In a surprise move, Zion Kenan said on Thursday he would step down as CEO of Bank Hapoalim, Israel’s biggest lender, in six months’ time.
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“Mr. Kenan said he decided to leave the bank after 38 years of work and over seven years as CEO and after the bank adopted a strategic plan for the coming years and made the organizational changes needed to bring about its success,” Hapoalim said in a statement.
Kenan, 60, said he wanted to explore new business challenges in Israel and abroad, but only a few weeks ago the bank told TheMarker he had no plans to step down.
His announcement comes at a time of upheaval in Israel’s banking industry. This week the Knesset approved a law capping salaries for banks and other financial-service companies at 2.5 million shekels ($660,000) a year, a fraction of the 7.9 million Kenan got in 2015.
In addition, a government committee headed by former Antitrust Commissioner Dror Strum has tentatively proposed forcing Hapoalim and Bank Leumi, its No.2 rival, to divest their credit card subsidiaries – a move that would deprive them of profits and create new competition for them in the burgeoning consumer-credit segment.
Finance Minister Moshe Kahlon has made a career in politics of fighting for consumer rights and has targeted the banking industry for other reforms aimed at bringing down the cost of banking services and loans. Hapoalim’s next CEO will have to operate in a more hostile regulatory environment than Kenan faced.
Hapoalim has long been Israel’s biggest bank in terms of number of clients and lending, but under Kenan’s tenure as CEO it caught up and eventually surpassed Bank Leumi in terms of market capitalization.
Under Kenan, Hapoalim shares have risen about 60%, double the increase in the Tel Aviv Stock Exchange Banking index and giving it a market cap of 26.2 billion shekels as of Thursday, compared with 20.6 billion for Leumi. Moreover, while Leumi stopped paying dividends since 2011, Hapoalim resumed them two years ago and has since distributed 1.4 billion shekels to shareholders.
On Thursday, news of Kenan’s resignation sent Hapoalim shares down 1.4% at 19.42 shekels in late trading.
Kenan grew up in the poverty-ridden Ajami neighborhood of Jaffa and joined Hapoalim at age 23 as a teller. He rapidly rose through the ranks, and whenhe took over the CEO’s job in August 2009 the challenges he faced were enormous.
The world economy was in the midst of a deep global recession and the bank was recovering from losses it had made investing in U.S. mortgage-backed securities. The same year, Hapoalim was coping with the trauma created when its chairman, Danny Dankner, was forced to step down in the face of a criminal probe.
Over the last few years, Leumi has had to contend with a wide-ranging U.S. government probe into its aiding American clients to evade taxes and agreed to pay a $400 million penalty and had to set aside funds to cover employee pensions.
But Hapolaim’s gains were not solely due to Leumi’s problems. Kenan has been a proactive manager. Hapoalim’s credit portfolio grew close to 12% in the last three years, compared with 8% for Leumi. In 2012-15, its accrued net profits reached 11 billion shekels, 4 billion more than Leumi. Kenan cut costs by slashing 1,900 jobs in four years.
“When it comes to manpower, Bank Hapolaim is the efficiency leader,” said Alon Glazer, head of research at Leader Capital Markets. Economies of scale in bank is a critical factor and Hapoalim leads there as well.”
Sources said on Thursday that Ari Pinto, who is now Hapoalim’s deputy CEO and chief operating officer, responsible for strategy, resources and operations, is the leading candidate to take the top job. Like Kenan, Pinto joined the bank at a young age and made his career there. He has degrees from American universities.
Hapoalim is only one of two of the big five Israeli banks headed by a man, but there are good odds that this will change because all the other rumored candidates for Kenan’s job are women.
They include Lilach Asher-Topilsky, a former top Hapoalim who is now CEO of Israel Discount Bank; Anat Levine, who now heads Clal Insurance’s Kanaf investment units, and Yael Andoran, who was director general of the Finance Ministry under Yair Lapid.