Israel Discount Bank Warns of Hit to 2013 Profits

Discount says profits will be down due to an additional provision of $38.6 million for holdings in First International Bank of Israel.

Israel Discount Bank said its 2013 net income would be reduced by 135 million shekels ($38.6 million) due to an additional provision for its holdings in the First International Bank of Israel (FIBI).

Discount, Israel's third-largest bank, made the provision in light of a request from the country's banking regulator, it said in a statement to the Tel Aviv Stock Exchange. It holds 26.5 percent of FIBI, Israel's fifth-largest bank, and has said it plans to trim its stake.

Israel's top banks are slated to issue fourth quarter and 2013 financial results in March. FIBI posted third-quarter profit of 144 million shekels, down from 161 million a year earlier.

Discount announced Tuesday that it had decided to cancel the sale of Discount Bancorp, the parent company of IDB Bank New York, rejecting all proposals submitted.

The bank’s recent profits, combined with a reduction in the provision of credit to borrowers had helped the bank come closer to meeting the core capital adequacy ratio targets set by the Bank of Israel for 2015. Consequently, the bank no longer feels the need to sell IDB, which it values at over three billion shekels ($900 million), to raise additional funds.

The decision by Discount’s board to cancel the sale leaves open the possibility that the bank will raise capital with a share issue instead of by selling assets. The board is expected to determine within another six months whether it can meet the 2015 target with current profits alone, or whether it will need to hold a share offering.

Sivan Aizescu contributed to this report.
 

Ofer Vaknin