Regulatory Filings • Oct 24, 2023
Regulatory Filings
Open in ViewerOpens in native device viewer
Limassol,October 24, 2023 -- Moody's InvestorsService ("Moody's") has today placed the depositratings of the five Israeli banks itrates on review for downgrade.Specifically, the rating agency has placed on review for downgrade the A2/P-1 long- and short-term depositratings ofBank Leumi Le-IsraelB.M.,Bank Hapoalim B.M., MizrahiTefahotBank Ltd., Israel DiscountBank Ltd.(IDB) and First InternationalBank of Israel Ltd.Previously, the outlook on the long-term depositratings was stable.
Concurrently, Moody's also placed the banks' long-term Counterparty Risk Ratings and Counterparty Risk Assessments on review for downgrade, as well as IDB's long-term foreign currency senior unsecured debtrating.At the same time, Moody's affirmed the five banks' baa2Baseline CreditAssessments (BCAs) andAdjustedBCAs.
Today's rating action follows the review for downgrade on theGovernment of Israel'sA1 long-term issuerratings, opened by Moody's on 19October 2023. Forfurtherinformation on the sovereign rating action, please referto Moody's press release: . In line with the sovereign ratings review, the review on the bank ratings may take longerthan the usual three months. https://ratings.moodys.com/ratings-news/410047
Please click on this link forthe List of Affected Credit Ratings.This list is an integral part of thisPress Release and identifies each affected issuer. https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL481686
Today's rating action is driven by the review for downgrade on theGovernment of Israel'sA1 rating.
Moody's assumes a very high probability of government support forIsrael's five large banking groups that itrates give their systemic importance and the Israeli government's long standing practice of injecting capital into such systemically important banks, in case of need.This results in three notches of government support uplift from their baa2Adjusted BCAs to theirlong-term depositratings ofA2.
During the review Moody's will assess the impact of a potential weakening of the sovereign's capacity to provide support, indicated by theGovernment of Israel's rating and whetherthis may reduce the support uplift incorporated in the banks'ratings.
Additionally, Moody's will also consider whetherthe military conflictrisks weakening the operating environment for banks sustainably.The longer and more severe the military conflict, the greaterits impact is likely to be on the economy. Moody's will also assess during the review whetherthe conflict negatively affects Israel's institutional strength, in particularthe effectiveness of policymaking.
The affirmation of the five banks' baa2BCAs andAdjustedBCAs reflects their strong and resilient financial fundamentals and potential forthese to withstand the impact of the current situation.
Asset quality is strong, demonstrated by a problem loan ratio of below 1% for each of the five banks as of June 2023 and contained credit costs over economic cycles, driven by relatively conservative underwriting and close and proactive oversight by theBank of Israel(BoI).
The banks have a deposit-based funding structure, mostly from households and small businesses, and healthy liquidity.
Capital metrics are moderate (average tangible common equity/risk-weighted assets ratio of 10.6% as of June 2023) but consistently stable and driven by theBoI's conservative risk-weightings, especially on mortgages.
However Moody's expects that the banks' asset quality will deteriorate overtime because of the impact the military conflict will have on Israel's economy.The extent of this will depend on its duration and scale, as well as actions by the authorities to cushion the impact on affected businesses and households.Banks also have relatively high, albeit varying, exposure concentrations to the construction and real estate sectorthat have grown in recent quarters and which could be affected in the event of a sustained disruption in real estate activity and demand.
The Israeli economy recovered relatively swiftly from past episodes of violent conflict and its dynamism benefits from a diversified high-tech sector as the main engine of growth. However, this conflict is more severe than the episodes of violence in the last few decades.As a result, there is a risk of a diversion ofresources, drop in investment and loss of confidence, which would undermine Israel's economic outlook.There was already a slowdown in real estate transactions before the conflict and a slight decline in property prices from recent highs. However, although activity in the sector has been curtailed by the current security situation, underlying demand forresidential units continues to be driven by a young and growing population.
Profitability will also materially decline from recent exceptionally high levels because of a higher cost ofrisk, lower credit growth and support measures to customers affected by the conflict, such as interest free loan repayment holidays for the most affected individuals and small businesses.Profitability, which had been moderate in the past, benefited significantly from higherinterestrates given banks' low-cost deposit bases, and was well above historical levels priorto the conflict.The five banks reported net income/tangible assets of between 1.1% to 1.3% in the first half of 2023. Positively, banks' had also made significant cost efficiency gains in recent years, which enhances their ability to withstand and recoverfrom shocks.
