Exactly a year ago, Bank Leumi celebrated a record gap (in its favor) between its market cap and that of its chief rival, Bank Hapoalim. At the end of the second quarter of 2022, the gap was NIS 10 billion, as Bank Leumi posted higher profits than Bank Hapoalim. A year went by, and Bank Hapoalim overtook Bank Leumi in its market cap, and was traded at NIS 43.19 billion, just above Leumi’s NIS 43.16 billion. That was until yesterday, when Leumi took back a narrow lead, and the competition between Israel’s two largest banks is closer than ever.
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<p>Hapoalim’s short-lived turnaround came after Bank Leumi had enjoyed the title of Israel’s most valuable bank since May 2021. A year later, it looked as though Bank Leumi was getting out of sight as far as the other banks were concerned. Its CEO, Hanan Friedman, decided to merge the activity of its US branch into Valley National, and Bank Leumi announced that it would record a gain of NIS 750 million in the following quarters as a result. Meanwhile, Bank Hapoalim continued to hold onto its independent activity in the US, and was having difficulty in ending its adventures in Switzerland and Turkey and selling its assets in those places.
<p>Recently, however, it has emerged that the merger of Leumi USA into Valley National came at a problematic time, as a crisis in US regional banks sent Valley National’s share price plunging by 50%. This cut the value of Bank Leumi’s stake in Valley National to just NIS 1.9 billion, versus the NIS 3.57 billion at which it was recorded in the bank’s books in 2022.
<p>As a result, Bank Leumi had to make a write-down of NIS 1.1 billion at the end of the first quarter of this year, which halved its quarterly profit to NIS 982 million, well below the profit of over NIS 2 billion presented by Bank Hapoalim. Bank Leumi’s return on equity was 7.8%, versus 17% for Bank Hapoalim.
<p>Accordingly, Bank Leumi’s share price is down 2% for the year to date, while that of Bank Hapoalim is up 5%.
<p><i>Published by Globes, Israel business news – <a href=”https://en.globes.co.il”>en.globes.co.il</a> – on June 12, 2023.</i></p>
<p><i>© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.</i></p>
