Leumi's Bond with Diamond Trade Pays Off

Bank Leumi knows diamonds.

The Tel Aviv-based banking company, which was founded by a leading Zionist, played an important role in the development of Israel's diamond business.

That expertise has come in handy for a U.S. subsidiary of one of Israel's leading banks, as Bank Leumi Trust Company of New York has refocused its energies away from the retail market to affluent individuals and midsize companies, including diamond merchants.

The new strategy, which the bank started implementing several years ago after a loss of about $145 million from problem real estate loans, has paid off, said Zalman Segal, the bank's chief executive.

In a recent conversation at the bank's strictly monitored quarters in the heart of New York's diamond district in midtown Manhattan, Mr. Segal pointed out that his institution earned $3.6 million in the first six months of this year.

"We are in the risk business, and anything can happen," said Mr. Segal. "But we feel that the bad times are behind us."

That is because the bank is now courting the kind of individual customers who have a minimum of $25,000 in deposits. Blue-streaked branch signs invite outsiders to inquire about the bank's Premier Banking services, Bank Leumi's notion of private banking.

When it comes to investments, affluent bank clients can choose from a variety of money market funds advised by Bankers Trust and mutual funds offered through Invest, a third-party marketing firm, or from a more customized portfolio approach - investing in which starts at $250,000.

Along with the customers that come out of its branches, the bank has decided to focus on affluent international clients and the owners or executives of companies in industries the bank has serviced for years, including the textile and diamond industries.

Mr. Segal acknowledged, however, that the bank's strategy of cost cutting and streamlining has also strained its morale at times.

Bank Leumi has reduced its New York presence from a peak of 22 branches five years ago to the current seven locations, which will be further cut to five by October. The restructuring has also meant a 50% staff reduction to 500.

"It's still a sensitive issue with us," Mr. Segal said.

Romanian-born Mr. Segal said it was only natural that the bank took advantage of those diamond connections in the United States, locating its headquarters to the heart of that industry on 47th Street and Fifth Avenue three decades ago.

It is easy to see why: Israel has continued to be the largest exporter of polished diamonds to the U.S., and New York is the gateway for 97% of all the diamonds that enter this country, according to bank figures.

The bank has special diamond and jewelry teams - along with teams that specialize in textiles and in real estate - that work with companies and their top executives to serve their commercial and individual needs.

But bank officials said that services to this industry - loans, letters of credit, cash management, and collection services - are not exclusively for Jewish clients.

The diamond industry itself is changing, they said, with India becoming a strong competitor in this field. The bank even sponsored a March conference for diamond movers and shakers of Indian descent.

And Bank Leumi is not the only bank to have courted the market.

ABN Amro Bank calls itself "the leading international lender to the diamond industry." Natwest Bank is courting diamond merchants with ads that promise, "It's like having an uncle in the banking business." And Chemical Bank is reportedly planning to penetrate the New York diamond market.

"It's a competitive market," Mr. Segal said.

But he added that because the bank arrived early to the diamond industry, it is now dealing with second and third generations of family- owned businesses.

"It gives us an advantage of belonging."

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