Thread by @pbcinc

Pro $SHVA.TA thread. What is #MASAB? Hebrew Acronym for 'Bank Clearing Center'. This is the firm that operates all bank to bank wires in Israel. Founded in 1982 by the same banks that founded $SHVA.TA and operated as one business unit until $SHVA.TA's demutualization in 2019 >

#MASAB is the backbone of all Banking transactions in Israel. Think SWIFT. Private co-owned today by the leading banks in Israel (25%: Hapoalim, Leumi, Discount and 12.5%: Mizrachi, Tfahot, benleumi). Its estimated Revs are ~ 46 M NIS, with ~ 8-9M NIS net profit. >>

Like $SHVA.TA, #MASAB is a critical financial Infra, and needs to operate on the safe, hardened facilities. Imagine even one morning in which you could not wire funds from your account due to a hacker attack or just malfunction. Now think about the costs associated. >>

Since #MASAB is smaller but has huge costs, from time immemorial, #MASAB & $SHVA.TA shared expenses. They use the same infra and share C suit management. Staff are billed per usage (developer building an app for #MASAB will be charged to #MASAB P&L). >>

#MASAB is charged a partial part of CEO, C suite fees as the smaller Co of the two sisters.

This arrangement helps to keep expenses low, share top-level employees without waste, and makes life easier in hiring and training new staff (it takes years to train a new Developer).

The result is lower fees for all involved (cost-based pricing). Should ever #MASAB be required to hire a duplicate set of C suite and tech resources, its fees will zoom out of proportion to its size with immediate implications (price inflation) to its users, >>

Not to mention the consequences to the stability of the whole financial system in Israel. This is why the regulator, Central Bank of Israel, has been supportive of the current labor sharing arrangement for, well, forever.

#MASAB operates on a distinct different Fin verticals than $SHVA.TA and the two do not compete. #MASAB has been working on developing a P2P application to make non-commercial bank wires simpler and more available, similar to the #Swish model >>

with the hope that more Apps and services will use the Tech to make family, friends, and P2P wires more accessible and cheaper. These P2P wires do not support basic Commercial requirements and therefore are not usable in the commercial context (lacks the Card Network Schema). >>

The process starting with the Demutualization of #SHVA.TA created a new situation: (2 half siamese Co's), held by different owners. Obviously, the Competitive (Antitrust) chief does not appreciate the arrangement (2020) and push for full separation, results be damned. >>

The Central Bank which needs to run a country is horrified by such prospects. At the end of the day, the likely resolution involved some sort of compromise. In any case, the implications of a full separation is manageable on the $SHVA.TA side (see financials) but devastating >>

On the #MASAB side. With massive expense inflation and a need to hire and train most of the employees from top to bottom, even the competition chief will likely think the consequences backfired horrifically.

This is why the final resolution will likely be made either in court (an ongoing process) or in an out of court compromise with all large financial stakeholders looking closely. In any case, even a full separation will take at minimum 5 years to happen, likely much longer.