Bank Hapoalim Warns on Profits Due To US Tax Probe

Bank Hapoalim Ltd., Israel’s largest bank, will set aside another $70 million to settle a Department of Justice investigation into the lender’s activities in allegedly helping U.S. clients avoid paying taxes.

The increase in provisions will “materially impact” third-quarter results, and brings the total amount to $120 million, according to an e-mailed statement from the company on Thursday.

That should reduce profit in the quarter to 629 million shekels ($167 million), Barclays Plc analyst Tavy Rosner said in a note to clients.

“The U.S. investigations have weighed on Hapoalim’s shares,” Rosner said. “Today’s announcement shows that the bank is now having ‘face-to-face’ conversations with the U.S. authorities, which could pave the way for a settlement in the coming months.”

A conclusion of the investigation, which stretches back to at least 2011, will remove a significant impediment to raising dividends, Yadin Antebi, Hapoalim’s chief financial officer, said in August. Hapoalim wants to increase payouts to shareholders to 50 percent of profit from 20 percent currently.

The provisions, which don’t include possible fines from the New York Department of Financial Services, are not an admission of guilt regarding any claims it may face, the company said.

Hapoalim shares dropped 0.7 percent to 21.25 shekels as of 10:20 a.m. in Tel Aviv.

Bank Leumi Le-Israel Ltd., the country’s second-biggest bank, settled its cases with the U.S. government after agreeing to pay $400 million in fines in 2014.

The bank paid $270 million to the Department of Justice and $130 million to NYDFS.

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