Potential for upgrades of the banks'ratings is limited, as indicated by the review for downgrade. However, the ratings could be confirmed at their current levels if Israel'sA1 issuerrating were confirmed.This would also depend upon banks' standalone fundamentals, notably their solvency and liquidity, being maintained
Israeli banks'ratings could be downgraded if the sovereign rating is downgraded, given the significant government support uplift that is incorporated in theirratings.
The banks'ratings could also be downgraded in case of a prolonged and wider conflict that could have a significant impact on the operating environment for banks and their standalone fundamentals, orif any individual bank's performance proves more volatile than in previous conflicts and economic crises.
The principal methodology used in these ratings wasBanks Methodology published in July 2021 and available at .Alternatively, please see the Rating Methodologies page on for a copy of this methodology. https://ratings.moodys.com/rmc-documents/71997 https://ratings.moodys.com
REGULATORYDISCLOSURES
The List ofAffected Credit Ratings announced here are a mix of solicited and unsolicited creditratings. For additional information, please referto Moody'sPolicy for Designating andAssigning Unsolicited Credit Ratings available on its website .Additionally, the List ofAffected Credit Ratings includes additional disclosures that vary with regard to some of the ratings. Please click on this link forthe List ofAffected Credit Ratings.This list is an integral part of thisPress Release and provides, for each of the creditratings covered, Moody's disclosures on the following items: https://ratings.moodys.com https://www.moodys.com/viewresearchdoc.aspx? docid=PBC_ARFTL481686
Forfurther specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions andSensitivity toAssumptions in the disclosure form. Moody's RatingSymbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.
Forratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices.Forratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the creditrating action on the support provider and in relation to each particular creditrating action for securities that derive their creditratings from the support provider's creditrating. For provisionalratings, this announcement provides certain regulatory disclosures in relation to the provisionalrating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed priorto the assignment of the definitive rating in a mannerthat would have affected the rating.Forfurtherinformation please see the issuer/deal page forthe respective issuer on https://ratings.moodys.com.
For any affected securities orrated entities receiving direct credit support from the primary entity(ies) of this creditrating action, and whose ratings may change as a result of this creditrating action, the associated regulatory disclosures will be those of the guarantor entity.Exceptions to this approach exist forthe following disclosures, if applicable to jurisdiction:AncillaryServices, Disclosure to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity orits designated agent(s) and issued with no amendmentresulting from that disclosure.
Regulatory disclosures contained in this press release apply to the creditrating and, if applicable, the related rating outlook orrating review.
Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the issuer/deal page on https://ratings.moodys.com for additionalregulatory disclosures for each credit rating.
AlexiosPhilippides VicePresident-SeniorAnalyst Financial InstitutionsGroup Moody's InvestorsService Cyprus Ltd. PortoBelloBuilding 1,SiafiStreet, 3042 Limassol POBox 53205 Limassol, CY3301 Cyprus JOURNALISTS: 44 20 7772 5456 ClientService: 44 20 7772 5454
Henry MacNevin Associate Managing Director Financial InstitutionsGroup JOURNALISTS: 44 20 7772 5456 ClientService: 44 20 7772 5454
ReleasingOffice: Moody's InvestorsService Cyprus Ltd. PortoBelloBuilding 1,SiafiStreet, 3042 Limassol POBox 53205 Limassol, CY3301 Cyprus JOURNALISTS: 44 20 7772 5456 ClientService: 44 20 7772 5454
© 2023 Moody's Corporation, Moody's InvestorsService, Inc., Moody'sAnalytics, Inc. and/ortheirlicensors and affiliates (collectively,"MOODY'S").Allrights reserved.
