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The financial report published today by Bank Leumi reveals the biggest case of corporate embezzlement in Israel's history.

In early 2001, Leumi uncovered problems at its Swiss subsidiary. The Swiss branch had to make a provision of SF 140 million, or about NIS 340 million, subsequent to the theft by a bank employee.

Leumi's chiefs refuse to expand on the case, saying only that it was carried out in a sophisticated manner. They add that the provision is conservative, and that the bank set aside funds to cover any account it suspects to have suffered.

The bank also notes that it made the enormous provisions at the advice of its accountant, even though its legal counsel says the bank has insurance coverage against embezzlement.

The enormous provision shifted Leumi's Swiss branch to a loss of SF 51 million for the year (NIS 124 million), compared with the net profit of SF 32 million it contributed for 1999.

Leumi Switzerland was established in 1953. It runs a branch in Geneva and another in Zurich, providing mainly private banking services to international customers.

Privatization ahead for Leumi

Today MI Holdings, the government company responsible for managing government companies, is supposed to choose a financial consultant to advise the state on selling its interest once and for all.

Although its shares are traded on the Tel Aviv Stock Exchange, the State of Israel still owns the controlling 41.7% interest in Bank Leumi. The Migdal group owns another 8.5%.

The consultant will have six weeks to investigate whether any international financing institutions might want to buy the controlling interest.

Chairman Eitan Raff said that failing that, the government will float 16% of the bank's equity on the TASE. Altogether the state owns 41% of the bank's shares.

The value of the 16% stake is about $455 million, at Leumi's current share price.

During 2000 the state of Israel sold its 13% holding in Bank Hapoalim on the TASE for NIS 2.1 billion.

Leumi reports dip in Q4 net

Bank Leumi reported a net profit of NIS 1.605 billion for the year 2000, 24.4% more than in 1999.

Leumi's profit is only a bit shy of the profit reported by arch-rival Bank Hapoalim.

For the fourth quarter of 2000, Leumi reported netting NIS 339 million, compared with NIS 346 million in the fourth quarter of 1999.

Leumi achieved a 15.3% net yield on capital in 2000, the highest in the Israeli banking establishment. The bank today also announced it will distribute dividends of NIS 806 million, or 52% of its net profit in 2000.

The salary of CEO Galia Maor came to NIS 4.1 million, relatively modest compared with the NIS 10.4 million commanded by Hapoalim chairman Amiram Sivan.

Leumi's chairman Eitan Raff earned NIS 2.25 million in 2000, again a fraction of the sum earned by his colleague at Hapoalim, whose annual salary came to NIS 7.1 million.