HSBC, Europe’s largest bank by assets under management, has a new CEO – Georges Elhedery.

While the challenges facing him are many, from the navigation of fluctuating interest rates to growing geopolitical tensions between China and the West, in Malta, there is only one question the business community would put to Mr Elhedery.

“Will HSBC stay in Malta? Or will persistent rumours of a market exit finally come true under your tenure?”

Let us backtrack a bit.

Rumours about HSBC’s wavering commitment to Malta have dogged the bank for years, with a 2020 Financial Times piece stating that bank executives are exploring the sale or closure of divisions in “small, non-strategic countries” – Malta chief among them.

Geoffrey Fichte, HSBC Malta CEO since May 2023, has been at pains to dismiss such rumours, pointing to significant local investments by the bank.

These include new €30 million headquarters – “HSBC’s largest investment in a headquarters anywhere in Europe and probably the largest investment of any company in Malta in its own headquarters” – and a €5 million upgrade of its ATM network.

“I could speak until I’m blue in the face but you just need to look at what we’re doing in Malta”, he told Times of Malta last year.

Sceptics would however point to HSBC’s diminishing footprint in the country, with the bank closing eight branches in late 2019 and another two during the pandemic. Another two were re-opened, but reportedly remained teller-less.

Meanwhile, HSBC has not shied away from exiting non-core markets – even major ones.

Over the last 10 years, the bank has sold its Brazilian and Russian operations, exited its US mass-market retail banking business, and sold its French and Canadian retail banking businesses.

All of those were far larger than Malta, but a closer look shows that most were in a very different situation to the Maltese division.

In the USA, for example, HSBC posted a net loss in 2020.

Upon review, the bank decided to sell about two-thirds of its 150 US branches, convert between 20 and 25 locations into international wealth centres, and close another 35 to 40 branches, in a bid to focus on areas where HSBC had competitive strengths, such as international banking and wealth management.

In France, HSBC was also simply not profitable, posting a €288 million pre-tax loss in its last year of retail operations. At the time, the bank said it found it difficult to compete against larger domestic players.

The bank trotted out the same argument when it came to its Canada retail business, saying that it lacked the scale to compete effectively with larger players. And while the Canadian operation was profitable – unlike the ones in France and the USA – HSBC nonetheless decided to exit the market as part of a broader strategy to streamline operations and focus on markets where it has a stronger competitive advantage.

In all three cases – the USA, France and Canada – the HSBC leadership acknowledged prior to the fact that the business was up for sale, and ultimately, all three market exits were the result of a wider strategic review that was part of a planned restructuring rather than a surprise move.

Importantly, in all three countries, the bank was a relatively small player in the retail banking segment.

In Malta, on the other hand, HSBC is the country’s second-largest bank and remains very competitive.

While its branch footprint has been in decline, the high interest rate environment drove it to post record results for 2023, with profit before tax surging 141 per cent to €134 million.

It has close to €3.1 billion in outstanding loans and advances, against customer deposits of €6.1 billion – the second highest in the country.

But as HSBC cuts down on its global presence to focus on fast-growing Asia, questions will likely persist over its commitment to small economies like Malta, despite the bank’s multi-million efforts to prove otherwise.

And that is where Mr Elhedery re-enters the picture.

Aged 50, he was born in Beirut, Lebanon, and educated in Paris, France. He has been employed by HSBC since the early 2000s, initially as a rates trader, moving up the ranks until he took over the Middle East, North Africa and Turkey region, and eventually becoming co-head of HSBC’s Global Banking and Markets business.

He has served as HSBC’s chief financial officer since January 2023.

Mr Elhedery has been labelled by many observers as “the obvious choice” – he took a six-month sabbatical in 2022, an opportunity to learn Mandarin in a subtle but strong nod to his ambition for the top role at the bank – which is dual-listed in London and Hong Kong.

Outgoing CEO Noel Quinn said he is “delighted” to hand over the stewardship of the bank to Mr Elhedery.

“He understands the importance of putting our clients’ needs first, our heritage and our unique position in the world,” wrote Mr Quinn on LinkedIn.

Mr Elhedery will now have to face the same pressures that led HSBC to decrease its global footprint under Mr Quinn.

Some HSBC Group shareholders, led by China-based Ping An Asset Management, have been pushing the bank to focus on its growing Asia business and shed its operations in other markets – effectively calling for the bank to be broken up to free up capital for investment in the most profitable markets.

Ping An first surpassed a five per cent stake in HSBC in December 2017, and further increased its shareholding in subsequent years to become the bank’s single largest shareholder, a position it retained until May 2024, when it slightly reduced its shareholding to 7.98 per cent.

The pressure piled on Mr Elhedery by Ping An and shareholders of a similar Asia focus will likely be at the core of any future decision on the bank’s Maltese business.

Whether the boost to the Maltese division’s profitability seen last year will be a factor in any decisions made at the bank’s global boardroom – or perhaps simply serve as a carrot for any prospective buyer – remains to be seen.