Banks continue to take actions that will allow them to increase lending to the public, which has been one of their major growth engines in recent years, and is also marked as an engine of growth for the coming years. This week, the Harel insurance company purchased a NIS 1 billion mortgage portfolio from Discount Bank.
For Discount, this is the first sale of a mortgage portfolio, as part of its capital management and planning strategy. This coincides with the accelerated growth in the Bank’s activity in the mortgage field, which is reflected in a 26.5% increase in housing credit in 2021 – the highest figure in the banking system. This transaction will not have a direct material effect on Discount’s capital, but for the bank it is an initial experience in selling a mortgage portfolio, a tool that may become significant in the near future for the purpose of raising capital.
The sale of the mortgage portfolio joins another step that Discount has taken recently in order to increase capital adequacy in order to expand the bank’s credit portfolio. Last week, Discount issued shares, the first since 2016, when the bank ended the institutional raising phase with a record demand of NIS 1.7 billion, of which the bank responded to NIS 1.424 billion, well above market estimates that raised NIS 700-800 million.
Under the agreement, Harel acquired 80% of the total portfolio, at a value of about NIS 1.25 billion, and Discount was left with a holding of 20% of the portfolio. The Bank will continue to manage the portfolio as a whole in accordance with its accepted procedures and principles and will be entitled to an annual management fee, with the transaction embodied alongside the management fee that Harel will pay the Bank also margins that reflect profit for both parties.
Harel stated that the acquisition is another move that implements Harel’s skill in purchasing mortgage portfolios, following transactions the company has previously made with Bank Hapoalim, Mizrahi Tefahot and Leumi. The value of Harel’s total mortgage portfolio before the last transaction was about NIS 3.2 billion, and following the purchase of the additional portfolio, it will increase to about NIS 4.2 billion.
Yuval Gavish, Deputy CEO and Head of Business at Discount, said that “the deal with Harel, led by the syndication unit, is another breakthrough for Discount and the development of skills that will serve us well in the future as the bank’s accelerated growth continues.”
Sami Babkov, Head of the Investments Division at the Harel Group, stated that “for the past two years, Harel has focused on diverse investments in the residential real estate markets in Israel and abroad, and the mortgage sector is a key and important part of this market in Israel. In order to produce a current return with a low credit risk for savers. “