Israeli bank Leumi's shares rise after U.S. tax settlement

Basler Kantonalbank

23/12/2014 16:19

* Leumi to pay U.S. fine totalling $400 mln 
    * Other Israeli, Swiss banks still under investigation 
 
    By Steven Scheer 
    JERUSALEM, Dec 23 (Reuters) - Shares of Israel's Bank Leumi 
 LUMI.TA  jumped nearly 4 percent on Tuesday after it agreed to 
pay $400 million to settle two separate investigations into 
whether it helped its American clients evade U.S. taxes. 
    While the size of the fine was not a surprise, the timing of 
a deal was unclear. The saga had weighed on Leumi all year, with 
its shares lagging the market and its peers.  
    The bank - Israel's second-largest lender - had already set 
aside money to cover the settlement, which was announced by U.S. 
authorities late on Monday. 
    "We expect to see upward moves in the stocks as the 
settlement with U.S. authorities should lift a major overhang 
from the shares," said Barclays analyst Tavy Rosner, who rates 
Leumi "overweight" with a price target of 16 shekels. 
    Leumi's shares closed up 3.9 percent at 13.25 shekels. 
    It will pay the U.S. Department of Justice $270 million, and 
another $130 million to the New York State Department of 
Financial Services (NYSDFS). Of the $270 million, $157 million 
is a penalty for U.S. taxpayer accounts held at its private bank 
in Switzerland.  ID:nL3N0U64PV  
    U.S. efforts to crack down on Americans using offshore banks 
to evade taxes have largely focused on Swiss banks, but lenders 
in other countries are also under scrutiny. 
    As Swiss banks started to curtail misconduct, Leumi viewed 
it as a "golden opportunity" to pick up business, said NYSDFS 
superintendent Benjamin Lawsky. 
    The investigation of Israeli banks started in 2011, two 
years after Swiss bank UBS AG  UBSG.VX  was fined $780 million. 
    Credit Suisse  CSGN.VX  agreed in May to pay more than $2.5 
billion in penalties for helping Americans dodge taxes. 
    Several other Swiss banks are still under investigation by 
U.S. authorities, including Julius Baer  BAER.VX , Zuercher 
Kantonalbank and Basler Kantonalbank  BSKP.S .  
    The size of the Credit Suisse fine prompted some analysts to 
bump up their most estimates for future fines.  ID:nL6N0O72AZ  
    MainFirst analyst Kilian Maier said it was difficult to draw 
conclusions on what the Leumi settlement meant for Julius Baer, 
Switzerland's third-biggest listed bank, but that the size of 
the fine was a "slightly negative" sign. Maier estimates Baer 
will receive a 1 billion Swiss franc ($1 billion) penalty in its 
tax case.  
    A spokeswoman for Baer said each case was different and 
could not be compared.  
    Israel's largest bank Hapoalim  POLI.TA  and fourth-largest 
lender Mizrahi-Tefahot  MZTF.TA  are also being investigated by 
U.S authorities. 
    ($1 = 3.9143 shekels; $1 = 0.9861 Swiss francs) 
     
 
 (Additional reporting by Joshua Franklin in Zurich; Editing by 
Pravin Char) 
 ((steven.scheer@thomsonreuters.com; +972 2 632 2210; Reuters 
Messaging: steven.scheer.thomsonreuters.com@reuters.net)) 
 
Keywords: BANKLEUMI SETTLEMENT/STOCKS