Discount Bank and Mercantile Bank Boards Approve Merger

The boards of directors for Discount Bank and Mercantile Bank have officially approved the merger of Mercantile Bank into Discount Bank, which fully owns it. According to Discount Bank, the merger is intended to accelerate the strategic plan led by Discount Group CEO Avi Levi, strengthen the group's competitive position, and adapt its operational structure to the business, technological, and operational challenges of the banking system. The merger process itself will be led by Mercantile Bank CEO Barak Nardi. The choice of Nardi to lead the merger leaves open questions about the management structure post-completion, including whether Levi will continue to head the merged bank and Nardi's future role.

The approval comes amid significant opposition from the Mercantile Bank workers' committee. Committee Chairman Alex Greenshpan informed employees that the managements of both banks presented a potential for streamlining that could affect hundreds of jobs within two years of the merger. However, the committee emphasizes that no official announcement of layoffs or retirements has been made, nor has the distribution of these potential efficiencies been clarified. Having had their proposals for streamlining without a merger rejected, the committee plans to approach the Histadrut labor federation to declare a labor dispute.

The committee has also argued that Mercantile Bank's board should have conducted a more independent review of the merger, especially since its "Mercantile 2030" strategic plan was only approved in December 2025. They have raised questions about whether difficulties in selling Cal (credit card company) influenced the timing and urgency of the merger, demanding an examination of whether the incomplete transaction or changes in its expected proceeds affected the group's needs. The committee has warned of potential appeals to regulators and legal action regarding the decision-making process.

The primary driver for the merger is Discount Group's operational efficiency challenge. In 2025, the group reported an efficiency ratio of 49.2%, the weakest in the banking system, while Mercantile Bank had a ratio of 47.4%. Discount's five-year plan aims to reduce its efficiency ratio to below 43%, with the group believing that consolidating headquarters and eliminating redundancies will enable a significant leap in efficiency that cannot be achieved by the banks continuing to streamline separately.

Mercantile Bank has approximately 1,500 employees, and a voluntary early retirement plan approved in December is expected to result in the departure of about 170 employees over three years. The merger now makes the workforce a highly sensitive issue, though the exact number of jobs included in the potential streamlining has not been disclosed. The key tests for the merger will be whether the savings from eliminating redundancies actually reduce Discount's efficiency gap and whether the group can uphold its commitment to preserving the Mercantile brand and its strengths in the Arab and Haredi communities and in the periphery, even after Mercantile ceases to exist as an independent banking corporation. The question of the merged bank's management structure, particularly the futures of Levi and Nardi, remains unresolved.