointing third-quarter earnings yesterday. It was the first of Israel's banks to post earnings for the period, with the others scheduled to report today.
Mizrahi, Israel's fourth-largest bank and its biggest mortgage lender, posted a NIS 260 million net profit in the third quarter, a 2% increase over the same time last year. Analysts polled by Reuters had expected the bank to report earnings of NIS 284 million. Return on equity was 13%, down from 14.9% in the equivalent period. Mizrahi shares fell 2.4% to NIS 37.10 in Tel Aviv Stock Exchange trading yesterday, essentially erasing Sunday's 2.5% gain.
The bank said net interest income rose to NIS 900 million from NIS 891 million a year earlier while the charge for credit losses slipped to NIS 116 million from NIS 142 million.
Mizrahi's capital adequacy ratio increased accordingly to 8.23%, bringing it close to the central bank's 9% target for the beginning of 2015. Mizrahi expects to reach the target a year sooner. Mizrahi retained its leading 34% share of the mortgage market with an 11% year-over-year growth in its mortgage portfolio.
The rotation agreement that brought Vidman to the chairman's job is aimed at maintaining the balance of power between the two families, which together own close to half of the bank's equity. Perry's sudden resignation last month to run for Knesset on Yair Lapid's Yesh Atid slate didn't allow the two sides enough time to perform a proper search for a candidate to replace him. Moshe (Muzi ) Wertheim has been filling in as chairman on an interim basis.
Although Vidman is an Ofer nominee, Wertheim consented to his being nominated for the job and praised him on Sunday. "I am certain that under Vidman's leadership, Mizrahi will continue to move forward successfully," he said.
Vidman, 68, who currently serves as a board member for a host of major companies, including many of the economy's biggest borrowers, will also chair the board's credit committee. Under Bank of Israel rules, the role of bank chairman must be a full-time job, and sitting on other corporate boards is prohibited. Vidman will likely be given four months to resign other board positions.