Sources in the banking system told "Globes" that Israel Discount Bank (TASE: DSCT) intends to float Israel Discount Bank of New York. They said that the IPO would be held in 2013 in order to help Discount Bank meet the Bank of Israel's new capital adequacy target for Basel III standard on bank capital adequacy and liquidity.
Discount New York posted a profit of $53 million in 2010 and $28 million in the first half of 2011. It is forecast to post a profit of $50-60 million this year.
Discount Bank wants to float Discount New York at least at its shareholders' equity, which is currently $795 million. The bank's capital adequacy ratio is 16.1%, and defined by the US Federal Deposit Insurance Corporation (FDIC) as "well capitalized".
With such a high capital adequacy ratio, under normal circumstances Discount New York could distribute a dividend, which would reduce its equity, but it would have to pay high taxes on it. Therefore, Discount Bank will have to solve Discount New York's tax problem before an IPO so that the bank can distribute the surplus capital as a dividend.
Discount New York is based on offshore deposits by Latin American Jews, who account for 65% of the bank's deposits. The US authorities look askance at this deposits structure. Consequently, the bank is trying to its local banking business and increase deposits from Americans in order to hold an IPO at a high capital multiple.
Discount New York is headquartered in Manhattan, and it has branches in Beverly Hills and the Miami suburb of Aventura. It opened a branch on Staten Island last year and it plans to open more branches in Brooklyn and on Long Island by the end of 2012.
Discount Bank New York subsidiary Discount Bank Latin America, based in Montevideo, Uruguay, is also expanding. It has 15 branches across the country, offering retail banking services. It is Uruguay's fifth largest bank and accounts for 10% of Discount New York's revenue.
Published by Globes [online], Israel business news - www.globes-online.com - on October 4, 2011
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