UBS expects a better banking environment in Israel in 2015.
In a survey of the Israeli banking sector, in advance of the banks' annual results, UBS has upgraded Israel Discount Bank (TASE: DSCT) and downgraded Bank Hapoalim (TASE: POLI). "We upgrade Discount bank to a Buy from Neutral as we believe that it is well on track in implementation of its restructuring plan which should lead to substantial efficiency benefits… We downgrade Hapoalim to Neutral from Buy as we expect litigation risks to continue to weigh on the stock in the near term and potential charges posing a risk to our dividend forecast of 30% pay-out in 2016." UBS has raised its target price for Discount Bank from NIS 6.7 to NIS 8.2, and lowered its target for Bank Hapoalim from NIS 22.5 to NIS 20.6. Bank Leumi (TASE: LUMI) and Mizrahi Tefahot Bank (TASE:MZTF) remain rated Neutral.
"Despite political and regulatory overhang stemming from elections on 17 of March, we expect 2015 to result in a better banking environment. We expect 2015 CPI to increase marginally compared to 2014 leading to positive NIM (net interest margin) impact, while interest rates are expected to stay flat for most of 2015. Fees that were negatively impacted by regulation in 2014, should marginally recover in-line with the loan growth. We expect asset quality to remain stable and all banks to focus on improving cost efficiency. We also indicate our relative preference for Leumi in 2015 as most of the overhangs to the investment case have been removed recently; however we remain Neutral pending more comfort on the post-election regulatory environment," UBS writes.
Published by Globes [online], Israel business news - www.globes-online.com - on March 3, 2015
© Copyright of Globes Publisher Itonut (1983) Ltd. 2015
Discount Bank
Stella Korin-Lieber and Irit Avissar