APS Bank’s major shareholders – the Archdiocese of Malta and the Diocese of Gozo – are likely to see their collective stake slashed to around 42 per cent should APS’s mooted acquisition of HSBC Bank Malta go ahead, meaning that the Church will no longer be the majority shareholder.
Though the Church would remain the largest shareholder in an expanded entity, it would have reduced more than half of its shareholding within a three-year period due to a process of dilution - in line with a decision taken by the shareholders in 2022 to significantly reduce their stake in the bank.
Just two years ago, APS was 100 per cent owned by the Church, with the Archdiocese of Malta holding an 81 per cent stake, while the Diocese of Gozo and the Cathedral Chapter owned 16 per cent and three per cent respectively.
Following an Initial Public Offering (IPO) by APS in May 2022, the Church’s collective shareholding dropped to 70 per cent, and this is envisaged to fall by a further 28 percentage points in the event of a successful acquisition.
Neither HSBC Malta nor APS have explicitly confirmed reports of a potential acquisition, but industry sources said discussions have been underway for some time even though APS stepped back in July 2023 and seven months passed before talks tentatively resumed.
During this period HSBC was free to find another buyer, and the sources said that, even now, there are several hurdles to overcome before a potential deal could become a reality – not least approval from regulatory authorities both at a Malta and European level.
The industry sources were also keen to address concerns raised about the potential deal: “Some critics opposing the acquisition have argued that it would be wrong for the Church to be heavily involved in a large bank. But the reality is that the Archdiocese of Malta and Diocese of Gozo would actually play a much smaller role than they do in APS today.
“Certain people have also claimed that a newly acquired entity would be the biggest bank in Malta. Yet again, this is wide off the mark. Bank of Valletta is, and will remain, the island’s largest bank – by some distance,” the sources said.
APS has experienced significant growth in recent years. The bank’s involvement in the Maltese economy has surged, with its loan book increasing from €806 million in 2016 to €2.9 billion by the end of 2023 – a growth rate unmatched by any other local bank.
However, APS Bank faces limitations in continuing this organic growth. Its major shareholders, the Archdiocese of Malta and the Diocese of Gozo, hold a capital base largely composed of legacy assets, such as churches and ecclesiastical treasures, which are not suitable for reinvestment in the bank.
This situation contributed to the bank’s decision to go public in 2022. The initial public offering (IPO) allowed APS Bank to diversify its shareholder base and raise the necessary capital for growth.
The €66 million share offering was heavily oversubscribed on the first day, attracting over €100 million in offers.
As APS prepares for a possible acquisition of HSBC Malta, its shareholding structure is likely to shift further. During its most recent Annual General Meeting, the bank obtained shareholder approval to increase its authorised share capital from €125 million to €250 million and to issue new shares up to a maximum of 50 per cent of its current share capital.
In a circular to shareholders prior to the AGM, APS Bank indicated its intention to "access the capital market" to strengthen its position in meeting its capital, business, and financial requirements.
These moves had been anticipated by CEO Marcel Cassar, who stated in the bank's latest annual financial statement that the bank would "be seeking to secure lower-cost funding and reinforce our capital base as we position ourselves to identify new, exciting opportunities for growth."
Last week, HSBC Malta kicked off a chain of events when it issued a company announcement informing the market that its parent company, HSBC Holdings plc, is undertaking a strategic review of its local operation, HSBC Bank Malta, in which the parent company holds a 70.03 per cent shareholding.
This was followed by an exclusive report by this newsroom identifying APS Bank plc as the local institution in talks to acquire HSBC Malta.
In recent years, HSBC has shifted its focus from Western markets, such as the US, France, Canada and Greece, to more profitable regions in Asia. This has prompted the global bank to pursue an aggressive exit strategy in several countries.
