Bank Hapoalim, Israel’s biggest lender, is paring back its international private banking business, announcing on Sunday that it had decided to sell its Miami operation, close its Uruguay office and substantially cut back its activities in Switzerland.
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The bank said in a statement to the Tel Aviv Stock Exchange that it had agreed to sell its private banking portfolio, which manages about $2 billion in assets for clients, to Safra National Bank of New York for $16.5 million.
Safra will take on some 60 employees at Hapoalim’s Miami branch after the transaction is completed by the end of next March. The bank said it didn’t expect to record a gain on the sale after expenses. The bank’s Miami office will continue to offer commercial banking services but may eventually be closed, Hapoalim said.
The closure of the Uruguay subsidiary will also include offices elsewhere on the continent. In Switzerland, where Hapoalim manages private banking assets of about $3.5 billion, the unit will remain open with reduced staff and infrastructure, the bank said.
That will leave Hapoalim as the only Israeli bank with a major Swiss unit. Orit Lerer, CEO of Bank Hapoalim Switzerland, will stay on and collect what might be the biggest salary of anyone at the bank – 4.8 milion shekels annually – because Israel’s pay cap law for financial executives doesn’t apply overseas.
Shares of Hapoalim ended down 0,5% to 22.29 shekels ($5.84) in TASE trading.
“These transactions come against the background of an examination the bank has been undertaking for some time in the field of private banking, in order to adjust to changes that have occurred in the business and the regulatory environment,” Hapoalim said.
Hapoalim’s exit from private banking comes three years after its rival, Bank Leumi, took the same steps. The segment carries a great deal of risk and doesn’t generate sufficient profits to justify it. Hapoalim is facing an investigation by U.S. tax authorities into suspicions that it helped its American clients evade taxes and has put aside 600 million shekels against a future settlement.
Leumi paid a $400 million penalty two years ago in settling similar tax suspicions in the U.S.
While it is exiting private banking, Hapoalim is still interested in expanding its banking business in the United States, especially in medium-sized business lending. Hapoalim’s CEO, Arik Pinto, is determined to buy a U.S. bank to help promote the plan but he is blocked from doing anything about it until the tax investigation is over.
Even afterwards, the bank may have trouble getting regulatory approval for an acquisition because the bank will almost certainly be subject to close supervision in the period following a settlement.