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The Safra brothers, Joseph and Moise, yesterday joined Bank Hapoalim and Bank Leumi in competing to buy Israel Discount Bank New York. The family currently controls First International Bank of Israel and an international banking group with $4 billion in equity that includes private banking specialist Bank of New York and Brazil's Banco Safra as well as banks and representative offices in Luxembourg, the Bahamas and South America.

The Safra group's spokesman, Robert Siegfried, yesterday confirmed that the group is in talks with the Israeli authorities but refused to offer any additional details. If the Safra group does buy Discount New York, it could merge it with Safra National Bank of New York, a similar sized operation to Discount New York.

Safra National Bank of New York has about $400 million in equity and it manages about $5 billion in assets. Discount New York has about $490 million in equity and it manages about $6.2 billion in assets.

The Safra group is behind a great deal of activity in South America, as is Discount New York. A merger of the two banks would create one of the largest banks in the New York area as well as one of the most central for the South American Jewish community.

A financial source estimated yesterday that the Safras entry into the bidding war for Discount New York will make it much harder for Israeli suitors Hapoalim and Leumi to win. The Safras' and Discount New York enjoy great synergy and the family's financial strength will be hard to surpass. The Israeli banks will also face financing and accounting difficulties in buying Discount's New York subsidiary. Both banks will have to raise outside capital to finance the huge deal.

The huge gap between Discount New York's value for the deal ($600-800 million) and its equity will force the buyer to write down goodwill over several years, hurting net profits. In other words, the buyer will consolidate Discount New York's results into its balance sheet and enjoy the profits, but will have to deduct the cost of the investment from net profits, off-setting the boost.

Accepted depreciation in Israel is 10 years, but Bank of Israel's Supervisor of Banks could require an Israeli buyer to write it down over five years, making a dividend difficult in the first years after the acquisition.