Mizrahi-Tefahot Bank Ltd. (MZTF), Israel’s biggest mortgage company, is looking for acquisitions to replace Israel Discount Bank Ltd. (DSCT) as the country’s third-largest bank, Chairman Jacob Perry said.
“We tried to buy other banks in Israel, and we are still looking, but there is not too much merchandise,” Perry, a former head of the Shin Bet domestic security service, said in an interview. “The goal to enlarge our domestic and international activities through mergers and acquisitions is still on the agenda for the coming years, which may turn us into the third-largest bank.”
Mizrahi, which says it has a 16 percent share of the banking credit market and sells more than a third of the country’s mortgage loans, may be affected by new central bank regulations. The Bank of Israel has said it will limit variable- rate mortgages to reduce risks to borrowers and banks as interest rates increase.
The new regulations won’t have an immediate impact on mortgage demand, Perry said. “If regulations will be harder, it may affect our profitability.”
Perry, 67, said Israel’s fourth-largest lender had searched for acquisitions in eastern Europe, then abandoned the idea given the economic situation in the region.
“Any acquisition will be subject to approvals by the antitrust authority and the Bank of Israel who in the past have come in the way,” Terence Klingman, an analyst at Meitav Investment House Ltd. in Tel Aviv, said by telephone. “If the bank attempts to buy a bank abroad it may impact the share price due to more uncertainty about their activities.”
Mizrahi fell 1 percent to 35.35 shekels at the 4:30 p.m. close in Tel Aviv. The shares have gained 18 percent over the past year, the most in the five-member Tel Aviv Banking Index (TABANK), which increased 12 percent over that period.
Mizrahi has been cautious in mortgage lending with an average loan-to-value ratio of about 50 percent, according to Perry. In the first quarter, provisions for problem loans fell 5.3 percent.
Bank of Israel Governor Stanley Fischer has increased the benchmark lending rate to 3.25 percent from a record low of 0.5 percent since August 2009.
“The central bank has brought interest rates to a high level and I don’t think it will be raised much more,” Perry said.
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