Bank Hapoalim, Israel’s largest bank, said yesterday its board had approved a cost-cutting plan under which 1,500 employees will take early retirement between 2017 and 2020, at a cost of 1.2 billion shekels ($312 million).
The layoffs are in addition to 300 workers expected to leave the bank voluntarily in 2016, the bank said.
Subject to the approval of the Bank of Israel, the cost of the program in terms of the capital adequacy ratio will be spread out over five years to avoid an immediate and full impact on the ratio, Hapolaim said. But the bank said that from 2021 it expected to generate annual pre-tax savings of 450 million shekels from the job cuts.
The Bank of Israel has ordered banks to improve their operational efficiency. Hapoalim rivals Bank Leumi and Israel Discount Bank have already announced job cuts and early retirement plans this year.
Between 2012 and 2015 Hapoalim reduced its workforce by 1,800 employees, or 13%. Its operating efficiency ratio — the ratio of expenses to income — stood at 61% in 2015. It will fall to 58% in the latest cost-cutting program.
“The competitive and regulatory environment requires that the bank strive to become more efficient in order to meet regulatory demands,” Hapoalim CEO Arik Pinto said in a statement. “The bank’s management has taken on an especially challenging efficiency plan alongside plans and activities for business growth.”
Last week Hapoalim said it received approval from Banks Supervisor Hedva Ber to raise its dividend to 30% of net profit for the third quarter, from 20% today, and seeks to increase it to 50%.
Shares in Hapoalim ended down 1% at 21.86 shekels on the Tel Aviv Stock Exchange.
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