Brisk demand for Discount Bank shares

Demand was brisk for Israel Discount Bank’s (TASE: DSCT) share offering on Monday. The bank, managed by CEO Lilach Asher-Topilsky, raised NIS 700 million in the investment institution stage of the offering, with demand reaching NIS 1.3 billion.

The NIS 6.93 share price for the offering was 1.5% higher than Monday’s closing price, after the share dropped 3.3% on the news of the upcoming offering, but 2% below the share price before the announcement. Discount Bank head of financial markets Ran Oz managed the offering, which was led by Discount Underwriting and Investment, under managers Tzahi Sultan and Tal Rubinstein.

The offering included shares and options. Demand for shares totaled NIS 744 million, of which NIS 480m. was raised. Demand for options totaled NIS 180m., which if fully exercised would amount to NIS 540m.; the bank will actually raise NIS 224m. of this. Among others, the options were designated for large institutions currently holding 5% of the bank’s shares. The Supervisor of Banks recently permitted institutions to increase their holdings in banks to 7.5%, after approval is granted for the specific case. The options offered were designed to give the institutions time to obtain authorization before the options expire.

Discount Bank unexpectedly announced on Monday that it planned to offer shares in order to accelerate its growth, mainly in its credit portfolio, and in order to improve its capital adequacy ratio. The Discount Bank A share is traded at a 0.54 capital multiple, the lowest capital multiple for any of the major bank shares, following the bank’s low-profit margins and poor efficiency ratios. The bank hopes that its offering, combined with its recently announced new streamlining plan, will improve these parameters.