Knesset Panel Approves Sale of Last Government Shares in Bank Leumi

Business in Brief | June inflation data rattle the bond market ■ ECI Telecom plans to place $150 million in bonds in London ■ Bank of Israel publishes draft directive allowing bank share buybacks

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A Bank Leumi branch in Tel Aviv, January 24, 2016
A Bank Leumi branch in Tel Aviv, January 24, 2016Credit: Ofer Vaknin

June inflation data rattle the bond market

Israeli bond prices moved sharply Monday after June inflation figures reignited concerns about an interest rate hike. The price of the government’s unlinked 9.2-year shekel bond fell 0.71%, while that of the 18.4-year bond fell 0.36%. But investors were buying inflation-index government bonds, boosting the price for long-dated issues by 0.46%. Bank of Israel Governor Karnit Flug last week calmed an anxious bond market after she signaled that an interest rate hike wasn’t imminent. However, the mood changed again Sunday, after the government said consumer prices rose 1.3% in the 12 months through June, putting inflation inside the target range for the first time since 2014. Jonathan Katz, economist at Leader Capital Markets, said the central bank was more interested in core inflation, which rose only 1%. “Nevertheless, if the [rising] trend in rental prices continues and the shekel continues to weaken we can expect a rate hike in fourth quarter 2018,” he warned.
(Eran Azran and Yoram Gabison)

Knesset panel approves sale of last government shares in Bank Leumi

The Knesset Finance Committee approved Monday the sale of the government’s remaining shares in Bank Leumi, Israel’s second-largest lender.  The 5.8% stake, worth about 2 billion shekels ($550 million), will be sold sometime in the coming year, Finance Ministry Accountant General Rony Hizkiyahu told lawmakers. “We want the longest time possible to sell so that there won’t be any downward pressure on the stock price,” he explained. As it is, he noted, a leak about the impending sales earlier this month caused Leumi shares to fall 5%. Leumi shares ended down 1.4% Monday at 21.75 shekels. In spite of their recent decline, Hizkiyahu termed the sale a “good deal” for the government since the stock is now trading at book value. He assured union leaders who attended the meeting that Leumi employees would be entitled to buy 10% of the stock on offer at a 25% discount. Proceeds will be used to pay down state debt.  (Hagai Amit) 

ECI Telecom plans to place $150 million in bonds in London

Israeli telecoms-equipment maker ECI Telecom plans to sell $150 million in bonds in a London private placement, sources said Monday. The proceeds will be used to repay an equivalent amount of debt ECI owes four overseas funds that began coming due in March. One of Israel’s leading tech companies in the 1990s and traded on Nasdaq at a $4 billion valuation, ECI fell on hard times after the dot-com crash and was delisted. It ran into more trouble amid emerging competition from China and the collapse of the Russian economy, which was a key market for the company. In March ECI reached a compromise with unions that led to the dismissal of 60 employees — fewer than the 100 management had sought to shed — amid other cost-cutting measures. Meanwhile, however, ECI’s business has improved. Sources said earnings before interest, taxes, depreciation and amortization reached $55 million from just $29 million the year before, while revenue rose 35% to $380 million. (Guy Erez)

Bank of Israel publishes draft directive allowing bank share buybacks

The Bank of Israel published Monday a draft directive to allow the country’s banks to buy back their own shares, potentially increasing the appeal of banking stocks to investors. Under the directive, Israeli banks will be allowed to purchase up to 5% of their share capital on condition that the buyback has the approval of the Bank of Israel’s supervisor of banks and the bank’s board. An offer to buy back shares cannot ordinarily be directed to a specific group of shareholders, the central bank said. “We are aware that numerous investors see great importance in a company having the option to buy back its shares, as an alternative to distributing a divided,” said Supervisor of Banks Hedva Ber. Bank Leumi, Israel’s second-largest lender, had already announced it planned to buy back 2% of its shares by March 31, 2019. The Tel Aviv Stock Exchange Banks-5 index ended down 0.4% Monday. (TheMarker)

Shares lose ground on lower Wall Street opening

Tel Aviv shares came under pressure late in the day on Monday after Wall Street opened lower. The TA-35 and TA-125 indexes both finished down about 0.2% at 1,545.28 and 1,382.95 points respectively, on turnover of 891 million shekels ($245 million). Among blue chip losers, Perrigo lost 2.2% to 272.10 shekels after Goldman Sachs downgraded the stock from Neutral to Sell and cut its Wall Street price target $4 to $74. Teva Pharmaceuticals fell 1% to 84.21, marking its third decline in the last four session. Excellence Brokerage lowered the target price of Bezeq to 4.40 from a previous 5, but the share nevertheless rose 1% to 3.92. It also cut Cellcom Israel to 28 from 32 and Partner 19 from 20. Cellcom ended down 0.2% at 20.67 and Partner down 0.9% at 14.85. El Al Airlines jumped 10.1% to 93 agorot, marking a 23% gain in the last three sessions, after oil prices extended their declines. (TheMarker)