HSBC’s departure, Malta’s strategic interest and ‘a dog trying to bite an elephant’

HSBC Holding’s announcement on Wednesday that it will be carrying out a “strategic review” of its 70% shareholding in the Malta subsidiary came as no surprise.

The writing has long been on the wall despite repeated affirmations by HSBC bosses in Malta that the bank is here for the long haul.

The review could take some months to complete but at the end of it, the parent company is very likely to decide on selling its Malta shareholding.

This prospect has already set the rumour mill going as to which investors could come forward to takeover HSBC’s operations.

Business website Whoswho.mt ran with the exclusive story that APS Bank, the church bank, is “set to acquire HSBC Malta” even implying that talks are currently at “an advanced stage”.

APS has made no company announcement on the Malta Stock Exchange as it would be obliged to do as a listed company if this news is true.

But financial observers who spoke to MaltaToday have described any such move as “a dog trying to bite an elephant”.

Based on today’s trading price for HSBC shares (€1.30), the market value of HSBC’s 70% shareholding currently stands at around €328 million.

Similarly, the value of APS Bank’s total shareholding based on today’s trading price (53c) is just over €200 million.

This very basic comparison highlights the difference in size between the two banks with one market analyst speaking to MaltaToday on condition of anonymity saying he finds it hard to understand how APS can be in a position to buy out HSBC.

On Facebook, Finco Treasury Management Ltd Director Paul Bonello, posed the question: “Incidentally, from where would APS come up with the money: some new bail-inable and subordinated issues?”

Bonello earlier described the APS rumours as “ultra-unrealistic”.  “People do your proper homework as to the habitual €100 million annual profits of HSBC Malta and to what would be a sensible price earnings ratio in an eventual sale and you will inevitably come to the conclusion that these rumours cannot make sense,” he said.

Bonello also questioned APS’s failure to issue a company announcement if it is in advanced talks with HSBC.

Another market analyst said if APS did buy HSBC it would become the second largest bank after Bank of Valletta and could raise competition concerns.

“But a more pertinent concern is from a strategic national standpoint since if the APS rumours are true, Malta will be losing an international bank and replacing it with a local one, something that may not be salutary for the country,” the analyst said.

HSBC carries clout and is immediately recognisable as a reputable banking institution for investors. But more importantly, given its international nature it benefits from correspondent banking through its parent company.

“If all the major banks in Malta are Maltese-owned, the country could be in for a rough ride if it faces issues with correspondent banks ever again,” the analyst added.

Sources close to government have told MaltaToday that HSBC’s strategic review is unlikely to be completed anytime soon, however, they hinted that having an international bank was the desired option.

“Government has no control over the eventual sale but it is in the national interest that an international bank is attracted to the fold so that the country’s eggs are not all in the same basket,” the sources said.

APS has so far issued no communication to the market about the rumours concerning its talks with HSBC. As a listed company, it is obliged to first inform the market of any changes.

APS Bank plc went public in 2022 when it issued 110 million new shares to the public and was listed on the MSE.

APS was originally owned by the archdiocese of Malta through two companies with a combined shareholding of more than 79%, the diocese of Gozo (18.2%) and the Metropolitan Cathedral Chapter (2.3%).

However, after the share issue, the Maltese archdiocese shareholding was diluted to 55.1%.