Bank Leumi le-Israel B.M.

Strong market position and franchise as one of the two largest banking groups in Israel. Sound liquidity, supported by deep domestic funding base. Improving capitalization to adequate levels. Moderately high likelihood of extraordinary government support, if required. Concentration, though recently declining, in corporate loans. Potential correction in residential real estate given recently rising house prices in Israel. Lower short-term growth prospects given geopolitical tensions in the region. Weak, albeit improving, operating efficiency. Standard&Poor's Ratings Services' outlook on Israel-based Bank Leumi le-Israel B.M. (Leumi) is stable. We expect the bank to gradually increase its capitalization from current adequate levels, while maintaining its strong market position and sound funding and liquidity. Capitalization is likely to benefit from moderation in risk

...Outlook: Stable Standard & Poor's Ratings Services' outlook on Israel-based Bank Leumi le-Israel B.M. (Leumi) is stable. We expect the bank to gradually increase its capitalization from current adequate levels, while maintaining its strong market position and sound funding and liquidity. Capitalization is likely to benefit from moderation in risk asset growth, lack of dividends, and regulatory drive for higher capital. In our base-case scenario, we consider that the risks attached to the economic impact of geopolitical tensions in the region, including a correction in the residential real estate sector and significant stress on a few large domestic conglomerates, should remain contained and manageable. We view limited upside rating potential at this stage but could consider a positive rating action if economic prospects strengthen and trigger a substantial improvement in loan quality, and if the bank's corporate loan book concentration decreases significantly. Alternatively, we could lower...

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