Bank Leumi (TASE: LUMI) has established a subsidiary, Leumi Tech, which will coordinate the bank’s operations in the high-tech sector. The company’s goal is to further the bank’s involvement in small- to mid-sized technology companies (with sales of up to $10 million), such that the total credit extended to them will reach NIS 2 billion within three years. As of today, Leumi’s credit in the sector is estimated at just a few hundred million shekels.
A month ago, “Globes” reported that Yifat Oron, who was partner at Vertex Venture Capital, would be joining Bank Leumi, and would be managing the bank’s operations in the sector. It has now been announced that Oron has been appointed Leumi Tech CEO, and she has already begun meeting with high-tech companies in order to expand the bank’s operations in the field. Leumi will officially launch the operations in the first half of the year, sources believe.
Former Ministry of Finance Director General and NICE Systems Ltd. (Nasdaq: NICE; TASE: NICE) CEO Haim Shani and former Microsoft Israel President Moshe Lichtman both serve as advisors to Bank Leumi - it cannot be ruled out that they will be appointed to formal positions at Leumi Tech as well. Bank Leumi was an anchor investor in a fund that the two raised, which invests in high-tech.
A growth engine
When Shani and Lichtman began raising money for their fund and reached Bank Leumi CEO Rakefet Russak-Aminoach, she decided to take advantage of the opportunity, and not to suffice with passive investment in the fund, but rather to expand Bank Leumi’s activity in the field of high-tech. The bank understood that high-tech is a main economic growth engine, but that Leumi’s exposure, and the exposure of the banking sector as a whole, is relatively low, due to the levels of professional knowledge and required specialization to operate in the field. After examining the topic over many months, it was ultimately decided to establish Leumi Tech.
There is an apparant conflict of interests between Leumi Tech and the fund, however, sources at the bank see it as synergy rather than conflict: the fund is a venture capital fund, and Leumi Tech operates in the field of credit alone, with more established companies, therefore, the two companies will be able to refer clients to each other, depending upon their needs.
Leumi, today, has a foothold in the field: the bank has specialist staff for the sector working at ten of its branches in high-tech centers. However, there are many bank services that Leumi and other Israeli banks do not provide for the companies, which has created a vacuum filled by foreign banks that specialize in the field, such as Silicon Valley Bank (SVB).
There are a few barriers that impeded the development of the bank’s operations in the sector, such as the ability to give credit against future payments by customers abroad. Another barrier that deterred the bank from extending credit is the professional knowledge necessary to analyze the risks of high-tech companies, which is different from other sectors. For example, in comparison to other market sectors, analysis of financial reports is far less relevant than forecasts. The high-tech sector is also very dynamic and changing, and professional knowledge of trends in the sector is critical for decision making and extending credit. Leumi Tech and Oron are meant to remove these barriers.
Leumi does not intend to make organizational changes: the high-tech teams and credit officers will remain in the commercial division, but Oron and her team will advise them, and collaborate with them on decision making. Oron will also need to bring new clients to the bank, and to build a mix of products and services that meets the sector’s needs, while faced with the ambitious target of tripling the bank’s credit portfolio in the sector within three years.
Published by Globes [online], Israel business news - www.globes-online.com - on January 8, 2014
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