Leumi takes charge on US tax probe costs
Israel's second-largest lender warns of possible 42% drop in profits after taking a charge of NIS 340 million on costs of American investigation into possible tax dodging by its citizens
As a result of this expense and a provision for an early retirement program, Leumi said it expects to post a net loss of NIS 100 million ($27 million) for the fourth quarter of 2012 and a net profit of NIS 1.09 billion ($290 million) for the full year.
Leumi made a profit of NIS 618 million ($166 million) in the final three months of 2011 to give a total for the year of NIS 1.89 billion ($510 million).
It said the estimates for 2012 exclude any contribution to be had from the bank's 18% stake in conglomerate Israel Corp, which has yet to report results.
Leumi also said that since it does not know for certain how much it will have to spend on the US investigation, the final expense could be significantly higher.
The bank has urged US clients to disclose information about their accounts to US authorities, who are investigating Leumi and other foreign banks as part of a wide-ranging campaign to crackdown on Americans using offshore banks to avoid taxes.
The US effort has been focused largely on banks in Switzerland, but it has been known that banks in other countries, including Israel, are under scrutiny.
In a December 16 letter obtained by Reuters, Leumi urged US clients to join the Internal Revenue Service's voluntary disclosure scheme.
Leumi's fourth-quarter provision is to cover any expenses arising from the investigation, which relates to the period 2002-2010, including the cost of advisers hired by the bank.
"This provision is not an admission regarding any complaint that might be raised against the group by US tax authorities," Leumi said in a statement.
Leumi is scheduled to report results on March 21.
