Mizrahi Climbs to April High as Credit Improves: Tel Aviv Mover

Mizrahi Tefahot Bank Ltd. (MZTF), Israel’s fourth-largest bank, advanced to the highest level in more than a month after reducing bad loan provisions amid an improvement in corporate credit quality.

The shares rose 2.8 percent to 38.54 shekels, the highest level since April 2, at 3:51 p.m. in Tel Aviv. Bank Hapoalim Ltd. (POLI) and Bank Leumi Le-Israel Ltd. (LUMI), the country’s two-biggest lenders, increased 2 percent and 2.4 percent, respectively. The two banks are scheduled to report earnings on May 30. The Tel Aviv Banking Index gained 2.4 percent while the benchmark TA-25 (TA-25) Index advanced 1.4 percent.

Mizrahi said provisions were equivalent to 0.1 percent of outstanding loans. Leader Capital Markets (LDRC) Ltd. and Psagot Investment House Ltd. had forecast provisions of 0.2 percent. The Bank of Israel today said business sector debt to lenders in March declined by about 0.9 percent from the previous month mainly to the strengthening of the shekel and repayments. The shekel has appreciated 3.7 percent in the past six months.

“The business sector is deleveraging and credit quality is improving and this has affected provisions,” Terence Klingman, head of research at Psagot Investment House Ltd., said today by phone from Tel Aviv. “This helps neutralize the slowdown in the economy.”

Israel’s economy will probably slow to 2.8 percent in 2013, excluding gas output, from 3.2 percent last year, the central bank said in March. The five-stock Tel Aviv Banking Index has advanced 2.8 percent this year compared with a 7.6 percent gain of the MSCI World/Banks Index.

Bank Leumi is set to post profit of 621 million shekels for the first quarter of the year and Bank Hapoalim a net of 630 million shekels, according to data compiled by Bloomberg. Israel Discount Bank Ltd. (DSCT), forecast to post a profit of 218 million shekels, gained 3.2 percent today.

Mizrahi’s results hint at “good earnings for other banks as well,” Klingman said. He recommends investors buy Mizrahi shares and has a 44-shekel price estimate.

To contact the reporter on this story: Shoshanna Solomon in Tel Aviv at ssolomon22@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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