The head of the U.S. division, Shlomo Mosseri, is presently in discussion with all clients to allow them to find financing alternatives in a gradual and orderly manner. There will be no time pressures exerted on the diamond clients, but the bank sees the end of 2014 as the target for completion of the pull-out.

 

The decision caught U.S. bank management by surprise, although it was not wholly unexpected.

 

Bank Leumi is Israel’s largest bank, and has subsidiaries in some 20 countries and 12 branches in the United States.

 

One of the first decisions made by its President and CEO, Rakefet Russak-Aminoach, after being appointed to lead the bank in early 2012, was to pull out of diamond industry financing, and it is completing its Israel pull-out in the first quarter of this year.

 

Just a few years ago, Bank Leumi’s diamond branch in Israel had a $400 million-$500 million credit portfolio.

 

Bank Leumi USA is an American bank and is also Leumi's largest subsidiary. Leumi USA has branches in New York, Illinois, California and Florida, and has granted $3.8 billion in credit and holds $4.9 billion in deposits. According to the latest financial data, for the first nine months of 2013, the bank’s profits on its U.S. operations were down by 50 percent, mostly due to write-offs of bad loans. In previous years its profits hovered around the $20 million mark.

 

Outstanding credit that has been extended to diamond clients in the United States is believed to amount to some $200 million. This compares to total outstanding credits of the bank to the public of some $75 billion.

 

As the share of diamond financing in the bank’s credit exposure became wholly insignificant, the extra costs associated with the special expertise required in a diamond financing operation was no longer considered cost effective, according to Mosseri.

 

The bank has, in recent years, made significant provisions (exceeding $150 million) to cover the expenses that might be incurred by the group due to investigations being conducted by the U.S. authorities suspecting money laundering and assisting U.S. customers to evade taxes in the years 2002-2010. It also paid significant penalties both in Israel and abroad for violations of anti money laundering laws.

 

The heads of the Israeli diamond industry have severely criticized Bank Leumi – which is partly owned by government – for its withdrawal from the diamond business which it has supported, directly and through subsidiaries, from the sector’s beginning.

 

What remains to be done for the bank is changing its website, which, as of today still maintains that “from our U.S. headquarters in the diamond district at Fifth Avenue and 47th Street in New York to our diamond exchange branch in Ramat Gan, Israel, from Chicago, Los Angeles, and Miami to the United Kingdom and Switzerland, we support the global diamond industry, from producer to consumer, from rough to retail.” No more.

 

There was no immediate comment from the bank regarding the report.