Tel Aviv shares jump 5 pct, bank stocks surge

By Steven Scheer

JERUSALEM, April 2 (Reuters) - Israeli shares jumped more than 5 percent on Thursday, led by financial stocks, amid signs of optimism that global leaders in London will agree on ways to boost the global economy.

The blue-chip Tel Aviv 25 index .TA25 rose 5.3 percent, while the broader TA100 .TA100 ended 5.1 percent higher.

Gains were broad-based but the largest increases came from bank shares, with Israel Discount Bank (DSCT.TA), Israel's third largest lender, up 12.1 percent and Hapoalim (POLI.TA), the second largest, up 10 percent. The index of Israel's five largest banks <0#.TELBANK> rose 7.9 percent.

Leumi (LUMI.TA), which surpassed Hapoalim in the fourth quarter as Israel's largest bank, closed 8.6 percent higher.

"The global economy looks a little better and stocks are cheap," said Terence Klingman, a banks analyst at the Excellence Nessuah brokerage in Tel Aviv.

"When we start seeing the global rally in equities, there is less worry about corporate earnings and therefore less worry about bad debt provisions."

Earlier on Thursday, Deutsche Bank upgraded Hapoalim to "buy" and its target to 10 shekels from 7.90. Hapoalim's shares closed at 8.69 shekels.

Deutsche said its upgrade was largely due to Hapoalim trading at such low valuation levels.

"The bank has cleaned up its securities portfolio and barring another major US/Europe bank collapse we do not expect further large writeoffs," Dan Harverd wrote in a client note.

"Since we calculate underlying mid-cycle return on equity potential at 10-11 percent we view the stock as fundamentally undervalued and already pricing in a tough 2009-2010."

Israel's gains came as European shares rose and U.S. futures pointed to a higher Wall Street.

U.S. markets opened as Tel Aviv closed and were up nearly 3 percent in morning trade as investors were optimistic that leaders at the G20 meeting would find ways to temper the financial crisis.

Israeli benchmark 10-year bond prices fell 0.4 percent to yield 4.43 percent, while the shekel ILS= advanced 0.8 percent against the dollar to a one-week high of 4.1750.

The shekel slid 1.3 percent against the pound and was flat against the euro.

(editing by John Stonestreet)