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The board of directors of Bank Hapoalim decided yesterday to authorize the merger between the bank and its subsidiary, Mishkan Mortgage Bank, as part of restructuring measures planned for 2003. Some 150-200 people out of Mishkan's current payroll of 400 are expected to lose their jobs as a result of the merger.

Mishkan is Bank Hapoalim's mortgage arm and operates counters in some 70 Hapoalim branches. The merger is expected to result in job losses primarily at the managerial and logistics level and not among sales staff.

Yesterday, Bank Hapoalim CEO Eli Yones presented the merger plan to representatives of Mishkan's workers committee.

The sides are due shortly to commence negotiations in order to discuss retirement terms for employees who will lose their jobs as a result of the merger, as well as the terms of integration of the remaining employees into Bank Hapoalim.

The management of Hapoalim wishes to maintain its past tradition of voluntary retirement rather than forced redundancies.

However, it would appear that as a result of the economic situation, which has hit Hapoalim's profits, the retirement packages to be offered to Mishkan employees will not be as generous as those offered to Hapoalim group employees in previous instances, such as the merger of America-Israel Bank into Hapoalim four years ago.

In the past, Hapoalim has given out retirement packages based on a rate of compensation of up to 280 percent; this time, however, the bank will offer far less, and protracted negotiations can be expected.

Bank Leumi is also weighing the possibility of merging with a subsidiary, Leumi Mortgage Bank.

Mortgage banks belonging to the big banks operate from within the high-street branches of the parent bank and, therefore, mergers do not create significant changes as far as the public is concerned.

Against the current backdrop of economic uncertainty, the banks are preparing their work plans for 2003, and given that it is clear that it will be extremely difficult for them to increase profits, the emphasis is on cut backs and efficiency measures.

Senior banking industry sources that if there was no improvement in the economic situation, the banks would come under pressure to further reduce costs and, in the second half of 2003, would have to adapt their work plans and take difficult decisions.