Fitch upgrades Leumi, Hapoalim

Bank Leumi branch picture: Tamar Mitzpi
Bank Leumi branch picture: Tamar Mitzpi

Fitch Ratings has revised Bank Leumi and Bank Hapoalim's IDRs and Support Rating Floors to 'A' from 'A-'.

On Friday, Fitch Ratings announced an upgrade in the ratings of Israel's big two banks, Bank Leumi (TASE: LUMI) and Bank Hapoalim (TASE: POLI). The banks' Long-Term Issuer Default Ratings (IDRs) and the Support Rating Floors have been revised to 'A' from 'A-'.

The banks' Short-Term IDRs and Support Ratings have been affirmed at 'F1' and '1', respectively. The Outlooks on the Long-Term IDRs are Stable.

Fitch said that both banks' Viability Ratings (VRs) were unaffected by its rating action. It added that the rating action reflects the upgrade of the Long-Term IDR of the State of Israel to 'A+'/Stable from 'A'/Positive on 11 November 2016. "The banks' Long-Term IDRs and Support Rating Floors are driven by our expectation of an extremely high probability that support will be provided to these two banks by the Israeli state if needed," Fitch's announcement said, "The key drivers of the strong probability of support are the deposit-driven liability structure, the interconnection of the system and the absence of a deposit insurance guarantee. Our view is reinforced by the banks' systemic importance, large domestic franchises (each accounting for about 30% of sector assets), their importance to the Israeli economy, and the lack of developed resolution legislation."

Fitch cautions that the IDRs, SRs and SRFs are potentially sensitive to a change in its assumptions around the Israeli authorities' propensity or ability to provide timely support to the banking sector. "While the introduction of a resolution law is in discussion, Fitch does not expect this law to become functional in the short-term. The country does not operate a deposit guarantee system and the practical implementation of resolution tools, such as bail-in of senior creditors, remains unlikely in Fitch's view," analyst Claudia Nelson writes.

As far as the outlook is concerned, Fitch states that "given the high level of ratings of the banks we do not expect further upgrades of the State of Israel's IDR to result in a further upgrade in the Long-Term IDR of either bank."

The rating actions are as follows:

Leumi: Long-Term IDR upgraded to 'A' from 'A-', Stable Outlook; Short-Term IDR affirmed at 'F1'; Support Rating affirmed at '1'; Support Rating Floor revised to 'A' from 'A-'; viability Rating unaffected at 'bbb+'.

Hapoalim: Long-Term IDR upgraded to 'A' from 'A-', Stable Outlook; Short-Term IDR affirmed at 'F1'; Support Rating affirmed at '1'; Support Rating Floor revised to 'A' from 'A-'; Viability Rating unaffected at 'bbb+'.

Published by Globes [online], Israel business news - www.globes-online.com - on November 27, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

Bank Leumi branch picture: Tamar Mitzpi
Bank Leumi branch picture: Tamar Mitzpi
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018