Bank Leumi Drops on U.S. Tax Probe Provisions: Tel Aviv Mover

Bank Leumi Le-Israel Ltd. (LUMI) dropped to the lowest level in three weeks after the country’s largest lender by assets said it would post a fourth-quarter loss as it makes a provision to cover costs related to a U.S. tax probe.

The shares retreated 2.4 percent to 12.85 shekels, the lowest intraday level since Feb. 12 at 1:29 p.m. in Tel Aviv. The TA-25 benchmark stock index slid 0.3 percent.

The TA-Bank index, which measures the performance of Israel’s five largest commercial banks, dropped 1.2 percent. Leumi said today it would take a 340 million shekels ($91 million) provision to cover costs related to an investigation by U.S. authorities connected to suspected clients’ tax evasion. Final expenses may be significantly higher, the bank said in an e-mailed statement. The bank said it expects to post a fourth- quarter loss of 100 million shekels including the special provision.

“Leumi may be required to provision additional sums covering these investigations as U.S. authorities tend to be very harsh with their level of fines,” Terence Klingman, head of trading at Psagot Investment House Ltd. said today by phone.

No Admission

The provisions are not an admission to any claim that can be made against the group by U.S. authorities, the bank said in today’s statement.

Dozens of U.S. citizens who used offshore accounts to avoid taxes have helped the federal government in a criminal investigation of two Israeli banks, Leumi and Mizrahi Tefahot Bank Ltd. (MZTF), two people familiar with the matter said last month. The probe comes amid a U.S. crackdown on offshore tax evasion that has widened since UBS AG, the largest Swiss bank, avoided prosecution in February 2009.

Zurich-based UBS, which paid $780 million, said it helped clients evade taxes, and later turned over data on thousands of accounts. Since then, at least 11 banks have been the subject of U.S. criminal investigators, including Mizrahi; Leumi; and Credit Suisse AG, the second-largest Swiss bank.

Mizrahi shares fell 0.7 percent to 38.33 shekels. When asked if the bank will also announce a provision because of the investigation Benny Shoukron, a spokesman for Mizrahi, said “no.”

To contact the reporter on this story: Shoshanna Solomon in Tel Aviv at

To contact the editor responsible for this story: Alaa Shahine at

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