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Discount Bank improved its capital adequacy; reinsured its NIS 2.9B performance bonds portfolio

Led by CRS


This step will allow Discount Bank to release risk assets in the amount of 1.15 billion NIS to increase the core capital adequacy ratio and to grant new credit.


Discount Bank recently completed a deal with international (Re)insurers rated at least AA- which insured 80% of the portfolio in the amount of NIS 2.9 billion, which included performance guarantees issued to customers of the Bank’s business division. These customers include defense sector exporters, real estate contractors, infrastructure projects and public transportation projects.


As a result of high international rating, the insurance policy will allow Discount bank to release risk assets in the amount of approximately -1.15 billion. According to Basel 3 regulations. The capital adequacy ratio will increase by approximately 0.1%, and divert the assets released in order to grant new credit.


The current deal, which is first in the banking arena was led by Mrs. Orit Alister – Head of Corporate Division, Orian Dagan, Head of Syndication, Uri Twig, Head of large companies, and Michal Caspi- Head of real estate and infrastructure.


This transaction joins a similar deal that Discount Bank carried out less than a year ago in which the bank ceded to high rated (Re)insurers, over 80% of the existing housing bonds portfolio totaling about 4 billion NIS (the transaction was increased later).


In the footsteps of Discount, Leumi Bank also completed a similar deal, in early 2016 in the amount of 25 billion NIS; in addition, Hapoalim bank is expected to complete a similar transaction like Leumi bank in the Q3/ 2016.


Since the appointment of Lilach Asher-Topolsky as Discount’s CEO in February 2014, the Bank performed changes that included, freezing the credit portfolio growth, closing activities abroad, credit portfolios sale, and other steps that will enable the bank to solve the capital adequacy problems.


By the end of March 2016 Discount Capital adequacy level met the Bank’s administration target of 9.4% which enabled the bank to increase its credit activities.


Thus, the Bank recorded that the last 12 months ending in March, an increase in 6.1% (this includes 1.6% from Q1 2016) of the credit portfolio, with most of its increase was in the housing portfolio (excluding housing loans which grew by 2.6% in Q1) and small businesses.

This contributed to the improvement of the financing income during the period of low historical interest rates.

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