Leumi sells off Swiss business

Rakefet Russak-Aminoach
Rakefet Russak-Aminoach

Bank Leumi will sell Leumi Switzerland and Leumi Luxembourg to Julius Baer.

After making a provision of more than NIS 1 billion, following an investigation by US authorities into its alleged abetting of tax evasion by its customers, Bank Leumi (TASE: LUMI) is closing down Leumi Switzerland, one of its main overseas branches. The bank, managed by CEO Rakefet Russak-Aminoach, will sell its business in Switzerland to the Julius Baer investment bank. The financial amount of the deal is not yet final; it depends on the banks' equity when the deal goes through.

In any case, an amount equal to Leumi Switzerland shareholders' equity plus 10 million Swiss francs ($11 million) will be paid for the bank. As of the end of 2013, the bank's equity was 241 million Swiss francs. Julius Baer will also acquire Leumi Luxembourg. The particulars of this deal have not yet been finalized, but it appears that it will take place at the bank's equity at the time of the transaction. As of the end of 2013, the bank's equity was €43 million. Completion of the deal is expected by the end of the year. It appears that Bank Leumi will make neither a profit nor a loss on the deals.

This deal is a part of our strategy of expansion in Israel," Julius Baer deputy head for Latin America, Spain, and Israel Stephen Kamp said today. "Leumi Switzerland has quite a few Israeli customers, as well as customers from Latin America, two groups among whom we at Julius Baer want to expand our business."

Kamp added that in addition to this deal, Bank Leumi and Julius Baer are expected to cooperate in other areas, with mutual referral of customers. "Julius Baer has no banking license in Israel, and we therefore can't engage in banking activity, such as providing credit. If we have relevant customers looking for ordinary banking services, we'll refer them to Bank Leumi," Kamp said.

The sale of its business in Switzerland and Luxembourg ends with a whimper one of Bank Leumi's main activities private banking in Europe, most of which will be liquidated following the deal. Leumi Switzerland was founded 61 years ago, and former Bank Leumi CEO Galia Maor served as Leumi Switzerland chair until recently. The bank, which engages in private banking, serves thousands of wealthy customers. Its assets total 5.2 billion Swiss francs, as of the end of 2013. Three years ago, Bank Leumi, then managed by Maor, decided to expand its business in Switzerland, acquiring the Swiss Safdie Bank for 143 million Swiss francs (NIS 670 million). Safdie Bank's assets totaled 3 billion Swiss francs at the time of the transaction, with the acquisition practically doubling Bank Leumi's business in Switzerland.

The sale of Leumi Switzerland and Leumi Luxembourg is not the only step taken by Bank Leumi in order to cut down its overseas activity. Reducing its overseas business is a material change in the bank's policy; for years, Bank Leumi believed in a "follow your client" policy. The bank has changed its attitude, and is in the process of closing its overseas offices in places like Australia, Toronto, and France. After this deal, Bank Leumi will be left with activity in the US, UK, and Romania. The business in Romania has also caused Bank Leumi considerable losses, and the bank has even written off a significant part of its investment there. Banking system sources predicted that Bank Leumi would also have to sell this activity, although it does not appear that anyone is eager to acquire it.

Published by Globes [online], Israel business news - www.globes-online.com - on July 21, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

Rakefet Russak-Aminoach
Rakefet Russak-Aminoach
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