Bank Leumi Le-Israel Ltd. and Bank Hapoalim Ltd. advanced on bets declines in the past year were overdone after the central bank published capital ratio guidelines that were lower than expected.
Bank Leumi, the country’s largest bank by assets, climbed 2.3 percent to 11.44 shekels at the 4:30 p.m. close in Tel Aviv, after rising 5.5 percent yesterday. Bank Hapoalim Ltd. gained 2.1 percent to 13.63 shekels after surging 6.7 percent yesterday. Israel’s benchmark stock index fell 0.2 percent today.
The Bank of Israel published draft guidelines that set a minimum core ratio of 9 percent for all banks in Israel to be implemented by Jan. 1, 2015. The regulator recommended a minimum ratio of 10 percent for Leumi and Hapoalim as of Jan. 1, 2017. Investors were expecting guidelines in the range of 10 to 11 percent.
“The cloud of uncertainty that was hanging over the shares in the past nine months, when people started to talk about higher capital ratio requirements, has been lifted,” said Zach Herzog, equity sales trader at Psagot Investment House Ltd. in Tel Aviv. “Israeli banks are more attractive versus their foreign peers. This is just the beginning of a rally.”
Leumi shares are valued at 7.8 times estimated 2012 earnings and Hapoalim has a multiple of 7.4, compared with 11.3 for the MSCI World Financials Index, according to data compiled by Bloomberg. Leumi’s valuation discount versus the MSCI gauge reached 34 percent on March 13, the biggest gap since Nov. 30.
Israel Discount Bank Ltd. increased 1.9 percent to 5.075 shekels. Mizrahi Tefahot Bank Ltd. advanced 1.4 percent today, after climbing 8 percent yesterday.