Israel's Biggest Bank Sets Aside $80 Million More for U.S. Fines

  • Hapoalim has provisioned $268.5 million for U.S. tax probe
  • Shares gain most in more than four years as volume surges
Customers wait beside automated teller machines (ATM) outside a Bank Hapoalim Ltd. bank branch in Jerusalem, Israel, on Sunday, March 16, 2014. The Bank of Israel's surprise interest-rate cut last month was another shot in a losing battle against one of the world's strongest currencies. Photographer: Bloomberg/Bloomberg

Bank Hapoalim Ltd., Israel’s largest lender, set aside an additional $80 million for potential fines stemming as U.S. authorities probe whether the bank helped clients evade taxes.

The decision to increase those provisions, which now stand at $268.5 million, comes after Hapoalim held discussions with the U.S. Department of Justice between September and November, according to a Tel Aviv Stock Exchange filing Thursday. The DOJ and the New York Department of Financial Services are investigating tax evasion claims against the Israeli bank.

Hapaolim warned the settlement ultimately may be “significantly higher” than what it has already put aside. By comparison, Bank Leumi Le-Israel Ltd., the country’s second-biggest bank, settled its cases with the U.S. government after agreeing to pay $400 million in fines in 2014. The bank paid $270 million to the Department of Justice and $130 million to NYDFS.

Israeli banks have been exiting the private-banking business in Europe and the U.S. to minimize compliance risks with international tax authorities, who have taken a tougher stance on tax cheats in recent years. Hapoalim last month agreed to sell its private banking units in Switzerland and Luxembourg to Bank J. Safra Sarasin AG and Banque J. Safra Sarasin SA.

Hapoalim management has said that resolving the tax probe is a necessary step on the way to boosting the dividend payout to half of the bank’s profits, from 40 percent currently. It also would pave the way for Hapoalim to grow its U.S.-based operations.

Shares of Hapoalim were up 3.4 percent at 23.83 shekels as of 12:42 p.m. in Tel Aviv, the biggest gain since August 2013, as some investors expected the provisions to be even higher, according to Saar Golan, an equity trader at Bank of Jerusalem Ltd.

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