HSBC Malta unaware of APS negotiations, but requests clarity from parent HSBC Holdings

HSBC Malta has said it was not aware of any negotiations taking place between its majority shareholder HSBC Holdings plc, and Maltese bank APS Bank plc.

A company statement issued on Wednesday night at 11pm from HSBC Malta, reacted to media reports that the small bank APS – majority owned (55%) by the Maltese Catholic archdiocese – was the interested buyer of HSBC Malta after parent company HSBC Holdings announced a “strategic review” of its indirect 70% share in the bank.

But HSBC Malta said it was actually requesting clarification on this from HSBC Holdings.

“Reference is made to reports in the local media earlier that APS Bank is in advanced negotiations with the majority shareholder to buy its shareholding in HSBC Malta… HSBC Malta announces that it is not aware of any such negotiations taking place between the majority shareholder and APS Bank p.l.c. or any other third party but has requested clarification of the position from its majority shareholder. HSBC Malta will make further announcements as and when required.”

Still, HSBC Holding’s announcement on Wednesday that it would carry 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.

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.

Based on Wednesday’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.

Financial observers who spoke to MaltaToday described any such move as “a dog trying to bite an elephant”, a basic comparison that illustratres the difference in size between the two banks.

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 called out the lack of clarity in the HSBC company announcement that would have described the purported sale, if media reports are indeed correct, as a “strategic review”.

“It raises so many more questions than it answers. In my opinion its ‘diplomatic language’  is pulling wool over the public’s eyes and inevitably giving rise to some ultra unrealistic rumours as to the local purchasers, in the process causing a drastic – and uncalled for – price fall on some €100 million in ordinary citizens’ life savings alone. Or is this a convenient manner of reducing the purchase price?”

Bonello said that HSBC should reassure the market that it was not desperate to sell out as if this were some court-mandated auction. “The regulators must ensure there is more clarity and visibility in the market. The Maltese investing public has never really understood what is equity investing – that can be dangerous in such situations.”

If APS did buy HSBC it would become the second largest bank after Bank of Valletta and could raise competition concerns. A more pertinent concern would be that Malta loses an international bank and replacing it with a local one, losing the clout of an immediately recognisable and reputable banking institution for investors. Given its international nature, HSBC Malta benefits from correspondent banking through its parent company.

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%.