Bank Leumi (TASE: LUMI) has launched a streamlining plan that will include an 8% reduction in its workforce, on the eve of the departure of president and CEO Galia Maor. The bank will cut 800 jobs by 2014, including 300 jobs this year.
"We will undertake a series of streamlining measures to reduce the bank's costs and improve its efficiency ratio," said Bank Leumi in a statement today. The bank estimates that the measures will cut costs by NIS 350-400 million a year beginning in 2015, boosting its return on equity by 1%.
"The banking system must be streamlined," Bank Leumi head of Finance and Economics Division Yaakov Haber told "Globes". "The employees' salary agreements are untouched, there will be no layoffs; we will hire far fewer workers in the coming years."
Bank Leumi had 9,725 employees in Israel, at an average salary cost of NIS 328,000 a year. Therefore, most of the savings will come by reducing the number of jobs. The bank believes that it will reach its target of 800 fewer positions by 2014 through the departure of employees who reach retirement age, normal employee replacement, and reduced hiring of new employees. The plan will not apply to subsidiary Arab Israel Bank Ltd., which is set to expand operations.
The most ambitious part of the streamlining plan to transfer employees between jobs. 1,000 employees are due to move from the bank's headquarters and branches as part of a plan that the bank calls "moving forward together". Some of these employees will be placed in back office centers, similar to a move by Bank Hapoalim (TASE: POLI) over the past three years. Bank Leumi also plans to reduce the number of branches by adapting them to the size of activity and through consolidation of external operations, such as credit centers.
Bank Leumi wants to reduce the area of its branches by 10% by the end of 2014, which will reduce rent. It also wants to cut spending on the procurement of infrastructures, by centralizing procurements to exploit economies of scale and supervision on vendors' prices. It will also try to reduce the use of outside consultants, and lower building and office maintenance costs.
Bank Leumi's share price rose 1.3% in morning trading to NIS 12.10, giving a market cap of NIS 17.6 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on February 12, 2012
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