Israel's Bank Leumi is marketing a new shekel-denominated structured deposit linked to the performance of the Tel Aviv Banking index (Tabank).
The two-year Shekel Structured Deposit pays 80% of the increase of the underlying index provided it does not grow by 33% or more during the term; otherwise a flat 2.5% coupon is paid.
Leumi said its investment rationale for the product is that after a rally in the banking sector in 2009 and since the beginning of 2010 the sector has performed negatively.
Currently, the Tabank is traded with a P/E ratio (weighted) of around 0.94, compared with around 0.5 and lower, observed during the peak of the crisis in the markets and around 1.1 observed during the recent prosperity, which had been recorded since then. Leumi believes that should the average return on capital presented by the banks reach double-digit, this level would be of interest for investment.
The two-year Shekel Structured Deposit will be available until 5 October. Minimum investment is NIS15,000 ($4,012).