Israel Banks Are ’Place to Hide,’ Citigroup Says

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Israel Banks Are 'Place to Hide,' Citigroup Says, Lifting Leumi
July 01, 2010, 8:07 AM EDT

By David Wainer

July 1 (Bloomberg) -- Israeli banks are "a place to hide" from risk, Citigroup Inc. said as it raised its recommendation for Bank Leumi Le-Israel Ltd. to "buy," citing economic growth and share price declines.

"For the risk-averse looking for a place to hide," investors should take advantage of Israeli banks, analysts Michael Klahr and Simon Nellis wrote in a note to investors. "Israel avoided recession in 2009 due to its robust financial sector, monetary easing/negative real rates, a strong fiscal response and strong high-tech exports."

Israel's rebound from the global financial crisis has been powered by exports, which make up almost 50 percent of gross domestic product. Bank of Israel Governor Stanley Fischer said on June 18 the bank expects economic growth of 3.7 percent this year. Israel's economy expanded an annualized 3.6 percent in the first quarter.

The shares of Leumi, the country's largest bank, plunged 20 percent in the second quarter, while Bank Hapoalim Ltd., the second-largest, fell 14 percent and Israel Discount Bank Ltd., the number three, slumped 22 percent in the period. Israel's benchmark index lost 14 percent and the MSCI World Index, which tracks more than 1,600 stocks, was down 13 percent.

Citigroup increased Leumi from "hold" and lifted the share price estimate 11 percent to 17.5 shekels. The shares were unchanged at 13.91 shekels at 12:41 p.m. in Tel Aviv.

Hapoalim and Discount had their price estimates cut 1.7 percent and 12 percent to 17.2 shekels and 8.5 shekels, respectively. The analysts cited a lower sustainable return on equity.

Hapoalim fell 1.4 percent to 13.87 shekels and Discount lost 2 percent to 6.455 shekels.

--Editors: Claudia Maedler, Peter Branton.

To contact the reporter on this story: David Wainer in Tel Aviv at cmaedler@bloomberg.net.

http://www.businessweek.com/news/2010-0 ... leumi.html