A major client abandoned Maritime Bank of Israel (TASE: MART ) after the collapse of Trade Bank.

The client jumping ship lowered deposits at the small institution by 20%, to NIS 706.5 million, from NIS 868 million at the end of the first quarter.

Analysts surmise that the general public is starting to avoid small banks, for fear of their collapse. The implosion of Trade Bank, on an embezzlement scandal, was closely followed by the collapse of Industrial Development Bank, after a series of heavy loans turned sour.

After the collapse of Trade Bank three months ago, Maritime Bank's outgoing manager, David Levison, put out a letter to customers, saying that size doesn't matter. Trade Bank's collapse, he wrote, had been due to bad management and control.

His letter does not seem to have had the desired effect, as deposit withdrawals picked up during the second quarter.

The incumbent chief executive, Rony Hizkiyahu, said that most of the drop in deposits was due to a single large client pulling out. He refused to divulge the client's name, but added that the customer has already put back some of the money.

Hizkiyahu added that the pace of withdrawals has slowed since an initial flood after Trade Bank's fall. Maritime Bank is preparing for a takeover by Bank Hapoalim, he said.

Maritime reported an 81% drop in net profit to NIS 700,000. Its profits for the first half were NIS 3.3 million, down 59% from the parallel half of last year.

Financing income before provision for doubtful debt dropped 16.2% from the parallel quarter to NIS 8.8 million. For the first half, that figure reached NIS 18.9 million, down 12.5% from the parallel half.

Provision for doubtful debt was half a million shekel for the second quarter, up 25% from the parallel quarter. For the first half, the bank set aside NIS 1.8 million, up 100% from the same six months of 2001.

Bank Hapoalim is expected to offer to buy Maritime's shares according to a value of 72% of its shareholders equity. As of the end of the second quarter, that equity stood at NIS 259.5 million, hence Hapoalim's offer is expected to value the bank at NIS 186.8 million, or NIS 31 per share. That is 11% over Maritime's opening price Thursday.

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