August 30, 2012–Bank Leumi Le-Israel (LUMI) Ltd. set aside almost five times as much cash in the second quarter as it did a year earlier to cover bad loans amid increased concern companies will be unable to repay debts as the economy slows.
Bad debt provisions at Israel’s largest bank by assets rose to 333 million shekels ($82 million) from 73 million shekels a year earlier, the Tel Aviv-based bank said in an statement. Profit fell 50 percent to 280 million shekels, trailing the mean analysts’ estimates of 455 million shekels. Bank Hapoalim Ltd. (POLI), the second-largest bank, said net income fell 15 percent to 607 million shekels, less than the 610 million shekels mean estimate of five analysts surveyed by Bloomberg.
“The big banks are struggling,” Terence Klingman, head of research at Psagot Investment House Ltd in Tel Aviv, said today by telephone. “They’re more exposed to international and big local borrowers and to currency fluctuations.”
Israeli companies will struggle to roll over maturing liabilities to pay obligations coming due in 12 months, Moody’s Investors Service said in a report on May 8, the same day it cut the outlook on the nation’s banks to negative from stable. Economic growth is expected to slow to 3.1 percent this year, from 4.8 percent in 2011, according to central bank estimates.
The Bank of Israel kept its benchmark interest rate unchanged for the second consecutive month on Aug. 27 at 2.25 percent, as it seeks to shore up the economy. It has gradually been reducing the rate from 3.25 percent.
The central bank said it will probably lower its domestic growth forecast of 3.4 percent for next year in September. About 40 percent of gross domestic product is made up of exports, with Europe and the U.S. representing the country’s largest markets…Read More>>