The aggregate exposure of Israel's banks to Citigroup Inc. (NYSE: C) is $500-600 million, after the banks drastically reduced their exposure in recent weeks. In addition, Israeli Exchange Traded Funds (ETFs) have an aggregate exposure of around $600 million to Citigroup.
Citigroup's share fell 50% last week, including 20% on Friday to just $3.77, giving a market cap of $20 billion. The share has lost nearly 90% from its 52-week high of $35.30.
Banking sources today estimated Bank Hapoalim's (TASE: POLI; LSE:80OA) exposure to Citigroup at $40 million, and the exposure of Bank Leumi (TASE: LUMI) and Israel Discount Bank (TASE: DSCT) at $200-250 million each.
Past notices to the Tel Aviv Stock Exchange (TASE) by the four largest ETF firms - KSM of Excellence Investments Ltd. (TASE: EXCE), Discount Bank's Tachlit, Mabat of Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS), and Psagot Investment House Ltd. - showed that, at the end of September, these firms had an exposure to Citigroup of more than 10% of their assets under management. Despite the high exposure, bank managers are not worried that Citigroup will collapse.
Gross, Kleinhendler, Hodak, Halevy, Greenberg & Co. partner Natalie Jacobs said that even if Citigroup were taken over by the government, and does not go bankrupt, it was quite possible that some derivatives would lose all value, since nationalization would be considered an insolvency event.
A Discount Bank spokeswoman declined to mention any numbers related to the bank's exposure to Citigroup. Bank Leumi also declined to comment. A Bank Hapoalim spokeswoman said that the bank would provide proper disclosure about its exposure to foreign banks as stipulated in Bank of Israel regulations, and in the bank's financial report, which will be published later this week.
If the situation at Citigroup deteriorates, the Israel Securities Authority may order Israel's banks to issue immediate reports about their exposure, as it did in the case of the Lehman Brothers' collapse in September.
Published by Globes [online], Israel business news - www.globes-online.com - on November 23, 2008
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