Preferred candidate to acquire HSBC is international payments solutions provider RS2

The Shift has learned that RS2, an international payments solutions provider based in Malta, is the leading candidate to acquire HSBC, which it has been serving since 1993 (originally at the time of Mid-Med Bank).

Ongoing negotiations also involve a consortium of local investors.  The Qatar National Bank (QNB), the largest financial institution in the Middle East, also expressed interest in the acquisition yet no formal negotiations are ongoing with the latter.

Sources close to the ongoing process coordinated by Goldman Sachs have indicated that RS2 may soon be declared the preferred bidder.

RS2 is not a bank, although it has been based in Malta for decades. It is controlled by Radi Abd el Haj, who bought a Maltese passport. The company is considered a favourite in the ongoing bidding process, particularly due to its ties with Barclays Bank, which owns 18.5% of RS2.

The Shift is informed that Finance Minister Clyde Caruana is informally supporting RS2’s bid, contrary to what happened with the failed APS bid. Although Caruana does not have the final say, his approval may facilitate the crucial green light needed by the Maltese regulators and the European Central Bank (ECB).

Observers told The Shift that while RS2 has the ‘internationalisation’ desired for the second-largest Maltese bank to compete with Bank of Valletta, there are still concerns about its financial standing and robustness.

While HSBC Malta’s market value hovers around €550 million, RS2’s is €120 million. The company has not performed well financially recently, registering significant losses and a downturn in its share price.

Data for 2023 shows the company, which has subsidiaries in various continents, including the US, registered a €0.5 million loss while its market share price deteriorated significantly.

RS2 plc is majority owned by El Haj, the company’s CEO. Through ITM Holding Ltd, which is also registered in Malta, he is the Ultimate Beneficiary Owner of the company, with 50.2% of its shares.

Other shareholders are Barclays Bank (18.5%) and Mario Schembri, the company’s non-executive Chair (2%), while the public holds 33% of the shares.

Al Haj spent most of his life either in Germany, where he studied, or in Malta. In 2016, he acquired Maltese citizenship through the cash-for-passports scheme.

Lawyer Robert Tufigno, the founder of GTG Advocates, sits on the board with Franco Azzopardi, Hilary Galea Lauri, Croatian Raza Karapandza and US citizen John Elkins.

The competition

While RS2 appears to be the favourite, HSBC has not yet ruled out a significant offer from a group of prominent Maltese businessmen and interest shown by the Qatar National Bank (QNB). The latter has not made an official bid.

Led by Lombard Bank chairman Joe Said, a former banker and businessman involved in different economic sectors, the offer by a so-called Maltese consortium is described as interesting and very strong. The combined individual wealth of the consortium’s participants is considered to be vast, some 20 times bigger than that of RS2.

Sources said that the consortium has told HSBC that it has no interest in controlling the bank’s management but only in investing in its shares once they are available.

Formed by a group of individual companies, members intend to buy individual stakes in HSBC, less than 10% each, while keeping the same management to manage the banking business. This is already a tried and tested formula that has been implemented in many large banks around the world.

No information has been divulged on the companies forming part of the consortium fronted by Lombard Bank’s Joe Said.

Qatar’s National Bank, the biggest bank in the Middle East, also expressed interest in a possible takeover of HSBC Malta.

While QNB has no financial difficulties in acquiring HSBC Malta, as its value runs into tens of billions, its problematic issues are more regulatory, particularly since it is not a European Bank. That is why it has not made an official bid yet.

QNB already operates branches in the UK, France and Switzerland, but does not have a licence to offer retail banking.

While the acquisition of Malta’s HSBC would give QNB a foothold in the EU market, doubts have been raised over a possible ECB refusal to approve an eventual deal.