A look at the CrediaBank deal

CrediaBank is a brand that officially only came to life just over two months ago following the merger of Attica Bank and Pancreta Bank in Greece. However, it seems that this brand has already become a household name in Malta given the wide publicity in recent weeks following the first announcement on 15th August that they were selected as preferred bidders for the majority stake of HSBC Bank Malta plc and the subsequent notification on 16th September that they signed an agreement for the eventual purchase subject to various conditions.

There have been numerous articles replicating the key details of the agreement between the parties and other opinion pieces on the subject matter from people within the industry. Without trying to be repetitive, I will aim to provide what I believe to be some important facts to pass judgement on the agreement reached between the parties and the details known to date.

Many investors and market participants seem to have been caught by surprise by the price of €200 million agreed between the independent seller (HSBC Continental Europe) and the prospective buyer (CrediaBank) for 70 per cent of HSBC Malta. Despite a number of remarks making reference to the value that was reportedly agreed to by the Government of Malta at the time during the privatisation of the bank just over 25 years ago when HSBC had entered the Maltese market, in my view it is more important to view things from today’s perspective.

It is natural to conclude that the price of €200 million (or €0.793 per share) represents a sizeable discount to the current market price. One of the common multiples that is used across the international banking sector to judge a bank’s valuation is the price to book multiple. The net asset value per share of HSBC Malta as at 30th June 2025 was €1.708 per share and the deal between the parties for the 70 per cent stake is 0.46 times book value.

In other words, this is a 54 per cent discount to the net asset value. While it is surely a good entry-point for the incoming investor given the majority stake and the market share of the bank across loans and deposits, one must also highlight the significant IT investment that is immediately required given the bank’s dependency on HSBC Group systems.

Moreover, when overhauling a core banking system and integrating many other IT systems concurrently, the migration risk is significant as was unfortunately experienced by many customers in Malta over recent months with a specific credit institution.

Several initial comments on social media clearly indicate another very important risk that must not be underestimated which is the attrition or loss of business as some customers may prefer to bank with other institutions in Malta in view of the upcoming change in the identity of the majority shareholder in HSBC Malta. In fact, it is of utmost importance for HSBC Malta shareholders and financial analysts to track movements in deposits and loans in the coming reporting periods to gauge the level of attrition.

As such, while it is obvious to state that the price of €0.793 agreed between CrediaBank and HSBC Continental Europe is low (without also knowing what other bidders may have been prepared to pay), these factors also need to be factored into the equation when passing one’s judgement.

The reality is that Malta is a very small market indeed and due to a change in strategy at HSBC Group level some years ago, it was evident to most industry observers that they were keen to exit the Maltese banking sector like they did in many other countries over recent years. As such, there was a seller eager to dispose of their stake at a price that was in all honesty extremely immaterial to them given the overall size of the HSBC Group. This is the reality despite the belief from many exponents that Malta could easily attract other top-tier banks to replace HSBC and have numerous bidders competing against each other for the majority stake of Malta’s second largest bank.

Although investors may be disappointed at the price of €0.793 agreed between the two independent parties, they should be satisfied though that CrediaBank agreed to establish and announce an equitable price of €1.44 for the eventual mandatory bid that will take place after the block trade of the 70 per cent stake takes place in due course.

The legal interpretation of the Capital Markets Rules of the MFSA on takeovers could have also permitted that the buyer offers the same price of €0.793 to all minority shareholders as was being advocated clearly in certain sections of the media prior to the announcement of 16th September.

Instead, in what I describe as a ‘genius move’, CrediaBank gave minority shareholders the comfort of an established potential exit route coupled with the receipt of dividends from HSBC Malta on a more regular basis (quarterly) which avoids unnecessary speculation and anxiety for an extended period of time until all regulatory hurdles are overcome.

While the price to book multiple of the block trade for the 70 per cent stake is 0.46 times, the equitable price of €1.44 at which minority shareholders may wish to exit next year is equivalent to 0.85 times the book value. Incidentally, this is exactly in line with the price to book multiple of Bank of Valletta plc based on the current share price and above the multiple of other banks such as APS Bank plc at 0.66 times and Lombard Bank Malta plc at 0.50 times.

Time will tell whether a bank with a lower credit rating operating under a new brand will transmit the right dose of energy to win back market share that was lost in recent years. Therefore, one needs to judge this prospective new majority shareholder on the effectiveness of their strategy to expand the bank’s services and profitability not only for the benefit of the thousands of minority shareholders but also on the wider Maltese economy.

It is still far too early to draw such conclusions, and one can only start to monitor this progress in the first half of 2027 given the indication that the change of ownership is aiming to be concluded by the end of 2026. Meanwhile, the foundations are strong given the risk-averse business model of HSBC Malta in recent years and its current positioning in the market.

In the interim period during the transitional phase from one shareholder to the next, it is important for industry observes and shareholders of the three largest retail banks to track deposit flows across the sector as well as movements in the loan books when these report their figures on a quarterly basis in the coming reporting periods.

Undoubtedly, this is a very interesting time for the banking sector in particular and also the Maltese capital market.

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