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TWST: Can we begin with a brief historical sketch of Israel Discount Bank (Tel Aviv: DSCT.TA) and an overview of your core activities today?

Dr. Goldschmidt: Israel Discount Bank Group is comprised of: Israel Discount Bank, the bank in Israel which is the parent company and the third-largest bank in terms of total assets, holding a market share of approximately 13%-15%, depending on whether you look at assets, liabilities or capital market activities. We have a full branch in London, rep offices in Paris, Berlin, Buenos Aires, Santiago De Chile and Sao Paulo. A 100% subsidiary in New York, Israel Discount Bank of New York, which is the seventh-largest bank in New York State, and the largest Israeli bank abroad. The bank itself has a substantial network in South America. Israel Discount Bank (Switzerland), a wholly owned subsidiary located in Geneva, focusing on private banking. A 100% subsidiary in Israel, Mercantile Discount Bank, which was once a joint venture with Barclays Bank, 65% of Discount Mortgage bank. In terms of financial non-banking investments, we hold a majority share in the largest credit card company in Israel called Visa CAL. We are also involved in capital market activities through our subsidiaries: an asset management company as well as an investment bank. The bank owns a provident funds management company and holds 55% in a mutual fund management company. We have a 20% stake in the third largest Insurance company in Israel, Harel Insurance Investments.

TWST: How has your business grown and changed over the last few years?

Dr. Goldschmidt: We have actually changed our strategy quite dramatically during the last two years. Going back three or four years, our bank had some problems in the construction and real estate loan portfolio. We had a large concentration in the real estate business. In fact, about 28% of our loans were given to that sector, and since the Israeli economy was and still is in a slowdown, we were badly hit. We started provisioning before the other banks in Israel, so we believe that we have already cleaned up most of our loan portfolio, ahead of the other banks. I think that this is evident if you look at the figures, where you will note that our loan loss provisions are going down at a time when the other banks, talking about September 2003, are still increasing provisions. So we believe that our loan portfolio is relatively clean. The major focus of our strategy right now is the retail sector. This is a major change for us. In the past, the bank believed it should concentrate on the corporate sector; not abandon the segment of retail customers, but concentrate on the large corporations where the fixed costs for granting credit are small. This was a mistake and after we figured out that the major contributor to our profits is the retail sector and not the wholesale sector, we initiated a shift in our strategy and we're putting in a lot of effort right now to attract new retail customers. We were very successful in doing that during the last year-and-a-half, attracting 100,000 new such customers. We're putting a lot of effort and money into reshaping the type and quality of service and also the product line that we are offering to those customers and we are seeing the fruits of that effort. We have seen an increase in our net interest income, as well as in our margins. Again, greater margins are obtained from the retail sector.

Mr. Banin: The Bank continues to offer and improve its services tailored to meet the needs of its customers. The organizational structure has also been successfully redesigned to put the customer at the forefront. The bank is organized along different divisions, with each division servicing a different type of customers. The corporate banking division provides services to the large companies and to other specific customer segments such as construction; the commercial banking division provides services to middle-market customers, the banking division is responsible for the households and small companies. To further improve the customer-oriented organizational structure of the bank, we very recently established an asset management division.

TWST: Have you opened new branches as part of that initiative to capture more retail customers?

Dr. Goldschmidt: As a matter of fact, we have attracted 100,000 new customers at a time when we closed about 32 branches. We have been able to decrease our operational costs while adding customers. We have been able to do that, even though we decreased number of branches. This was done by merging branches that were close by, thus minimizing the possibility of losing customers because of location.

TWST: Can you talk a little further on the products that you are offering to the customer and how you are meeting their needs?

Dr. Goldschmidt: We are a full-service bank, not only as far as classic bank products are concerned, but also in terms of the services that we are offering in the capital market. Israel is currently in an environment of decreasing interest rates, a process which started almost a year ago. Of course, when you have a decreasing interest rate, your retail customers are looking for alternative investments which are not too risky. We have the largest provident fund company in Israel, where you can invest in funds which are then put into the various capital market vehicles. We also have a mutual fund company, which has also been quite successful in terms of the yields it generated for our customers. In the mutual fund company, there are various types of products catering to customers that want to put more money into stocks or more money into government bonds, private debt, etc. So, we have different products to cater to different tastes. Going back to the bank, we have various types of deposits - long term, short-term, index linked, non-index linked, linked to the CPI, linked to the dollar, linked to the Euro. We also structure deposits for those customers who are not satisfied with interest rates and are ready to take a little bit more of the risk. They can for example, select a product where we guarantee the principal and we offer 70% of a given index, which is comprised of the NASDAQ, Nikkei and some European indexes. So, we really offer a very broad type of products.