HSBC (NYSE:HBC) analysts Mark Rorison and Nadia Kabbani updated their research on First International Bank of Israel (TASE:FIBI), controlled by the Safra family.

The two rated the share a Hold and set its price target at NIS 25, 6% above its level on the Tel Aviv Stock Exchange. The upgrade followed the publication of the bank's third-quarter results last week.

Rorison and Kabbani say their rating is based on the 162% increase in FIBI's provision for doubtful debts, as instructed by the Supervisor of Banks.

Another problem is FIBI's involvement with tycoon Gad Zeevi, who is thought to owe Israel's banks in the region of $800 million. Of that, 16% is owed to FIBI. The bank had to make an extra specific provision of NIS 25 million on that loan alone.

Rorison and Kabbani say the bank's exposure to Gad Zeevi was partly alleviated by a rally in Bezeq stock, which Zeevi provided to secure his loans. The gap between his collateral and exposure is estimated at around $68 million to all the banks, with FIBI's part coming to about $11 million.

The two analysts estimate that general provisions will decrease in the year's fourth quarter, though the specific provisions are expected to remain in their current high level due to the rough market conditions in Israel.

The HSBC duo updated their forecasts for fiscal 2001. They predict that income from financing activities this year will total NIS 1.22 billion and that FIBI will net NIS 212 million, 33% less than in 2000.

Yet the analysts see an upswing in 2002, with financing profits totaling NIS 1.3 billion and net profit reaching NIS 295 million.

Rorison and Kabbani say FIBI stock is relatively cheap, and note that FIBI could look toothsome to investors looking to buy a bank. But its cheap share price could be attributed to the bank's diminished liquidity, from the possibility of an upcoming financing round in the next six months, and from general market conditions.