The sale of Israel Discount Bank (TASE:DSCT) to the Bronfman family, it is becoming increasingly clear, was the biggest mistake made as part of the privatization of the country's banks. The bride and groom have not been a suitable match. The bank does not interest the family, and their control does not benefit the bank.
Under their leadership the bank has been run down and reached a position it should never be in - top in advertising and bottom in banking. Yields are low and it is an inefficient bank to the extreme. The bank has hundreds of very expensive and very superfluous employees that cannot be touched or even confronted. The owners want quiet. They don't want to sell a bank that's on strike.
Add to this the clumsiness of the management in ousting former chairman Shlomo Zohar, once close to the Bronfmans, but who could not suffer any longer the conduct vis-a-vis the Supervisor of Banks. Time and again the Supervisor demanded that the owners inject capital into the bank, and the owners promised that suitcases of money were about to arrive - but they never did.
At one stage, Zohar confronted the family and pressed them and eventually he resigned. Add to that, of course, the loose control over the CAL - Israel Credit Cards Co., whose clearing affairs are becoming more and more complicated, and now awaits the David Hodak report, which is expected to be tough and likely to name those responsible. In short, the Bronfman's level of commitment to the bank is in doubt.
The bank is about to be sold. Yossi Ciechanover, a director of the bank and close to Edgar Bronfman and an entire who's who of Americans and Israelis is supposed to find a buyer. At the same time, he serves as the family's long but not so strong arm in Israel.There are no takers, though of course it depends on the price. In February 2011 the controlling shareholding will be unblocked. In situations like this, the government, which still holds 20% of shares, the Ministry of Finance and Bank of Israel can climb down and from their conditions on control and offer the owners to bring forward the date of unblocking control to hasten a faster sale.
In the end, we are talking about the Bank of Israel, Israeli shareholders and Israeli customers. If there are complications that will be an Israeli not an American affair.
Published by Globes [online], Israel business news - www.globes-online.com - on July 6, 2010
© Copyright of Globes Publisher Itonut (1983) Ltd. 2010