Mind the Tech London 2023Bank Leumi CEO to high-tech sector: "We must not despair, let's secure the future of the Israeli economy together"
Mind the Tech London 2023
Bank Leumi CEO to high-tech sector: "We must not despair, let's secure the future of the Israeli economy together"
"The past year has significantly proven how crucial the technological revolution has been in the banking industry and how important it is to respond to events swiftly and in real-time," said Bank Leumi CEO Hanan Friedman during the Mind the Tech London conference
Hanan Friedman - CEO, Bank Leumi
(Credit: Hagay Dekel)
"A few months ago, when we met in New York, we discussed at length, the many challenges the high-tech industry is facing - especially in light of the changes in the global economy, the instability in the markets, and the challenges in the macro-economic environment," said CEO of Bank Leumi, Hanan Friedman, during Tuesday's Mind the Tech conference in London.
"Many high-tech companies have had to face a new and unfamiliar reality for the first time. This comes after many years of prosperity and consecutive growth and expansion, easy public offerings, and major funding and issuing rounds.
"Even now, when looking at the figures, the reality is still complex and challenging, and is forcing the growth engine of the Israeli economy to recalibrate.
"According to the LeumiTech and IVC annual report, the Israeli high-tech sector ended 2022 with a volume of investments that is similar to pre-Covid 2018 and 2019 – almost $ 15 billion, but this is a very sharp decline of 42% compared to 2021.
"The volume of funding rounds in venture capital funds is on the decline as well. The risk diversification among institutional investors is causing venture capital funds to raise less money than before. Recently published data indicates the depth of the slowdown in the high-tech industry. Services exports from Israel - 90% of which are provided by the high-tech industry - recorded a 2.6% decrease in the last quarter of 2022 compared to the previous quarter. This follows a negligible increase of 0.3% in the third quarter of 2022, in contrast to the very rapid growth in recent years."
Friedman isn't expecting the momentum to change in the near future. "The current background factors, worldwide and mainly in Israel, indicate that the slowdown in the high-tech industry is likely to continue into the coming months.
"Leumi’s macro-economic experts explain this trend by a weaker business sentiment and lower activity in Israel's high-tech export destinations, mainly the U.S. technology industry. This arises, first and foremost, from higher interest rates in the United States and developed markets, a significant factor in the technology industry, which is characterized by relatively high leverage rates.
"I believe we are all coming to the realization that the slowdown in the high-tech industry has major consequences for the growth potential of the Israeli economy and for the job market.
"Especially during these times, it is important to demonstrate creativity and innovation, and to find new channels for the continued development of the high-tech industry. I believe that banks today have a significant role to support companies that have substantial potential for development, and to help them overcome this challenging period.
"We saw this, just last week, in the way we took care of our customers who were in crisis mode, following the recent collapse of Silicon Valley Bank in the U.S. Once the crisis broke, we (at LeumiTech) set up an operations room that worked around the clock in order to assist Israeli startups and technology companies withdraw as much money as possible from SVB. We were able to help our customers transfer about $1 billion to Israel, very quickly. This ability, together with the unique value propositions we tailored for them was possible as a result of our financial resilience, and thanks to the ongoing relationship between LeumiTech and the tech industry.
"Another factor that has been dampening the activity of the high-tech sector in the past few months, is the greater uncertainty in the markets in light of Israel’s public and political climate. The situation is complex, considering the challenges I described earlier. We are well aware of the recent concerns raised by managers and employees of the high-tech industry. These people were born and raised in Israel, served in elite units of the Israel Defense Forces, and have chosen to establish their companies in Israel.
"Israel is the base for their operations, the root of their success. They have a deep connection to Israel. They want Israel to succeed and they are committed to seeing it thrive.
"Unlike many other global economies, the high-tech industry is the primary growth engine of the Israeli economy. This is not a cliché – this is a reality.
"The entrepreneurial spirit, the creativity, the bold attitude (or HUTZPAH), and the continued striving to do things better – these are all the foundation stones that Israeli tech companies grew up on, and are at the core of the quality of service they deliver, of their products, and of their vibrant work culture.
"This is a genuine marvel, and it is unique compared to any other country in the world!
"A few months ago - at the previous conference we held in New York - I said that Israeli companies are more resilient during crises than foreign companies. Today, I believe this even more strongly.
"Nothing can beat the Israeli spirit!
"It is clear to me that the challenges we are facing today are enormous, and are unlike anything we have experienced so far. These challenging times support what I have been saying continuously at recent public events: there is a strong correlation between the macro-economic environment and the technological revolution.
"The technological revolution is based on three foundation stones: customer tastes, competition, and work processes, which are becoming more mechanized and less dependent on employees.
"The past year has significantly proven how crucial the technological revolution has been, especially in the banking industry, and how important it is to respond to events swiftly, and in real-time.
"In the current macro-economic environment, which is characterized by high interest rates and volatile markets, the ability to update our advanced models quickly, based on automated credit-decisioning models which support our lending processes, allow us to help our clients – including our tech clients – to overcome challenging periods, faster and more efficiently.
"Last but least, it is within our power to make sure that the Israeli economy remains the miracle that it is.
"We must not despair! We are all hoping for a swift political resolution that will ease uncertainty and put us back on the right path!"
