Amir Barnea: It's a Fact - I Was Wrong'

Valuations expert decides to give up corporate appraisals in wake of FIBI deal

In an odd repercussion of the First International Bank of Israel takeover, appraiser Amir Barnea has sworn off carrying out evaluations.

"I am done with corporate appraisals," he vowed yesterday, after Zadik Bino and the Liberman family bought the 52 percent controlling interest in FIBI, plus 75 percent of the voting rights, for just $90 million.

Barnea carried out a widely publicized appraisal of Bank Hapoalim, Israel's biggest bank, for Israel Salt Industries, which holds 11.6 percent of Hapoalim's shares.

He ruled that Hapoalim was worth 30 percent more than its shareholders equity value. Later, he amended his evaluation to mirror the bank's shareholders equity, at a time when the bank was traded on the Tel Aviv Stock Exchange at half that amount.

He never appraised FIBI, but the FIBI deal this week, which values the bank at roughly its value on the TASE, makes a mockery of his evaluations, Barnea admitted. The value of the deal, in which the Safra banking family sold FIBI to Bino and the Liberman group, can be extrapolated to Israel's other banks.

The FIBI takeover places all the bank appraisals in a "ridiculous" light, Barnea said. It also renders the prices of other recent takeovers similarly ludicrous - such as Bank Hapoalim's takeover of Maritime Bank, he said.

Nor are the negotiations for other bank takeovers, such as Migdal Insurance looking at United Mizrahi Bank, or Bank Hapoalim's casting its eye on Discount New York, relating to realistic prices, he added.

"I revisited my appraisal this morning and searched for my mistake," Barnea said yesterday. "I couldn't find it. But it's a fact - I was wrong. If the ones selling First International were willing to sell at that price, then apparently my appraisal, and all the appraisals of the other banks, are wrong."

The FIBI takeover posts a severe challenge to appraisers and he has no answer to the challenge, he said.

Eli Daniel adds: Barnea told the assembled audience at the Tel Aviv Banking Conference at Tel Aviv University's Recanati Business School last night that all the major banks - Bank Hapoalim, Bank Leumi, Israel Discount Bank, United Mizrahi Bank and First International Bank - are likely to continue writing down doubtful debt at a rate of about 1.3 percent of their credit portfolios through 2007.

The rate is considered high, similar to that posted in 2002, substantially higher than the average rate in the preceding decade of 0.8 percent. Nonetheless, the projections are not homogeneous with Mizrahi's likely provision for doubtful debt 0.6 percent of its credit to the public, while Discount Bank could be forced to set aside 1.5 percent of its portfolio every year from 2003 through 2007.