Discount Bank Warns Credit Card Firm Sale May Collapse

Discount Bank is warning that its deal to sell its credit card company, Cal, is on the verge of collapse, urging regulators to facilitate the sale or allow the bank to withdraw from the process. The bank's CEO, Avi Levi, stated in a letter to the Bank of Israel and the Ministry of Finance that Discount Bank cannot find another buyer for Cal within the agreed timeframe, which extends to May 2027. The bank also believes that attempting to list Cal on the stock exchange instead of selling it is not feasible, as the minority shareholder, Israel Discount Bank (28%), is expected to veto such a move.

The sale of Cal to the Union Group (owned by the Horesh family) and Harel Insurance Company for approximately NIS 4 billion, agreed upon a year ago, is facing significant regulatory hurdles. The deal, with a completion deadline of November 2026, awaits approval from the Competition Authority's director, Michal Cohen, who previously blocked Harel's acquisition of a rival credit card company. The primary concern for the Competition Authority is potential information leakage, as the Union Group holds a 35% stake in the large pharmacy chain Super-Pharm, while Cal issues credit cards for Shufersal's customer club, which operates the second-largest pharmacy chain, Be.

Discount Bank argues that the local market lacks other potential buyers capable of acquiring Cal for billions of shekels without raising competition concerns. The prolonged delay in the deal's approval, the bank contends, undermines two major banking reforms: the Strum Law, which separated credit card companies from banks, and the "lean banks" reform. This is because Cal is a candidate for becoming a "lean bank," but the restrictions and delays hinder this transformation. "Any investor wants to know if they can grow Cal by making it a lean bank, but if Israel Discount Bank continues to hold a stake, it cannot be one," stated a capital market source, adding that this "zeros out the list of potential buyers."

Unlike a previous instance where Bank Hapoalim successfully spun off its credit card company, Isracard, the minority shareholder in Cal, Israel Discount Bank, is reportedly opposing a similar move, holding a veto right. Neither Discount Bank, the Bank of Israel, nor the Ministry of Finance provided a comment on the matter.