Bank Hapoalim intends to close up shop in London, the bank's leaders decided in a recent strategic discussion. The bank, one of Israel's two largest, has a branch in the United Kingdom's capital with a NIS 4.9 billion balance sheet. The bank wants to focus its international banking on moderate-sized corporate accounts within the United States. In other nations, it will focus on private accounts for well-heeled customers.
"As part of the annual working plan, the bank decided to focus and cut back its operations in London," its spokeswoman stated in response. Several months ago, Hapoalim decided to shut its branch in Singapore as well. That branch is expected to cease operations at the end of March.
The bank's new strategy, formulated under chairman Yair Seroussi, is quite different than that of his predecessors, Shlomo Nehama and Danny Dankner. Nehama and Dankner led the bank through a massive process of overseas expansion and acquisitions, under the belief that Hapoalim had exhausted its growth potential within Israel. Now, thanks to the implementation of the Basel III banking regulatory standards in Israel and around the world, banks need to become more conservative and cut their leverage, which forces them to focus on their core business.
By cutting operations overseas, Hapoalim will be able to maintain its level of operations within Israel - its core business - without having to drop corporate customers or market share.
Even so, its decision to close the London branch is surprising, since in the board's third quarter reports, published all of a month and a half ago, the bank stated that its strategy included expanding operations at that very branch. However, strategic discussions continued after that report was published and the board members ultimately changed their minds.
The London branch makes corporate loans, mainly to Israeli businesses with operations in London. It also has a trading room and offers private banking to well-off individuals.
This makes Hapoalim the third Israeli bank to scale back operations in London. Bank Discount shut down its private banking operations there, and now only offers corporate banking services. And the First International Bank of Israel (Beinleumi ) announced in August that it would be leaving the U.K. capital, too.
Banking sector sources said one of the reasons could be that in the wake of the global financial crisis, Britain has tightened banking regulation, which makes banking less profitable within the United Kingdom.