July 29, 2018 / 10:10 AM / 3 months ago

Israel's Bank Leumi expects to complete credit card unit sale this year

JERUSALEM, July 29 (Reuters) - Israel’s Bank Leumi expects to complete the 2.5 billion shekel ($685 million) sale of its credit card unit Leumi Card to Warburg Pincus by the end of the year, bank executives said on Sunday.

Leumi, which owns 80 percent of Leumi Card, and property developer Azrieli Group, which holds 20 percent, announced on Saturday that they had agreed to sell the business to the U.S. private equity firm, subject to regulatory approval.

Leumi said it would report a capital gain from the deal of about 234 million shekels.

Israeli regulators, in a bid to increase competition, have instructed the country’s top two banks to sell off their credit card companies by early 2020.

Leumi Card’s Chairman Yaron Bloch said the card company had considered an IPO, but after 17 companies, from Israel and abroad, expressed interest in potentially buying the company, it chose to sell.

“We are currently in a good, positive business environment ... there was no reason to hold off,” Bloch told Reuters by telephone.

Bank Leumi said it did not expect any obstacles to the deal going through after the Bank of Israel said it would look at Warburg Pincus’s business plan before the deal could move forward, a process it estimated would take about four months.

“We don’t think there is reason (for any delays),” Hanan Friedman, head of Leumi’s strategy and regulation division, told Reuters by phone. “This is about granting ‘permit to control’ to a group that has never gotten such permission in Israel.”

“But since (Warburg Pincus) has permission to control 19 financial groups in the OECD, including a permit they received two weeks ago in an EU country, we think the process should be relatively quick. So we believe it will be finished before the end of the year,” Friedman said.

Israel’s Harel Insurance Investments and Financial Services is lending Warburg Pincus 850 million shekels for the purchase.

“The Israeli payments, consumer finance and SME lending markets present considerable opportunity,” Daniel Zilberman, managing director and head of Europe at Warburg Pincus, said when the deal was announced.

Leumi’s main rival, Bank Hapoalim, last month submitted an initial prospectus with Israel’s securities regulator for a possible initial public offering of its Isracard credit card unit that also includes other sale options.

$1 = 3.6489 shekels Reporting by Ari Rabinovitch Editing by Steven Scheer and Susan Fenton

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