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Israel: Credit crisis hits Hapoalim

Concern is growing in Israel over the US MBS portfolio of what until recently was the country’s biggest bank by market capitalization, Hapoalim.

The best available estimates suggest that Hapoalim has about $700 million of exposure to structured investment vehicles and collateralized debt obligations, according to Terence Klingman, head of research at local investment house Excellence Nessuah. The bank has a further $3.7 billion in US residential mortgage backed securities, on which it has taken a write-down of $59 million from its capital account.

Hapoalim invested $365 million in a SIV capital note, and has had to write down $61 million from its capital account, as well as a further $12 million from its income as a consequence. "In Israel, if there is a permanent diminution in the value of these securities then the bank has to take them off its profit and loss statements, but if it is judged to be temporary, then it can take it off the capital account," says Klingman. "Up to now Hapoalim has written down SIV losses of $61 million from its capital account but our expectation is that some of this will also have to be written off through its income statement, as and when the credit crisis continues in America."

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