Is This a Good Time to Buy a Local Bank?

Members in the local banking sector believe that once the security situation improves and the economy returns to its former strength, foreign banks will be keen to buy control of local banks.

Citibank and HSBC are viewed as potential purchasers: both have set up branches in Israel and both have stated they are interested in buying a local bank, even though neither has made a concrete move in that direction.

Headquartered in London, HSBC's international strategy has not been on hold: the bank purchased the American mortgage bank Household Bank for $14.2 billion last week.

CEO of HSBC Israel, Yehuda Levy, welcomed the purchase, stating that it would expand the bank's presence in the U.S. retail banking sector and could prove to be a lucrative opportunity to improve on the bank's returns. "HSBC will acquire through the deal around 50 million clients, mostly in the United States and a few in Canada and England," he said. "Household has 1,400 branches in the United States, 200 in England and 110 in Canada."

The purchase was part of the bank's strategy to further develop its activities in new profitable centers, he said.

HSBC is keeping a relatively low profile in Israel, concentrating mostly on private banking for wealthy clients and providing foreign currency trading and credit deals for large companies.

Whereas Citibank declared its intention to enter the local retail banking scene and then changed its mind, HSBC has been content to develop the investment line of its business. The bank's latest spending spree shows that the international banking group harbors expansion plans, and Israel could - one day - be a potential contender.