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During the last three months, shares of the First International Bank of Israel gained 20%, an astonishing performance given that the benchmark Banks-5 index on the Tel Aviv Stock Exchange lost 13% in the same time. The bank, also known as Beinleumi, may well be the only bank stock in the world to do so wel these days.

Several possible reasons come to mind for Beinleumi's leap, none particularly satisfactory. One could be an upside surprise in the bank's third-quarter report, in the level of provisioning for doubtful debt compared with the other banks - just 0.55% of its loans portfolio. Another could be that it didn't lose much, relatively speaking, on its own investments in that quarter.

A third reason could be that Beinleumi returned to the TA-25 index from the start of 2009, when the TASE rebalanced its indexes. Yet another possible reason is that the bank's holding company (FIBI) consolidated its shares, which investors may take as an indication that the bank will also be consolidating its shares.

It's academic, since last week, the trend turned. Beinleumi stock lost 11.4%, while the Banks-5 index lost 5.7%.

The main factor probably weighing on Beinleumi stock is the bank's NIS 16.4 billion portfolio of securities, which contains no less than NIS 9.1 billion worth of bonds, fixed-income and linked. The portfolio also contains NIS 6.5 billion worth of dollar-denominated bonds. As of the end of October 2008, the value of that part of the portfolio had shrunk by NIS 264 million, compared with a value drop of NIS 148 million as of September's end.

Why does that matter now? Because the bank didn't write the losses off from its capital. Moreover, it may have suffered more losses after the end of October.

Are the losses final?

Beinleumi has in the interim sold some of those securities, and it may also have changed the composition of its portfolio since the end of October. But the third-quarter 2008 report is indicative of the bank's high-risk profile.

Beinleumi also had a portfolio of eurobonds, worth NIS 5.4 billion as of the third quarter's end. Of that, NIS 4.5 billion are bonds of foreign companies, mainly financial institutions in the developed nations. The bank posted a loss of NIS 43 million on its third-quarter statement on this portfolio, but the bonds actually accrued a loss of more than NIS 100 million that didn't make it into the balance sheet. Also, in its third-quarter statement Beinleumi revealed exposure amounting to NIS 805 million to mortgage-backed securities, some of which can be considered risky.

Most of the bonds the bank owns were issued by American federal institutions that have since received backing by Washington, but NIS 341 million lies in mortgage-backed securities issued by various financial institutions outside Israel. Of that, NIS 205 million is invested in bonds backed by prime mortgages - and the rest is in subprime stuff. In its third-quarter report, Beinleumi wrote a loss of NIS 52 million from five types of subprime-related bonds.

As of the third quarter's end, Beinleumi also had NIS 500 million placed in other high-risk financial instruments. Some were structured deposits gambling on interest rates (it booked an NIS 5 million loss there). Some were credit-risk instruments, hedge funds and credit default swaps. On these it booked a loss of NIS 44 million.

Now the bank is nearing its fourth-quarter report. We can expect it to reclassify some loss in value, categorized as temporary in its third-quarter statement, as permanent - which means the bank will be listing the losses in its profit and loss statement.