After cutting Israel’s credit rating, international ratings agency Moody’s has now downgraded the deposit ratings of Israel’s big five banks – Bank Leumi (TASE:LUMI), Bank Hapoalim (TASE: POLI), Israel Discount Bank (TASE: DSCT), Mizrahi Tefahot Bank and First International Bank of Israel (TASE:FTIN1; FTIN5). The rating cut is technical rather than automatic because in the event of a crisis, the banks would be supported by the state. Therefore if the country’s credit rating has been cut, it would be less capable of supporting the banks. The banks’ rating has been downgraded from A2 to A3.
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Israeli ratings agency Midroog explains that the rating cut might extend beyond the banks to government companies like the Israel Electric Corp. Moody’s announcement talks about the rating of long-term deposits, that is, the rating of the bank’s senior debt, so in fact it is about the rating of the entire bank. Moody’s has also given a negative outlook for the banks.
Midroog VP head of financial institutions Moty Citrin said, “Moody’s left the strong internal financial rating (BCA) for the banks unchanged at Baa2 and stressed their financial strength, capital adequacy and high profitability of the banks. The only thing that has changed from Moody’s point of view is the assessment of the state’s ability to support the banks.
He adds, “Also from Midroog’s point of view nothing has changed. The banks remain strong and stable, with a prominent positive financial profile, record profitability and significant cushions to absorb losses in a variety of extreme scenarios. Therefore, Midroog does not foresee a significant liquidity risk to the banking system even in the current scenario of ongoing fighting, given a significant inventory of liquid assets and a relatively stable source structure, which relies on a substantial component of retail deposits, which have demonstrated high stability throughout previous crises.”
Published by Globes, Israel business news – en.globes.co.il – on February 13, 2024.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.
