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Bank Leumi, the only bank in which the state still owns a controlling stake, netted NIS 92 million in 2008. That's just 3% of its profit in 2007, which was nearly NIS 3.36 billion.

In mid-March Leumi had estimated its fourth-quarter 2008 losses at NIS 1.16 billion. The final figure was greater: at NIS 1.18 billion.

The bank's provisions for doubtful debts - loans the bank suspects will not be repaid - swelled to NIS 2.14 billion, over five times the figure for 2007.

Losses from regular banking operations in 2008 totaled NIS 158 million, compared to profits of NIS 2.98 billion in 2007. The bank's return on its equity last year was just 0.5%, down from 17.4% in 2007.

Leumi's capital adequacy ratio at the end of 2008 was 11.49%, down slightly from 11.52% at the end of 2007. The capital adequacy ratio is an indication of a bank's stability and represents the proportion of the bank's equity that it can offer as loans. The Finance Ministry's supervisor of banks requires banks to maintain a minimum capital adequacy ratio of 9%, and would like banks to have a capital adequacy ratio of 12%.

Sources at Leumi blame two main factors for the bank's sorry profit showing in 2008: provisions for the decreased value of Leumi's securities investment portfolio and losses of NIS 2.3 billion on the sale of certain investments (about 5% of the value of the portfolio); and increased provisions for doubtful debts, by NIS 1.7 billion, to NIS 2.14 billion, or 1.01% of the loans granted by the bank. In 2008 Leumi's loans grew by 7.3%, to NIS 213.2 billion.

Leumi's taxes effectively reduced profits by NIS 410 million, due to expenditures that were not recognized as tax deductions, fluctuations in foreign currency exchange rates on overseas investments and the timing of postponed tax payments. NIS 65 million in additional profits from included companies offset some of the negative figures.

As of the end of 2008, Leumi's shareholder equity had shrunk by $49 million (about NIS 186 million) in accumulated losses from the bank's asset-backed securities portfolio, which was classified as a liquid asset, and $211 million (about NIS 776 million) was recorded in the profit and loss statement as a permanent decrease in value, with $130 million of this in the fourth quarter.

Chairman Eitan Raff told a press conference that despite the good condition of the Israeli economy at the beginning of 2008, the global financial crisis reached our shores in the third quarter and worsened in the final quarter. He estimated that 2009 will not be any easier, noting that the crisis will start to ease right where it began, in the United States.

"No one can say for sure when the tide will turn," said Raff, "but I believe that a full recovery, with a return to the growth rates we were used to in recent years, is not expected during the next two to three years. Thus the bank is understandably facing a difficult and challenging year."

The six highest wage earners at Leumi cost the bank NIS 19.2 million in 2008. Eitan Raff's salary cost was NIS 2.267 million, and CEO Galia Maor's salary cost NIS 4.434 million. Senior deputy CEO Zeev Nahari's salary expense was NIS 2.67 million, and Uzi Rosen, CEO of Leumi U.S., cost the bank NIS 4.454 million. The salary expenses of Gideon Altman, acting head of the Commercial Banking Division and Baruch Lederman, head of the Banking Division, were NIS 2.743 million and NIS 2.6 million, respectively.