CREDITRATINGSISSUED BYMOODY'S CREDITRATINGSAFFILIATESARETHEIR CURRENTOPINIONS OFTHE RELATIVEFUTURE CREDITRISKOFENTITIES, CREDITCOMMITMENTS,OR DEBTOR DEBT-LIKE SECURITIES,AND MATERIALS,PRODUCTS,SERVICESAND INFORMATION PUBLISHED BYMOODY'S (COLLECTIVELY,"PUBLICATIONS") MAYINCLUDESUCH CURRENTOPINIONS. MOODY'S DEFINES CREDITRISKASTHE RISKTHATAN ENTITYMAYNOTMEETITS CONTRACTUALFINANCIAL OBLIGATIONSASTHEYCOME DUEANDANYESTIMATED FINANCIALLOSSINTHEEVENTOF DEFAULT OR IMPAIRMENT.SEEAPPLICABLE MOODY'S RATINGSYMBOLSAND DEFINITIONSPUBLICATION FOR INFORMATIONONTHETYPESOF CONTRACTUALFINANCIALOBLIGATIONSADDRESSED BYMOODY'S CREDITRATINGS. CREDITRATINGS DONOTADDRESSANYOTHER RISK, INCLUDINGBUTNOTLIMITED TO: LIQUIDITYRISK, MARKETVALUE RISK,OR PRICEVOLATILITY. CREDITRATINGS, NON-CREDIT ASSESSMENTS("ASSESSMENTS"),ANDOTHEROPINIONSINCLUDED IN MOODY'SPUBLICATIONSARE NOTSTATEMENTSOF CURRENTOR HISTORICALFACT. MOODY'SPUBLICATIONS MAYALSOINCLUDE QUANTITATIVE MODEL-BASED ESTIMATESOF CREDITRISKAND RELATEDOPINIONSOR COMMENTARYPUBLISHED BYMOODY'SANALYTICS, INC.AND/OR ITSAFFILIATES. MOODY'S CREDIT
RATINGS,ASSESSMENTS,OTHEROPINIONSAND PUBLICATIONS DONOTCONSTITUTEOR PROVIDE INVESTMENTOR FINANCIALADVICE,AND MOODY'S CREDITRATINGS,ASSESSMENTS,OTHER OPINIONSAND PUBLICATIONSARE NOTAND DONOTPROVIDE RECOMMENDATIONSTOPURCHASE, SELL,OR HOLD PARTICULAR SECURITIES. MOODY'S CREDITRATINGS,ASSESSMENTS,OTHER OPINIONSAND PUBLICATIONS DONOTCOMMENTONTHESUITABILITYOFAN INVESTMENTFORANY PARTICULAR INVESTOR. MOODY'SISSUESITS CREDITRATINGS,ASSESSMENTSANDOTHER OPINIONSAND PUBLISHESITSPUBLICATIONSWITHTHEEXPECTATIONAND UNDERSTANDINGTHAT EACH INVESTORWILL,WITH DUE CARE, MAKEITSOWN STUDYAND EVALUATIONOFEACH SECURITY THATIS UNDER CONSIDERATION FOR PURCHASE, HOLDING,OR SALE.
MOODY'S CREDITRATINGS,ASSESSMENTS,OTHEROPINIONS,AND PUBLICATIONSARE NOT INTENDED FOR USEBYRETAILINVESTORSAND ITWOULD BE RECKLESSAND INAPPROPRIATEFOR RETAILINVESTORSTOUSE MOODY'S CREDITRATINGS,ASSESSMENTS,OTHEROPINIONSOR PUBLICATIONSWHEN MAKINGAN INVESTMENTDECISION. IFIN DOUBTYOU SHOULD CONTACTYOUR FINANCIALOROTHER PROFESSIONALADVISER.
ALLINFORMATION CONTAINED HEREIN ISPROTECTED BYLAW, INCLUDINGBUTNOTLIMITEDTO, COPYRIGHTLAW,AND NONEOFSUCH INFORMATION MAYBE COPIEDOROTHERWISE REPRODUCED, REPACKAGED, FURTHERTRANSMITTED,TRANSFERRED, DISSEMINATED, REDISTRIBUTEDOR RESOLD,OR STORED FOR SUBSEQUENTUSEFORANYSUCH PURPOSE, INWHOLEOR IN PART, IN ANYFORM OR MANNEROR BYANYMEANSWHATSOEVER,BYANYPERSONWITHOUTMOODY'S PRIORWRITTEN CONSENT.
MOODY'S CREDITRATINGS,ASSESSMENTS,OTHEROPINIONSAND PUBLICATIONSARE NOT INTENDED FOR USEBYANYPERSONASABENCHMARKASTHATTERM IS DEFINED FOR REGULATORY PURPOSESAND MUSTNOTBE USED INANYWAYTHATCOULD RESULTINTHEM BEINGCONSIDERED BENCHMARK.
