Moody's cuts Bank Leumi

Moody's Investors Service said it downgraded the long-term local-currency deposit rating of Bank Leumi to A1 from Aa3. The bank's A1 long-term foreign-currency deposit rating was affirmed.

The outlook is negative.

"The rating actions reflect Moody's expectations of a worsening in Leumi's financial fundamentals resulting from: (a) accelerated deteriorating economic and operating conditions in Israel, which is expected to lead to higher default rates among borrowers, (b) the ongoing financial crisis which continues to weigh negatively on capital markets, suggesting further impairments of financial assets held, (c) reduced profitability due to elevated credit costs, the realization of financial asset impairments, a lower interest rate environment and perhaps a weaker business expansion, and (d) exposure to sectors that Moody's expects to face severe financial stress during this economic downturn, such as construction and tourism," Christos Theofilou, a Moody's analyst, said in a statement.

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