UPDATE 1-Israel’s Bank Hapoalim profit dips on provision for U.S. tax probe
Q4 net profit 478 mln shekels vs 633 mln
* Bank provisioned 196 mln shekels in 2014 for U.S. tax evasion
* Provisioned 360 mln shekels in Q4 for cost cuts
* Shares down 1.3 pct (Adds quotes, details from news conference, analyst’s comments)
By Tova Cohen
TEL AVIV, March 10 (Reuters) – Bank Hapoalim, Israel’s largest lender, reported lower quarterly profit as it set aside money for streamlining and for a potential fine from a U.S. tax evasion investigation.
Hapoalim on Tuesday posted fourth-quarter net profit of 478 million shekels ($119 million), compared with 633 million a year earlier and below expectations of 615 million in a Reuters poll.
Hapoalim said it provisioned 196 million shekels in 2014, including 89 million in the fourth quarter, to cover a tax evasion investigation by U.S. authorities that is in a preliminary stage. The bank said it is too early to assess if it will be fined.
On March 5, the New York State Department of Financial Services issued a document disclosure order referring to its investigation of the bank’s activity with American clients.
Leumi, Israel’s second-largest lender, in December agreed to pay fines totalling $400 million to settle two separate investigations into whether it helped U.S. clients evade taxes.
U.S. efforts to crack down on Americans using offshore banks to evade taxes have largely focused on Swiss banks, but lenders in other countries are also under scrutiny.
Even though other Israeli banks are seeking to close their private banking operations in Switzerland, Hapoalim plans to maintain its Swiss activities.
“We have a successful operation and plan to continue. There is a market, there is demand,” Chairman Yair Seroussi told Reuters following a news conference. It also plans to strengthen its U.S. banking operations.
In the fourth quarter, Hapoalim provisioned 360 million shekels for cost-cutting measures. CEO Zion Kenan said Hapoalim will reduce headcount by several hundred positions, mainly through early retirement.
Two similar plans in the past two years each reduced manpower by more than 500 workers, leaving the bank with nearly 12,700 employees.
Shares in Hapoalim fell 1.3 percent to 18.06 shekels in afternoon trade, outpacing declines in the broader market.
Underlying results were good but regulatory risks remain the main concern, Barclays analyst Tavy Rosner said.
“Leumi’s recent settlement … emphasises the risk of fines in the industry. We believe this mostly explains Hapoalim’s share weakness seen over the last couple of months as investors may fear a potential contagion to other banks,” Rosner said.
Its Tier 1 capital ratio in Basel III terms rose to 9.3 percent from 9.1 percent at the end of 2013.
Hapoalim will pay a dividend of 70 million shekels for the fourth quarter. ($1 = 4.01 Israeli Shekels) (Additional reporting by Steven Scheer, editing by Louise Heavens)
