Israel's Second-largest Lender Mulls Share Offering, Reports Doubling of 1Q Net

Sale is among three options Bank Leumi is exploring to help boost capital adequacy ratio.

Bank Leumi in Tel Aviv.
Bloomberg

Bank Leumi, Israel’s second-largest lender, reported Thursday first-quarter net profit and revealed that it was weighing a share offering to improve its capital base.

News of the planned share offering came in a series of clarifications to its 2014 annual financial statement. The bank said its ratio of Tier I capital to risk elements in Basel III terms was 9.21% at the end of last year, but after taking into account obligation the figure was just 8.09%, well below the 10.25% it has to reach by January 2017.

Leumi’s capital adequacy ratio rose to 9.37% at the end of the first quarter, the bank said. In addition to the share offering, Leumi said it was also weighing the selling of unspecified assets or by more selective lending.

Meanwhile, the bank reported The Israel Corporation, boosted by a gain from the sale of shares in its holding company, earned a net 1.17 billion shekels in the first quarter, up from 565 million a year earlier.

Leumi had been forecast to earn 983 million shekels, according to a Reuters poll of analysts. Excluding the 418 million-shekel gain from the sale of 6.9% of Israel Corporation, Leumi’s net profit was 753 million shekels.

Leumi said an investigation being conducted against it by the U.S. Securities and Exchange Commission is focused on suspicions that the bank provided investment counseling to American clients with a license.

The bank, which paid $400 million in a settlement of charges that it had helped American clients evade U.S. taxes, said the current investigation did not require it to set aside funds for any future penalties. Nevertheless, it decided to make a provision of at least $5 million in the first quarter.