The agreement announced last week to resolve the dispute over terminal benefits at HSBC Bank Malta closes one chapter, but opens a far more troubling question: Why are Maltese shareholders being asked to pay for HSBC Continental Europe’s exit?
HSBC Malta’s company announcement last Tuesday, 23 December, confirming that an agreement had been reached between the Malta Union of Bank Employees (MUBE) and HSBC Bank Malta, was at first glance welcome news. It brought to a close a dispute over the payment of terminal benefits arising from the sale of the Maltese bank by HSBC Continental Europe to Greece’s Credia Bank.
The agreement itself is not in dispute. HSBC employees were plainly correct in maintaining that the collective agreement entitled them to terminal benefits in cases of a “transfer of business, take-over or similar”. On that point, the matter should never have been contentious.
What is far more troubling is the announcement’s disclosure that one third of the €30 million terminal benefits bill – some €10 million – is to be borne by HSBC Bank Malta itself. This apportionment is both inequitable and, at best, legally questionable.
HSBC Bank Malta is the object/target of the sale, not the seller. The obligation to meet terminal benefits arises directly from a transaction initiated, negotiated and executed by HSBC Continental Europe, which was determined to exit the Maltese banking market. The terminal benefits are therefore a cost consequential to that sale and should be borne in their entirety by the vendor, not by the entity sold.
HSBC Bank Malta derived no benefit from the transaction. On the contrary, it suffered a marked diminution in reputation and standing after being sold to Credia Bank, the sole European bidder, which is rated six notches below HSBC Malta by Moody’s, Fitch and Standard & Poor’s.
Transferring €10 million of this cost onto the Maltese bank is therefore not merely inappropriate; it is highly doubtful that it is lawful. The payment lacks legal consideration for HSBC Bank Malta and borders on misappropriation and oppression of the minority.
This cost-shifting appears to be little more than a device by HSBC Continental Europe to offload its own obligations. Maltese shareholders are, in effect, being required to subsidise the vendor to the tune of €10 million.
This is particularly striking given the terms of the sale itself: HSBC Continental Europe sold the Maltese bank at a price-earnings ratio of less than two years’ after-tax profits, at €0.793 per share – a 45% discount to the market price of €1.44, and a 54% discount to the net asset value of €1.71 per share. Having accepted such terms, the vendor now appears unwilling to absorb the full costs of its own exit.
Historical precedent underlines the anomaly. When Barclays sold its Maltese operations in 1974 and paid substantial terminal benefits, those costs were borne by Barclays in London rather than passed on to Mid-Med Bank. One can readily imagine the reaction of Dom Mintoff had any attempt been made to saddle the Maltese bank with such liabilities.
The financial consequences are material. Of the €30 million payout, €10 million will effectively be borne by Maltese minority shareholders, translating into some €6.5 million in foregone after-tax dividends.
The Maltese State will also lose an estimated €3.5 million in tax revenue – a leakage that appears to have elicited little concern from the finance minister, who has endorsed the transaction on the basis that Credia Bank “ticks all the boxes”.
Against this backdrop, it is perhaps unsurprising that HSBC’s chief executive, Geoffrey Fichte, who only months before the September 2024 announcement had insisted that HSBC was in Malta “for the long haul”, appeared so visibly content at the signing of the agreement with MUBE.
Even if the €10 million charge were imposed after completion of the sale, it would remain unacceptable. The burden would still fall on Maltese shareholders and Maltese Revenue.
If Credia Bank has, as is believed, agreed to shoulder part of the terminal benefits cost, that cost should be reflected in the purchase price and absorbed through the Greek bank’s own profit and loss account, not transferred to the Maltese subsidiary.
Paul Bonello is a financial analyst and stockbroker.