A senior executive of Bank Hapoalim (TASE: POLI) once told me a joke: "You see a man sitting on a cactus, and ask him, 'Why? Doesn’t it prick you?' He replied, 'It seemed like a good idea at the time.'"
The acquisition of banks in emerging markets also seemed like a good idea at the time to Bank Hapoalim. Buy banks, upgrade them, bring in know-how, technology and the products of the Israeli bank, and a bonanza awaits.
Two Bank Hapoalim chairmen led the dream: Shlomo Nehama and Dan Dankner. The outbreak of the global economic crisis collapsed the bank's emerging markets strategy. The plan to create a network of banks in Russia, Ukraine, Kazakhstan, Turkey, and Greece never materialized. All that is left is Turkey's BankPozitif and its loss-making subsidiary in Kazakhstan.
BankPozitif is crippled by the lack of a deposits from the public permit from Turkey's Savings Deposit Insurance Fund. Since acquiring BankPozitif in 2006, Bank Hapoalim has been trying to get this permit, and always kept an optimistic face about it. The permit is just around the corner, it's about to be issued, just another push and we'll get it, said the bank. To no avail, no permit was forthcoming, and BankPozitif's growth is anemic, its profits are negligible, and its return on equity is in the single digits. The bank is stagnant by every measure.
On top of all this is the deteriorating political picture. Israeli-Turkish ties have chilled, and Turkish Prime Minister Recep Tayyip Erdogan attacks Israel with increasing frequency and vehemence. It is becoming unpleasant to be an Israeli in Turkey, and even less pleasant to do business there. The Turkish media has a clear anti-Israel bias, and Turkey is drawing closer to Iran, Syria, Hizbullah, and Hamas.
TMSF's announcement that it was cancelling the AdaBank tender put paid to Bank Hapoalim's latest, and especially creative, effort to obtain a deposits from the public permit for BankPozitif. In principle, Bank Hapoalim can keep going with the current conditions for years to come, but under the circumstances, what does Bank Hapoalim have to do in Turkey?
Now is the turn of Bank Hapoalim chairman Yair Seroussi to clean up the mess. Bank Hapoalim is at an impasse, without a deposits from the public permit, and will probably never get one. It is possible to initiate the countdown to sale of BankPozitif, say goodbye, fold the tent, and return to Israel.
Published by Globes [online], Israel business news - www.globes-online.com - on November 28, 2010
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