31 May 12 19:41–The long threatened credit crunch has arrived. The banks’ financial statements for the first quarter of 2012 show that credit to the business sector fell by 0.9% in the first quarter, compared with the preceding quarter, after rising by 5.2% in 2011. Since the alternative source to bank credit, bond issues on the capital market and in private placements, is almost completely closed to new offerings, businesses are facing an ever growing problem.

A few weeks ago, Bank Leumi (TASE: LUMI) chairman David Brodet said, “The credit crunch is not as bad as it seemed to us a few months ago, after the Bank of Israel’s capital adequacy requirements were clarified, but the problem has not
disappeared.”

Business credit fell to NIS 381.2 billion at the end of March from NIS 384.7 billion at the end of 2011, a total decline of NIS 3.5 billion. Business credit normally grows at a rate at least equal to the rise in GDP. Given the 2012 GDP growth forecasts of 2.5-3%, business credit ought to have grown by 0.75-1% in the first quarter. Instead, credit granted by almost all the banks fell. The last such decline occurred in the first quarter of 2009.

Bank Hapoalim (TASE: POLI), the biggest business lender, reduced its credit by 1.5%, and says so explicitly in its financial report. On the other hand, the bank increased credit to small business by 0.7%, after CEO Zion Kenan marked the sector as a strategic target.

Mizrahi Tefahot Bank (TASE:MZTF) also cut its business credit by a similar amount, while Bank Leumi and Israel Discount Bank (TASE: DSCT) both cut their business credit by 0.9%…Read More>>

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