Instead of Banker, Israel's Bank Leumi Picks Lawyer as New CEO

Hanan Friedman will replace Rakefet Russak-Aminoach by the end of the year

Michael Rochvarger
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Newly appointed Bank Leumi CEO Hanan Friedman.
Newly appointed Bank Leumi CEO Hanan Friedman.Credit: Knesset Spokesperson
Michael Rochvarger

Bank Leumi, Israel’s biggest lender by market capitalization, on Tuesday named Hanan Friedman as its new CEO, choosing a lawyer who only joined the banking industry five years ago.

Friedman, 48, and now head of Leumi’s strategy, innovation, and transformation division, will take over from Rakefet Russak-Aminoach by the end of the year. Leumi said its board had approved the appointment, but it still needed confirmation from the Bank of Israel.

His appointment fills the last of three openings for top jobs at Israeli banks after Dov Kotler was named CEO of Bank Hapoalim and Uri Levin CEO of Israel Discount Bank in June.

Married, religious and the father of four, Friedman received his law degree from Bar-Ilan University and was a practicing lawyer with the firm Lipa Meir & Company from 1999 to 2005. He then became legal adviser to Yair Hamburger, the CEO of insurance company Harel, where he gradually assumed a key role in the company.

He became head of Leumi’s legal division in 2014. Even though he wasn’t Russak-Aminoach’s first choice for the job, he gradually won her support and played a critical role in settling the U.S. investigation into the bank’s role in helping American clients evade taxes.

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Two years ago, Friedman was named head of Leumi’s strategy and regulatory division and quickly assumed wider authority and a more expensive title.

He had a hand in almost every major undertaking the bank made, including the 2.5 billion shekel ($710 million) sale of its Leumi Card credit card unit to the U.S. private equity fund Warburg Pincus last year.

Friedman also played a major role in Leumi’s overseas operations, and the sale of a 15% stake in its Leumi USA unit last year to Endicott Management and MSD Capital.

Banking sources on Tuesday applauded the appointment, pointing to Friedman’s business experience and ability to make decisions. However, some warned that in an era when banks are facing immense challenges on the technology front, Friedman had little direct expertise.

Nor, they noted, has he even been a banker or served in either of Leumi’s two key divisions – business/commercial lending or retail banking. Friedman, they said, has never directly managed more than a few-score staff, but will now be heading at bank with 9,000 employees.

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“Like every other candidate, Friedman isn’t perfect and he has never been involved in bank lending,” said one source who asked not to be named. “But in the current environment, even the most experienced CEO in the world can’t manage a big organization like Leumi alone.”

Unlike Kotler at Hapoalim, Friedman will be at the helm of a bank with excellent metrics. Leumi’s market cap is 37 billion shekels, 2.5 billion more than its biggest rival, Hapoalim. In an era of super-low interest rates, Leumi earns a 10% return on its equity. It pays out 40% of profits as a dividend. Meanwhile, its Pepper digital bank has put it at the forefront of Israeli banks transitioning to a new, more online era.

Friedman can also expect that his top managers will remain in place, giving him a depth of banking experience he will need to rely on. Three senior managers left the bank in 2018-19, but no further departures are anticipated.

Still, Friedman faces challenges. Leumi needs to expand and upgrade Pepper in the Israeli market. It also plans to bring Pepper to the U.S. He also faces the task of reconfiguring the bank’s credit card business after the sale of Leumi Card, and a decision whether to conduct an initial public offering of Leumi USA or sell another stake.

Leumi’s search committee, which was formed in June after Russak-Aminoach announced she was leaving and was headed by Leumi’s new chairman, Samer Haj Yehia, retained a foreign head hunter to identify Israeli expats as possible CEOs.

The effort failed to produce a candidate. The final list came down to Shmulik Arbel, who is head of the corporate division; Ronen Agassi, head of capital markets; Michal Abadi-Boiangiu, a former treasury accountant general; and Avner Mendelson, the CEO of Leumi USA.

Mendelson dropped out of contention after his wife said he would prefer to stay in New York.

In any case, the job would have meant a pay cut for him: As CEO of the bank’s American unit he is not subject to the pay cap Israel has imposed on financial-service executives and gets a seven million shekel salary, far more than he would have gotten as Leumi CEO.