HSBC shares plunge 18% in a day, speculation of APS take-over ‘immature’

As HSBC cryptically announced its exit from Malta, the bank’s shares dipped by 18.1% in a few hours and led to frenzied speculation on the stock exchange.

While many in the banking sector were not surprised by the announcement, as the sixth-most powerful global bank had indicated its intention to leave, the way the announcement was made led to confusion and speculation.

HSBC shares plunged €0.30c per share, from €1.65 to €1.35, soon after the bank’s announcement that it was “undertaking a strategic review of its indirect 70.03% shareholding in the bank”.

In other words, HSBC had decided to sell its stake, or at least part of it, and exit the Maltese market.

It was an open secret in the sector that the global bank had given direction from its headquarters in London to exit problematic jurisdictions, such as Malta.

The county’s greylisting and related reputational damage continue to be compounded by new scandals involving money laundering and tax dodging.

Can APS afford to buy HSBC?

While HSBC’s exit announcement was already informally doing the rounds last week, banking experts still described the news as “a big blow to Malta’s economy and international reputation”.

A veteran top banker told The Shift: “This is not to be taken lightly. HSBC is a world player, and its name and presence in Malta are crucial. Its exit is a blow to the country’s reputation and a vote of no confidence in the island. The government should be very concerned,”

Others expressed concern over further speculation that APS – the Church’s bank was already in talks to take over HSBC.

Experts said that if this were true, the Church’s bank would already be in irregular territory as it was obliged to inform the market through a company announcement if such discussions were ongoing.

“An APS takeover would be a disaster. Malta needs an international player, not another small local bank. The interest of the economy requires otherwise. It is also unclear how APS can afford to buy the 70% HSBC stake,” another financial expert said.

Malta’s banking sector is already considered lacking competition, with BOV and HSBC dominating the market.

Although growing, APS only has a market share of less than 15%, with BOV having 50% and HSBC 35% to 40%.

Banking sources said that while a 70% shareholding of HSBC should fetch a price in the range of €450 million, APS’ value currently stands at just €200 to €250 million.

Experts said there were other ways of acquiring the bank without buying the entire 70% stake, but they still consider speculation about APS “very immature.”

Government sources also expressed their doubts on the APS option.

“Malta needs more international banking presence and not a reduction of its current banking market. Competition increases with another different bank and not a reduction of players,” a senior government source said.

The Shift is informed that HSBC has yet to conclude its sale. However, the only international player interested is a still-unnamed Middle Eastern player.

ECB to have the final say

According to EU banking regulations, the European Central Bank must approve an eventual sale of HSBC’s shares.

Since HSBC is considered to have a dominant domestic position, the ECB will have to examine all the repercussions, including whether the buyer is fit and proper, anti-trust and competition rules, and prudential requirements, among others.

Again, according to the experts consulted, the APS speculation doesn’t make sense, as the ECB might strike down such a deal.