Israel's last independent mortgage bank is going to disappear. Bank Leumi (TASE: LUMI) notified the TASE today that it will merge with its wholly-owned subsidiary Leumi Mortgage Bank Ltd. "This merger will enable the Leumi group as a whole to make a step forward at its level of synergy and quality of product offered to its customers," outgoing Bank Leumi president and CEO Galia Maor said.
The merger, managed by Leumi Mortgage Bank CEO Shuki Burshstein will be carried out in stages through the end of the year. A separate mortgage unit will be established, which will report directly to Bank Leumi's Banking Division, headed by deputy CEO Baruch Lederman. The new unit will operate on the current organizational structure, and will be responsible for the 110 mortgage representative branches and the subsidiary's 500 employees. Bank Leumi said that there would no layoffs as a result of the merger.
Over the past decade, Israeli banks have absorbed all of their mortgage subsidiaries. Bank Hapoalim (TASE: POLI) was the first, merging Mishkan Mortgage Bank. Mizrahi Tefahot Bank (TASE:MZTF) was second, merging Tefahot Mortgage Bank. First International Bank of Israel (TASE: FTIN) followed suit, and Israel Discount Bank (TASE: DSCT) announced the merger of Discount Mortgage Bank two months ago.
Bank Leumi expects the merger to save it NIS 20 million a year.
Sources at the bank said that the main reason for the merger was to expand its retail banking services. Many current Leumi Mortgage Bank customers are not customers of Bank Leumi, but after the merger, Bank Leumi will have information on these customers and can try to turn them into customers.
Leumi Mortgage Bank is Israel's third largest mortgage bank, with a 23% market share. Its mortgage portfolio totaled NIS 55 billion at the end of September 2011, after extending NIS 8.6 billion in new loans in January-September. The bank posted a profit of NIS 156 million in January-September, giving a return on equity of 7.9%.
Published by Globes [online], Israel business news - www.globes-online.com - on January 22, 2012
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