bank hapoalim 298 .
(photo credit: Ariel Jerozolimski [file])
Bank Hapoalim Ltd., which has sustained the biggest losses of any Israeli lender from the global credit crunch, said it won't meet its 2008 profit forecast and will probably post a loss from ordinary operations.
The bank will post return on equity of between zero and 2 percent, compared with a range of 7% to 10% it forecast on May 21, the Tel Aviv-based lender warned on the eve of the Sukkot holiday, citing the impact of the global crisis.
Hapoalim, the country's biggest lender by assets, posted a 1.6 billion shekel loss in the first quarter after it sold mortgage- backed securities and wrote down other assets. While it returned to profitability in the second quarter, the bank said September 15 it held about $ 109 million of assets linked to bankrupt Lehman Brothers Holdings Ltd.
"The possibility exists that developments in the financial world as they emerge and business decisions taken by the bank will lead to different results than those we have forecast," said Hapoalim in an official statement to the Tel Aviv Stock Exchange.
Hapoalim said it will probably post a negative return on equity of 1% to 3% from ordinary operations this year. In the second half, net profit will be about NIS 1b., compared with a NIS 973m. first- half loss, the bank said.
Hapoalim is the only one of Israel's five biggest banks to provide an earnings forecast. It said on Monday that it planned to continue its strategic plan "appropriate to changing conditions'' in the international capital markets.
Israeli banks haven't taken large subprime-related writedowns because they didn't invest heavily in the kinds of securities most severely affected by the credit crunch. While profit has fallen, Bank Leumi Le-Israel Ltd., the biggest lender by market capitalization, posted a first-half net of NIS 1.36b. and No. 3 Israel Discount Bank Ltd. reported net of NIS 256m.
The Bank of Israel cut its base lending rate by a half a point effective from Sunday, citing the need to reduce "volatility'' in the domestic financial market as well as expectations for lower inflation. The October 7 decision came hours after the Jerusalem-based central bank said lenders remain in "good and stable'' condition.
The Tel Aviv Stock Exchange's Fin-15 index of bank and insurance shares is down 39% so far this year, 12 points more than the benchmark TA-25 index of leading stocks. Hapoalim has fallen 44% this year. (Bloomberg)