Windfall From Cable Deal to Benefit Banks' Bottom Line, as Doubtful Debt Gets Erased

Bank profits are expected to grow by hundreds of millions of shekels next year in the wake of last month's merger of the cable companies. The merger involves a deal that plays in the bank's favor.

The merger reflects a debt value per subscriber of $850-$900. The supervisor of banks in 2002 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. The upshot of the reduction in debt per subscriber is that the banks will be able to reduce that provision in favor of its profit line.

A senior bank manager believes the supervisor of banks should send out a directive how to restate the debt, even though the bank leadership has sole authority to decide on correcting the provision. "It's a matter that involves all the banks," he said. "The supervisor needs to give direction on how to calculate the new size of the debt to prevent a situation in which each bank handles the matter in a different fashion," he cautioned.

Bank Leumi, which made a provision of NIS 300-400 million can expect 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.