In a surprise announcement, Bank Leumi’s Rakefet Russak-Aminoach said Sunday she would step down as CEO in the coming months after seven years as head of Israel’s biggest bank by market capitalization.
Her decision comes amid a wave of departures at Israel’s biggest financial institutions, creating an intense competition to find successors at a time when banks and insurance companies are subject to government-mandated salary caps for their top executives.
Bank Hapoalim's Arik Pinto, the CEO of the country's second largest lender, announced in April that he would be leaving his post by the end of the year, while Lilach Asher-Topilsky, CEO at Israel Discount Bank, the fourth largest lender, announced earlier this month she would be leaving to join the FIMI private equity fund.
In addition, the heads of the two banks’ key business-lending divisions – Hapoalim’s Ronen Stein and Discount’s Orit Alter – announced their resignations this month. Phoenix Insurance CEO Eyal Lapidot jumped ship in April and was appointed Housing & Construction Holdings' incoming CEO, and Shai Feldman, CEO of AIG Israel, announced he would be leaving his position in six months.
Russak-Aminoach, who joined Leumi in 2004 as head of the business division, did not mention the reason for her resignation, but said she timed it to coincide with the appointment of a new chairman to succeed David Brodet.
“I have been debating the right time to announce my departure from the bank,” she said in a letter to Brodet released by Bank Leumi. “I decided that it would be right to announce my departure before the bank’s board decides to name a chairman to replace you after nine years of service. This is to avoid anything that might connect between the appointment of a new chairman and my decision to resign.”
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Leumi said Russak-Aminoach’s resignation would take effect after the bank’s board finds a replacement for her.
Russak-Aminoach, 53, led Bank Leumi to an era of record profits and market cap. The bank's shares were down 1.7% at 25.32 shekels ($7.10) in late trading Sunday on the Tel Aviv Stock Exchange.
Furthermore, Under Russak-Aminoach’s leadership Leumi was the first of Israel’s banks to reach a settlement with U.S. authorities following an investigation into tax evasion by its U.S. clients, agreeing to pay a $400 million fine.
Leumi’s chief rival, Hapoalim, is still seeking to reach a final settlement in a similar inquiry, while Bank Mizrahi Tefahot reached an agreement only in March of this year.
In addition, Russak-Aminoach successfully engineered the government-ordered sale of Leumi's credit card unit to the U.S. private equity fund Warburg Pincus last year for 2.5 billion shekels. Hapoalim, also under orders to sell its Isracard unit, took longer to divest its shares and failed to get a much bigger valuation despite Isracard’s bigger market share.
Russak-Aminoach also put Leumi firmly into the online banking era with the 2017 launch of its Pepper digital platform.
The departure of so many finance industry executives over such a short period of time will no doubt contribute to the speculation that Israel’s 2016 law capping bank executive compensation at 2.5 million shekels ($700,908) a year is behind it. Before this law came into effect, remuneration for senior banks had risen to as much as 8 million shekels a year.
Between 2012 and 2018, Russak-Aminoach's total compensation reached 31.5 million shekels ($8.83 million) and by the time she leaves at the end of 2019 it could reach up to 35 million shekels ($9.81million).
In addition, her aggregate compensation prior to becoming Leumi's CEO adds some 15 million shekels ($4.21million) to the total.
Nevertheless, attempts to hire new CEOs will likely encounter difficulties due to pay ceilings.
The CEO posts at three of Israel’s top four lenders as well as two of its biggest insurance companies have been vacated or soon will be. Heading a big bank is challenging job, putting the executive chief in the public eye, while the compensation has become less attractive.
The decision by Migdal Insurance to appoint Ran Oz as CEO two weeks ago, while he has no background in insurance and wasn’t the board’s first choice for the job indicates the challenges financial institutions face.
Reuters contributed to this article.