Bank Leumi Leads Innovative Covered Bond Issuance in Israel to Foreign Investors

Bank Leumi Pioneers Covered Bonds for Foreign Investors

In a groundbreaking move for the nation's finance sector, Bank Leumi (TASE: LUMI), one of Israel's leading banks, has successfully issued approximately EUR 750 million in covered bonds aimed at European investors. This transaction not only marks Israel's inaugural venture into the covered bonds market but also highlights the bank's strong positioning and impressive demand amidst the competitive global banking landscape.

On January 13, 2026, the bank announced the issuance had attracted a staggering EUR 4.6 billion in bids, far exceeding expectations. The specifics of the bond series include a five-year duration, a margin rate of 0.68%, and an annual interest rate of 3.197%. Notably, this issuance received ratings of AA- from Fitch and Aa3 from Moody's—significantly higher than the ratings assigned to the State of Israel’s most recent bond issuance, which reflects Leumi's increasing prestige on the international stage.

Why Covered Bonds Are a Game Changer

Covered bonds are unique financial instruments that offer additional security to investors by being backed by a pool of mortgage loans. This collateralization mechanism allows banks to offer lower interest rates compared to standard corporate bonds, establishing a safer investment landscape. For Bank Leumi, this bond issuance underlines a strategic method to diversify funding sources, thereby reducing reliance on domestic financing methods.

The leadership behind this successful venture consists of Deputy CEO and Head of Capital Markets, Mr. Omer Ziv, along with Ms. Nitzan Sandor, who spearheaded the legal aspects of the transaction. In a statement, Mr. Hanan Friedman, CEO of Bank Leumi, expressed pride in being at the forefront of this innovative issuance that not only benefits the bank but also opens avenues for foreign investors' engagement within the Israeli market.

Unlocking New Opportunities

The issuance of covered bonds is particularly significant as it exposes a variety of foreign investors, especially from regions with limited previous engagement in Israeli investments, such as Germany, France, and Switzerland, to this collateral-backed financial product. As global covered bonds make up an estimated market size of around EUR 3 trillion, Bank Leumi's participation is a critical step in integrating Israel into these international financial frameworks.

A Response to Market Demand

The timing of this bond issue is particularly astute. By tapping into the robust demand from foreign investors, Bank Leumi not only maximizes its fundraising potential but also strengthens its presence in the global capital market. This approach may serve as a template for other Israeli financial institutions aiming to broaden their investment horizons.

Overall, this historic issuance is indicative of Bank Leumi's sound operational strategies and its commitment to meeting investor demands while fostering a growing dialogue between Israel and international capital markets. The anticipated listing of these bonds on the Tel Aviv Stock Exchange's institutional trading platform further solidifies their accessibility and underscores the bank's role as a pioneer in the region.

In conclusion, Bank Leumi not only sets a new precedent by issuing covered bonds but also demonstrates its capability and credibility in the global arena. The future looks promising as such financial innovations pave the way for deeper international investments and collaborations.