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Hapoalim Seeks China, India Growth on Higher Israel Trade

Chairman of Bank Hapoalim BM Yair Seroussi.
Chairman of Bank Hapoalim BM Yair Seroussi. Photographer: Daniel Acker/Bloomberg

Bank Hapoalim Ltd., Israel’s second-largest lender by market value, plans to expand in China and India as local companies increase trade with the Asian countries, Chairman Yair Seroussi said.

“We see a shift in trade into these two markets,” Seroussi said in an interview at Hapoalim’s headquarters in Tel Aviv, Israel. “We are following the Israeli companies trading and investing there to offer them services.”

Export of goods from Israel increased $10.5 billion in 2010 and 41 percent of this gain was attributable to Asian countries, according to the Central Bureau of Statistics. Hapoalim already has a private banking branch in Singapore, a representative in Hong Kong and a private equity business in Beijing.

“In about five years, we see this becoming a mature business that will influence our financials,” Seroussi said of the Asia operations.

The international business is an essential long-term growth driver, Seroussi wrote in a letter published in the 2010 annual report. In 2009, domestic operations accounted for about 87 percent of Hapoalim’s revenue, according to data compiled by Bloomberg.

“Following customers to Asia is good, but is not expected to contribute much to the bank’s profitability,” Terence Klingman, an analyst at Meitav Investment House Ltd., said in a phone interview. He has a “buy” recommendation on the shares.

Retail Market

Hapoalim said on March 31 that profit in the fourth quarter climbed 53 percent to 713 million shekels ($207 million) as net interest income increased and provisions for bad loans declined.

The shares slid 2.2 percent to 17.50 shekels at the 4:30 p.m. close in Tel Aviv, bringing the loss this year to 5.3 percent. That compares to a decline of 2.8 percent for Bank Leumi Le-Israel Ltd., the country’s largest bank, and a 0.7 percent drop for Israel’s TA-25 benchmark stock index.

Hapoalim, which has an approximate 32 percent share of the Israeli retail market, is seeking to increase business with students, ultra Orthodox and Arab customers as well as medium-sized corporate clients.

“In terms of retail, we see domestic growth in the Arab sector in Israel and in the ultra-religious sector, especially in the city of Jerusalem. We are only touching this potential and we think there is a lot of room to increase,” Seroussi, 55, said. Hapoalim is also growing in the U.S. and Switzerland, he said.

“In New York, we are expanding from our historical business with Israeli clients to the domestic middle market,” said Serrousi, who previously was the head of Morgan Stanley in Israel. That branch added 150 new corporate customers in the past year, he said.

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