Israeli, foreign investors lose millions as Bank Leumi shares drop

A number of prominent Israeli investors suffered a loss of tens of millions of shekels due to their failed investment about a year ago in Bank Leumi's shares.

In June 2022, the bank raised NIS 2.75 billion in a private offering for some of its shares. The most prominent private investor was Aaron Frankel, who purchased about 2% of the shares with an investment of NIS 933 million at a price of NIS 30.25 per share. Frankel's loss on this investment was estimated at NIS 50 million.

In addition, Alfred Akirov, Shlomo Eisenberg and several other Israelis bought shares amounting to NIS 2.2 billion, and foreigners bought shares for a total of NIS 550 million. The capital raising was led by Leumi's CEO Hanan Friedman and Samar Haj Yahya, chair of the board. 

In early May, Leumi announced that it recorded a loss of around NIS 1 billion due to its investment in Valley National. This is due to the sharp decline in the value of Valley National shares on the American stock exchange due to market uncertainty. Leumi holds 14.2% of Valley's shares.

The drop will be noted in the upcoming financial statements for the first quarter of 2023, and as a result, Leumi's profits will drop by 50% in the first quarter. Even after the current reevaluation, Leumi's books are balanced as a result of the merger. In the first half of 2022, the bank registered a profit of NIS 645 million before taxes; this balance includes profits from equity and dividends and brings the bank's total profit to about NIS 1 billion.

Bank Leumi: Valley National is a long-term strategic investment

Valley National has been operating in the US since 1927 with assets worth $64 billion. Valley, which is managed conservatively and has never recorded a loss-making quarter, recorded excess liquidity in relation to uninsured deposits. Seventy percent of Valley's deposits are insured.

Bank Leumi stated yesterday that the investment in Valley is a long-term strategic investment and is part of the bank's strategy to increase its credit portfolio in the US. Leumi made it clear that Valley is a bank with a consistent history of meticulous risk management, so the Israeli bank considers it to be a strategic partner.

In addition, Leumi continues to express optimism about the American banking sector. The bank noted that this is not expected to have a significant impact on the adequacy of regulatory capital.