All information contained herein is obtained by MOODY'Sfrom sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as otherfactors, however, all information contained herein is provided "ASIS" without warranty of any kind. MOODY'Sadopts all necessary measures so that the information it uses in assigning a creditrating is of sufficient quality and from sources MOODY'Sconsiders to be reliable including, when appropriate, independent third-party sources. However, MOODY'Sis not an auditor and cannot in every instance independently verify or validate information received in the creditrating process orin preparing itsPublications.
To the extent permitted by law, MOODY'Sand its directors, officers, employees, agents,representatives, licensors an suppliers disclaim liability to any person or entity for any indirect, special, consequential, orincidental losses or damages whatsoever arising from orin connection with the information contained herein orthe use of orinability to use any such information, even if MOODY'Sor any of its directors, officers, employees, agents,representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to:(a any loss of present or prospective profits or(b) any loss or damage arising where the relevant financial instrument is not the subject of a particular creditrating assigned by MOODY'S.
To the extent permitted by law, MOODY'Sand its directors, officers, employees, agents,representatives, licensors an suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any othertype of liability that, forthe avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY'Sor any of its directors, officers, employees, agents,representatives, licensors or suppliers, arising from orin connection with the information contained herein orthe use of orinability to use any such information.
NOWARRANTY,EXPRESSOR IMPLIED,ASTOTHEACCURACY,TIMELINESS, COMPLETENESS, MERCHANTABILITYOR FITNESSFORANYPARTICULAR PURPOSEOFANYCREDITRATING, ASSESSMENT,OTHEROPINIONOR INFORMATION ISGIVENOR MADEBYMOODY'SINANYFORM OR MANNERWHATSOEVER.
Moody's InvestorsService, Inc., a wholly-owned creditrating agency subsidiary of Moody's Corporation ("MCO"), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody's InvestorsService, Inc. have, priorto assignment of any creditrating, agreed to pay to Moody's InvestorsService, Inc. for creditratings opinions and services rendered by it fees ranging from \$1,000 to approximately \$5,000,000. MCOand Moody's InvestorsService also maintain policies and procedures to address the independence of Moody's InvestorsService creditratings and creditrating processes. Information regarding certain affiliations that may exist between directors of MCOand rated entities, and between entities who hold creditratings from Moody's InvestorsService, Inc. and have also publicly reported to theSEC an ownership interest in MCOof more than 5%, is posted annually at underthe heading "Investor Relations—CorporateGovernance—Director andShareholderAffiliationPolicy." www.moodys.com
Additional terms forAustralia only:Any publication intoAustralia of this document is pursuant to theAustralian Financial Services License of MOODY'Saffiliate, Moody's InvestorsServicePty LimitedABN 61 003 399 657AFSL336969 and/or Moody'sAnalyticsAustraliaPty LtdABN 94 105 136 972AFSL383569 (as applicable).This document is intended to be provided only to "wholesale clients" within the meaning of section 761Gof the CorporationsAct 2001. By continuing to access this document from withinAustralia, you represent to MOODY'Sthat you are, or are accessing the document as a representative of, a "wholesale client" and that neither you northe entity you represent will directly orindirectly disseminate this document orits contents to "retail clients" within the meaning of section 761G of the CorporationsAct 2001. MOODY'Screditrating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.
Additional terms for Japan only: Moody's JapanK.K.("MJKK")is a wholly-owned creditrating agency subsidiary of Moody'sGroup JapanG.K., which is wholly-owned by Moody'sOverseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody'sSFJapanK.K.("MSFJ")is a wholly-owned creditrating agency subsidiary of MJKK. MSFJ is not a Nationally RecognizedStatistical RatingOrganization ("NRSRO").Therefore, creditratings assigned by MSFJ are Non-NRSROCredit Ratings. Non-NRSROCredit Ratings are assigned by an entity that is not a NRSROand, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKKand MSFJ are creditrating agencies registered with the Japan FinancialServicesAgency and theirregistration numbers are FSA Commissioner(Ratings) No. 2 and 3 respectively.
MJKKor MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKKor MSFJ (as applicable) have, priorto assignment of any creditrating, agreed to pay to MJKKor MSFJ (as applicable)for creditratings opinions and services rendered by it fees ranging from JPY100,000 to approximately JPY550,000,000.
MJKKand MSFJ also maintain policies and procedures to address Japanese regulatory requirements.
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.