Citibank is planning to open a representative office in Tel Aviv and has scheduled a return to Beirut for later this year.
Speaking at the annual meeting of the Inter-American Development Bank in Jersualem, Citicorp vice chairman William Rhodes said last week that peace between Israel and its Arab neighbors will lead to growing economic opportunities in the Middle East.
Citicorp is not the first foreign bank to enter the region. Several Jordanian banks, for example, run branches in areas occupied by Israel.
One of the largest is Arab Bank PLC, a $15 billion-asset institution headquartered in Amman. It has a regional office in Ramallah, serving the West Bank and Gaza, as well as branches in Nablus, Gaza City, and Jericho. It also has sub-branches in west Nablus and the Gaza Strip.
According to Nofal S. Barbar, executive vice president of Arab Bank's branch in New York City, "The verdict is that there are lots of opportunities to do business in the Middle East, although there are still obstacles and concerns regarding the legal regulatory framework."
However, Mr. Barbar said he expected the pace of financial institutions doing business there "to pick up as soon as the peace process is finalized."
Britain's Barclays Bank and Poland's Bank Polska Kasa Opieki S.A. have offices in Israel proper. Barclays owns Barclays Discount Bank Ltd. jointly with Israel Discount Bank Ltd., while Polska Kasa has run a branch in Tel Aviv for several decades.
Citicorp has an extensive network across the Middle East, including offices in Egypt, Morocco, Tunisia, Bahrain, and Oman. It also holds a sizable minority stake in Saudi-American Bank.
The U.S. bank formerly maintained a branch in Beirut, but closed it down in the early 1980s, at the height of the Lebanese civil war.
A Citicorp spokesman in New York said that rapid economic progress in Lebanon was again making that country an attractive location for banks.
He added that Citicorp is mainly hoping to further develop its correspondent banking relationships in Lebanon and Israel, as well as doing some corporate banking, trade finance, and cash management in both countries. He said that the bank will likely soon seek to upgrade its representative office in Tel Aviv, which cannot actually transact business, to a full-fledged branch.
Many foreign banks have stayed out of Israel because the country has long been dominated by a handful of large banks, such as Bank Hapoalim and Bank Leumi, and is broadly considered to be over-banked.
However, a recent spate of peace treaties between Israel and Jordan and growing business links in the region have led several western firms, mostly securities firms, to step up their presence in the hope of obtaining mandates to privatize government-owned companies and bring issues to market on behalf of Israeli state agencies and private corporations.
Chase Manhattan Corp., for example, late last year reached an agreement with Bank Leumi to set up a program for American depositary receipts and global depositary receipts. The program would help Israeli companies issue negotiable certificates for their shares that could then be traded in the United States.