Bank Leumi (TASE: LUMI) has been forced to support its foreign subsidiaries with capital injections, guarantees, and credit lines, because of their losses and the financial crisis. Since the start of the current crisis, it has provided NIS 930 million in support for subsidiaries.
Bank Leumi's financial report for 2008 states, "In 2008, the bank made available to Bank Leumi Romania SA a line of credit in the amount of $100 million, for the purpose of expanding business activity, through a deposit without a repayment date, with the possibility of repayment after two years from the date on which a request for payment is made. As at the end of 2008, the balance of the deposit stands at some $ 75 million."
Bank Leumi added that it was asked by the National Bank of Romania to provide Leumi Romania with a liquidity line in the amount of $50 million, "to be used in the event of a liquidity crisis in the bank." The bank also noted, "The bank has given an undertaking in the amount of €10 million in favor of the European Bank for Reconstruction and Development to secure a line of credit which will given by EBRD to Bank Leumi Romania."
Bank Leumi Luxembourg SA, which provides private banking services, posted a net loss of €14.1 million in 2008, because of losses on investments in securities. Consequently, Bank Leumi stated that, in November 2008, its board of directors approved an additional capital increase of €6 million, by means of an increase in Tier I capital of Bank Leumi Luxembourg. Earlier, in March, Bank Leumi Luxembourg increased its Tier II Capital by € 5.9 million, by issuing a subordinated capital note to Bank Leumi.
Bank Leumi UK Ltd., which provides commercial and private banking services, and posted a net loss of ₤4 million in 2008, compared with a net profit of ₤12.1 million in 2007. During 2008, Bank Leumi UK raised ₤29.5 million in Tier II capital, of which ₤24.5 million was through two issues of subordinated capital notes to Bank Leumi. In addition, Bank Leumi invested ₤10 million in Bank Leumi UK's share capital. The total capital injection by Bank Leumi in its UK branch reached ₤39.5 million (about NIS 240 million).
Published by Globes [online], Israel business news - www.globes-online.com - on April 16, 2009
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