Bank Hapoalim's purchase of Investec Inc., the Israeli bank's first foray into U.S. securities brokerage, will let it expand the service menu for its U.S. corporate clients, says John Murabito, the CEO of Hapoalim Securities.
The bank already has private and corporate banking clients through its offices in New York and Miami. Adding Investec, a subsidiary of the London investment bank Investec PLC, will enable Bank Hapoalim to add brokerage and trading services to its underwriting capabilities for institutional customers, many of which are Israeli companies with U.S. affiliates or that want to trade U.S. securities, Mr. Murabito said.
"We'll be able to serve as a link to their needs" in the United States, he said in an interview Friday.
The New York-based institutional broker-dealer was renamed Hapoalim Securities as part of the deal, and Mr. Murabito was named CEO of the post-merger entity.
Hapoalim Securities will try to broaden its research and trading capabilities as a result of the purchase, he said. Before the deal Investec did underwriting for customers of an Israeli bank with which it was affiliated. But like Investec, which had customers throughout Europe, Hapoalim Securities' client base will not consist solely of Israeli companies, he said.
Bank Hapoalim had been looking to enter the U.S. brokerage business for some time before the Investec purchase, he said. Investec's adviser, Goldman Sachs Group Inc., approached Hapoalim about an acquisition roughly a year ago, he added.
Under the agreement, Bank Hapoalim's U.S. brokerage orders from existing Israeli institutional and retail investment customers will be directed to Hapoalim Securities. The bank's custodial relationships with major Israeli asset managers will be used to cultivate brokerage relationships.
Israeli companies have been entering the U.S. market in greater numbers, and Hapoalim Securities hopes to capitalize on the trend, he said.
"It's not new, but the trend is accelerating," he said. "Ultimately, we would like to become a representative of Israeli companies in the U.S. capital markets. We would then be able to shepherd a company throughout its life cycle, from start-up to IPO." About 120 companies are dual-listed on Israeli and U.S. stock exchanges, Mr. Murabito said.
A recent change in Israeli tax law that eliminates a penalty for buying foreign-listed stocks is expected to encourage investments by Israeli companies in overseas firms, he added.
"Israel is an incubator of high-tech, telecom, and defense companies, and many of them may ultimately establish [U.S.] subsidiaries," Mr. Murabito said. Hapoalim Securities will also look to broaden its institutional equity services, particularly on the research side, he said.
"We're going to focus on fundamental research emphasizing technology, pharmaceuticals, and health care," he said. "We want to mirror the emphasis of the Israeli economy in terms of corporate sectors."
The company will also publish equity derivatives research for individual clients looking to invest in options, futures, and exchange-traded funds, he said. Hapoalim Securities will also look to develop customized investment strategies for institutions and to expand into municipal bond sales, trading, and underwriting.
"The bank's credit rating clearly will help us in that business," Mr. Murabito said.
