Cable Merger to Increase Bank Profits by Hundreds of Millions of Shekels

Union reduced debt per user to $850-$900, meaning reduced provision for doubtful debt

Bank profits are likely to be boosted by hundreds of millions of shekels in 2007, because of the cable merger.

The long-delayed union of Matav, Tevel and Golden Channels resulted in arrangements that ultimately mean the banks can abolish charges they had taken for doubtful debt.

The merger reflects debt per subscriber of $850-$900. In 2002, the Bank of Israel had ordered the banks to make a doubtful debt provision of a billion shekels based on a debt per customer of more than $1,150 per user.

The reduction in debt per subscriber means the banks can reduce their provisions, which boosts profit.
 
A top bank source believes the Bank of Israel should send out a directive how to reevaluate the debt, though the bank management has the sole authority to decide on correcting the provision.

"It's a matter that involves all the banks," he said. "The Supervisor of Banks needs to explain how to calculate the new size of the debt to prevent each bank from handling the matter differently."

Bank Leumi, which made a provision of NIS 300-400 million, stands to benefit more than any other bank from this development.

Bank Hapoalim follows with a provision of NIS 200 million, and Israel Discount Bank isn't far behind with some NIS 150 million.

The collective debt of the cable companies to the banks is around NIS 3 billion. The banks hold about 30 percent of the unified company as collateral. Leumi holds the largest stake, more than 15 percent.