Market Report / Israeli stocks retreat following Obama speech

Bank stocks took a beating on the Tel Aviv Stock Exchange yesterday as leading indexes retreated in moderate trading of NIS 1.6 billion.

The declines in Tel Aviv followed a day of losses Monday on Wall Street after a speech by U.S. President Barack Obama about the state of the American economy.

The U.S. president called on Monday for a broad offensive to promote growth in the U.S. economy when Congress reconvenes. American private consumption grew at a rate of 0.4% in July, which is a rather brisker pace than anticipated and the steepest increase since March, after remaining unchanged in June. Personal income also rose in July, at a rate of 0.2%, but this was less than economists predicted.

In European stock trading, the FTSE 100 closed up 0.45% yesterday. Franfurt's DAX was up 0.22% and the CAC 40 in Paris rose 0.11%.

Over here, all the leading indexes were in the red. The benchmark TA-25 index lost 0.7% for the day, closing at 1,135. The broader TA-100 index lost 0.6% on the day's trading, closing at 1,046 points.

The Real Estate-15 index declined by 0.6%. Near the close of trade, futures indicated a decline up to 0.4% by leading U.S. indexes.

But the story of the day was bank shares, which took a hit despite the banks generally filing strong results.

The Banks-5 index shed 1.7% following earnings reports by Bank Leumi, Israel Discount Bank and First International Bank (also known as Beinleumi ).

Bank Leumi shares fell by 2.7% even though the bank reported second quarter earnings that were the highest profits in the banking sector. Leumi's NIS 660 million in net quarterly profits were 30% higher than the same quarter last year. For more on that, see the box on the right.

Israel Discount Bank shares tumbled 3.3% after the bank said it earned NIS 158 million in the second quarter, which was 53% less than the same quarter last year - see the box below for more on Discount's results.

Beinleumi shares fell 2.4% after the bank reported second quarter net profits of NIS 86 million, 38.5% less than the parallel quarter last year.

Also in the finance sector, Clal Finance shares fell 4%.

Profits at IDB Holdings, shares of which fell 1.7%, dropped 93% in the second quarter, compared to 2009, to just NIS 50 million, primarily as a result of the absence of profits from its speculation in Credit Suisse stock. IDB Holdings had net profits for the first half of 2010 of NIS 1.1 billion, compared to NIS 1.2 billion for the first half of 2009. IDB will distribute a NIS 108 million dividend on October 5.

Kardan N.V., which controls Kardan Israel, fell 3.1% after the company reported having second quarter revenues of 208 million euros. After deductions for ongoing operations, its operating profits jumped by 250% to 15 million euros in the second quarter. Kardan N.V. recorded a 17 million euro increase in the value of its assets in the second quarter, which compared to a 34 million euro loss in the quarter last year. This was due to the weakness of the euro in relation to the currencies of most of the countries in which the firm does business. Kardan reported a profit to shareholders of 14 million euros, compared to a 15 million euro loss for the same quarter last year.

Shares of the Delek Group gained 2.5% after the company reported that it finished the second quarter with a 71% drop in net profits, which came to NIS 64 million. For the first half, net profits were down 29% to NIS 269 million.

Shares of Enlight Renewable Energy shot up 7% after the company reported a lovely leap in revenues, to NIS 7.9 million in the second quarter, compared with NIS 0.6 million in the same quarter of 2009. For more on Enlight, see the briefs on Page 8.

Among the day's losers was Givot Olam Oil and Gas Exploration, which retreated 1%. Avner, which also exlores for fossil fuels, gained 4%.