Mizrahi Tefahot Bank Ltd. advanced the most in more than three weeks after the country’s fourth-largest bank approved a plan that boosts return on equity to 17 percent.
The shares added as much as 4.3 percent before closing 2 percent higher at 28.55 shekels at 4:30 p.m. in Tel Aviv. That was the biggest gain on a closing basis since July 1. The Tel Aviv Banking Index fell 2.3 percent and the benchmark TA-25 index lost 1.6 percent.
“While the aims are very ambitious, they met the aims of their previous strategic plan and they deserve credit for that,” Adi Scop, a banking analyst and the head of sales at I.B.I.-Israel Brokerage & Investments Ltd., said today by phone. “If they meet the new targets, I tip my hat to them.”
Mizrahi’s board approved a five-year plan to meet core capital requirements by January 2014 and maintain the existing dividend policy, the bank said in a filing to the Tel-Aviv Stock Exchange. The ROE target is based on the current core capital requirement of 7.5 percent. The rate was 14 percent at the end of 2011, according to data compiled by Bloomberg.
The bank plans to reach its goal through organic growth in its traditional businesses and with more efficient operations, fiscal constraint and greater back office activities, Chief Financial Officer Eldad Fresher said at a press conference today in Ramat Gan, Israel. “We will continue to do what we know how to do well,” he said. “There is no change in direction.”
Mortgage activity will continue to be a central focus for the bank, which is also looking to increase personal lending and loans to corporations. The plan includes an average gain in revenue by at least 8 percent a year until 2017 and keeping average annual expense increases under an estimated 4.5 percent. The bank plans to add 75,000 new customers a year by 2017 from an estimated 60,000 new customers this year.