Housing finance: Israeli banks search for growth
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Housing finance: Israeli banks search for growth

Over the past three years home affordability has deteriorated rapidly within Israel’s pre-1967 borders, especially in the central region around Tel Aviv and Jerusalem, near where the biggest Israeli housing settlements in the occupied territory are found.

Israeli house prices declined in nominal terms between 1999 and 2007. But in the past three years, they have risen 48% in nominal terms and 32% in real terms.

Housing finance is one of the few remaining areas in which Israel’s biggest banks can expand. Leumi, Hapoalim, Discount, Mizrahi Tefahot and First International together hold 95.5% of the total credit advanced to the public. The central bank is likely to be wary of further consolidation.

Bank of Israel blocked Hapoalim’s $136 million purchase of 76% of Ukrinbank in 2007 – perhaps fortuitously given the extreme recession Ukraine has since suffered. Rony Hizkiyahu, banking supervisor at Israel’s central bank, tells Euromoney that international bank purchases by Israeli lenders are welcome but have to come with a comprehensive risk assessment and fit into a clearly defined strategic plan.

Yair Seroussi, chairman of Hapoalim since June 2009, restricts his talk of international expansion to a vague mention of visits to India, where the bank does not yet have an office. "India is one of Israel’s more natural relationships," he says. He cites the two countries’ strong technology industries.

Even so, this autumn Bank of Israel allowed Hapoalim to submit a bid (capped at $60 million) for Turkey’s state-owned Adabank.

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