reiterated its Hold rating for
and sliced its price target from NIS 9.75 to NIS 9.2. The new price is only 5% above the market price.
UBS is not the only investment house to lower Bank Leumi's prospects on the Tel Aviv Stock Exchange. Last week investment house
(NYSE:LEH) reiterated its Buy recommendation but cut its price target to NIS 10.2.
UBS Warburg analysts Stephen Levey, Charles Silber, and James Chappell lowered Leumi's 2001 projected earnings per share to 85.5 agorot, and 2002 EPS to 96.6 agorot. They blame the cut on the economic slowdown in Israel, the weakness in the Israeli capital market, and the decline in banking profit margins.
The analysts expect Leumi's figures to be dragged down by the costs of establishing and marketing its new credit card, Leumi Card.
They also predict a drop in consumer spending, to the bank's detriment. Because of the recession, total credit is expected to grow by only by 7% in 2001 compared with 12% in 2000. Provision for doubtful debt is expected to come to 0.5% of loans.
As of March 2001, the bank had signed up 300,000 customers for Leumi Card. It is expected to have 700,000 customers for the card by year-end. But the analysts do not foresee Leumi Card significantly affecting Leumi's profit in 2001.
On the massive embezzlement uncovered at the bank's Zurich branch in January this year, the analysts say the bank believes the whole outlay will be covered by insurance. But the analysts did not factor in compensation from insurance, given the uncertainty when any will be forthcoming, if it comes at all.