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The valuations of Israel's banks are attractive. But they're still no buy opportunity, write analysts from American investment house

Goldman Sachs

in a fresh report on Israeli banking.

The problems the banks face include a slowing Israeli economy and the political uncertainty in the country, analysts Paul Formanko, Susan Leadem and Jerusalem-based Kory Bardash write.

The analysts' favorite is

Bank Leumi

, Israel's second-biggest bank by market cap.

Goldman Sachs listed Leumi on its Recommended List and set a price target of NIS 13, 40% above its current market price. The analysts say that Bank Leumi's stock has the most potential of the five big Israeli banks, and that this fact has yet to be reflected in its pricing.

Bank Hapoalim


Mizrahi Bank

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are rated Market Outperformer with price targets of NIS 14 and NIS 18, respectively.

The analysts point out that Bank Hapoalim has the skills and ability to merit an upgrade. As for Mizrahi Bank, the analysts note that the bank's growing presence in the mortgage sector (through its control in

Tefahot Israel Mortgage Bank

(Hebrew website) brings it growth opportunities beyond the scope of retail banking.

The banks that got the lowest rating are

First International Bank of Israel


Israel Discount Bank


Goldman Sachs says that the First International Bank's decision to focus on private banking was right, but the bank's medium size and its relatively small number of outstanding shares are not likely, in the analysts' opinion, to generate impressive performance.

As for Discount Bank, the analysts say that the bank is traded below its real value. But troublesome labor relations at the bank, changes in its management echelon and in its future ownership, which is still uncertain, are unlikely to lead to increased value.