Israel's Bank Leumi Considering Sale Of US Unit: Report

Bank Leumi Le-Israel BM BLMIF is reportedly in discussion on the potential sale of its U.S. banking division.

What Happened: According to a Bloomberg report citing unnamed “people familiar with the matter,” the Israeli bank is working with a financial advisor to coordinate the sale of Bank Leumi USA, which has $7.2 billion in assets, $6 billion in deposits and offices in New York City, Chicago, Los Angeles, Palo Alto, and Aventura, Florida.

Bloomberg’s sources stated Bank Leumi USA could fetch a $1 billion sale. Sources also said the bank might consider an initial public offering for the U.S. division, or it might decide to retain the business.

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Why It Matters: Israel’s banking industry is relatively small and tightly controlled. According to the Israeli news outlet The Media Line, Bank Leumi and rival Bank Hapoalim BM BKHYY control 61% of the nation’s banking market.

Despite its dominance at home, Bank Leumi had been severely impacted by the economic trauma of the COVID-19 pandemic. The lender’s 2020 profit of $642 million represented a 40% year-over-year plummet, while its loan loss expenses quadrupled to $780 million.

Israeli’s traditional brick-and-mortar banking is also facing a new challenge from fintechs.

In March, First Digital Bank, an online exclusive lender, became Israel’s first de novo bank since 1978. Apple Inc AAPL is introducing its Apple Pay digital wallet to the Israeli market this month — and, in doing so, taking control of the iPhone market.

Bank Leumi and Bank Hapoalim introduced their own digital wallet services earlier this year, but those are only accessible on Android devices.

(Photo courtesy of Bank of Israel.)