Pedestrians are reflected in the windows of a Bank Leumi branch in Tel Aviv May 30, 2013. REUTERS/Nir Elias/File Photo

JERUSALEM (Reuters) - Israel's Bank Leumi LUMI.TA and Azrieli Group AZRG.TA have agreed to sell their credit card business Leumi Card to the U.S. private equity firm Warburg Pincus for 2.5 billion shekels ($685 million).

Leumi said in a statement on Saturday it would receive 2 billion shekels for its 80 percent stake, and that real estate developer Azrieli had agreed to sell its 20 percent stake.

Israel's Harel Insurance Investments and Financial Services HARL.TA said it was lending Warburg Pincus 850 million shekels for the purchase.

The Bank of Israel said it would begin an examination into Warburg Pincus and its business plan before the deal could move forward, a process it estimated would take about four months.

In a bid to increase competition, regulators have instructed Israel’s top two banks sell off their credit card companies.

Leumi's main rival, Bank Hapoalim POLI.TA, last month submitted an initial prospectus with Israel’s securities regulator for a possible initial public offering of its Isracard credit card unit that also includes other sale options.

Leumi said that Warburg Pincus, which manages $45 billion in assets, will pay 1.05 billion shekels upon completion of the deal, a further 342 million shekels a year later, and the remaining amount after two years.