Israel’s Largest Bank to Cut 12% of Jobs in Cost Saving Plan

  • Lender says it expects cuts to come from voluntary retirement
  • Israeli lender is seeking to pay out more in dividends

Bank Hapoalim Ltd., Israel’s largest bank, approved a plan to cut 12 percent of the workforce, answering the call of regulators to slash costs as it seeks to boost its dividend.

The lender expects about 1,500 workers to choose voluntary retirement over the next four years in a plan that will cost the bank about 1.2 billion shekels ($312 million), according to an e-mailed statement from Hapoalim on Sunday. The reductions add to the approximately 1,800 positions eliminated in the years 2012 to 2015, taking the number of employees at Hapoalim to about 12,400 at the end of last year, according to data compiled by Bloomberg.

Hapoalim is the latest Israeli bank to implement a cost-cutting program, responding to demands by Banks Supervisor Hedva Ber that lenders’ increase efficiency by slimming down and embracing technology. Bank Leumi Le-Israel Ltd. and Israel Discount Bank both said earlier this year that they’re seeking to reduce their workforces by 1,000 people.

“The competitive environment and regulatory environment requires the bank to strive to become more efficient,” Arik Pinto, Hapoalim’s chief executive officer, said in the statement. “We’re working hard to continually improve our operating model, using technology to streamline work processes and improve customer service.”

Future Savings

The bank expects annual savings of about 450 million shekels starting in 2021. The cost cuts will also help Hapoalim’s case with the Bank of Israel, which is weighing a request from the lender to raise its dividend payment to 50 percent of profits. Last week, the central bank approved it paying 30 percent of third-quarter income as dividend.

Hapoalim shares slid 0.5 percent to 21.98 shekels at 10:49 a.m. in Tel Aviv.

The cost-cutting program will increase the bank’s Tier 1 capital ratio -- which calculates financial strength as the amount of core equity relative to assets that bear credit risk -- by 0.25 percent annually over the five years starting in 2017, according to a filing with the Tel Aviv Stock Exchange on Sunday. Hapoalim reported the measure at 10.6 percent at the end of June, higher than the central bank’s requirement of 10.2 percent by the end of 2016.

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