S&P Corrects Erroneous Bank Report After Market Impact
Translated & summarized from Globes by baba
Global ratings agency S&P issued a corrected report on Mizrahi Tefahot Bank after its initial assessment caused a significant drop in the bank's stock price. The erroneous report projected a sharp decline in the bank's return on equity, which was later revised upwards in an updated release. The correction led to a moderation of the stock's losses.
The story in 5 lines · by baba
- S&P corrected an erroneous report on Mizrahi Tefahot Bank that negatively impacted its stock price.
- The initial S&P report projected a sharp decline in the bank's return on equity for 2024-2028.
- The corrected report revised the bank's expected return on equity for 2024 upwards.
- Analysts Regina Arguniu and Matan Benjamin prepared the S&P report.
- Mizrahi Tefahot Bank's stock price stabilized after the correction became known.
Global ratings agency S&P was compelled to correct a report issued to investors concerning Mizrahi Tefahot Bank. The initial report, which otherwise appeared to be a routine rating update, projected a sharp decline in the bank's return on equity (ROE) for the current year and subsequent years (2027-2028). This projection surprised local market participants and caused negative pressure on the bank's stock for several hours.
An updated report was later released to rectify the figures. The original report, prepared by analysts Regina Arguniu and Matan Benjamin, maintained the bank's BBB+ rating with a "stable" outlook. It noted Mizrahi Tefahot's strong domestic brand and its ability to manage operational and risk costs amidst geopolitical shocks and economic slowdowns, contributing to a healthy ROE of 17%-18% in recent years.
However, the initial report erroneously predicted that increased competition and interest rate cuts by the Bank of Israel would reduce the bank's ROE to 12%-13.3% by 2026. This forecast implied a significant drop in the third and fourth quarters of the current year, as the bank's ROE stood at 15% in the first half (17% excluding a special tax on banks).
The corrected report, issued midday, revised the expected ROE for the current year to a range of 14%-14.9%. For the following year, instead of a low forecast of 11.9%-13%, S&P now projects an ROE of 14%-14.9%.
Following the correction, the decline in Mizrahi Tefahot's stock price moderated as market participants became aware of the error. The bank's stock had initially led the day's sharp declines, dropping by 4.5%, likely attributable to the erroneous S&P report.