JERUSALEM, Dec 3 (Reuters) - Israel Discount Bank's two controlling shareholders have sold a 7 percent stake for 493 million shekels ($140 million), the bank said on Tuesday, the beginning of a phased sell-off of their 25-percent holding.
Trying to turn around Israel's No. 3 bank has been tough for U.S.-Canadian businessman Matthew Bronfman and New York real estate investor Rubin Schron, who bought the stake from the government in 2005.
They have cut its loan portfolio to reduce risk assets and improve its capital adequacy ratio, and say they may sell part of its U.S. business to shore up the balance sheet. Recent profits have been bolstered by sales of proprietary securities.
The bank's shares fell 3.2 percent to 6.867 shekels by 1105 GMT after Bronfman and Schron sold 73.8 million shares at 6.679 each to Citigroup. It closed at 7.098 on Monday. Dealers said the stock has been sold on to institutional investors.
They cannot sell the remaining stock for at least 120 days.
Bronfman and Schron are no longer allowed to appoint directors or make any moves that controlling shareholders make, the Bank of Israel said after they announced their intent to sell control. Each of them will also be required to hold less than 5 percent of the bank, it said.
The Psagot brokerage owns 5.9 percent while some 69 percent of Discount is freely traded on the Tel Aviv Stock Exchange.
The bank last week reported a 25 percent rise in third-quarter profit but a 4.2 percent fall in net interest income.
In October, Discount named Lilach Asher-Topilsky as its new chief executive pending regulatory approval. She would replace Reuven Spiegel, who in August said he planned to step down in March 2014 for personal reasons.