6 - 12 April 2000

HSBC silent over CCF acquisition

by David Kelleher

HSBC (Malta) is keeping mum on the effect the successful acquisition of Credit Commercial de France by HSBC will have on the local banking sector. CCF, which was bought over the weekend by HSBC in a friendly US$10bn bid, has a 21.33 per cent shareholding in Lombard Bank plc, a direct competitor to HSBC in Malta. Local analysts are now asking whether the merger will affect Lombard Bank and how the local regulatory authorities will react to developments over the coming six months.

The main question that arises is whether HSBC will maintain a minority shareholding in Lombard Bank, with which it is already competing. Secondly, does HSBC plan to either sell off its 21.33 per cent shareholding in the bank or will it increase this percentage to one of a majority shareholding?

Contacted by The Malta Business Weekly, the Chief Executive Officer of HSBC (Malta), Tom Robson, would not comment on the acquisition or what HSBC will be doing with its shareholding in Lombard Bank. "No comment," this newspaper was told.

However, analysts close to the banking sector said that there could be some changes in the banking scene over the next six months. "As we have already seen when HSBC took over Mid-Med Bank, all tracers of the latter were removed within six months. This is significant and raises a number of issues," one analyst told The Malta Business Weekly.

Will HSBC be mentioned on Lombard's letterheads and correspondence, as CCF are at present? Will HSBC be able to force a change of name? Will it try and buy out more shares and therefore take control of Lombard Bank?

"These are all questions that will be answered in the coming months, however the takeover of CCF by HSBC could create a few conflicts in the local banking sector," he added.

A source close to the Central Bank questioned whether the local regulatory authority - the Central Bank - will accept HSBC taking a majority shareholding in Lombard Bank.

"It would be odd having two separate banks, which were once competitors, now having the same majority shareholder. It is not something that is looked upon favourably abroad. With the local authorities following international standards some problems could develop in this scenario," the source said.

On the other hand, the source said, HSBC could decide to simply sell off its shareholding in Lombard Bank, thus removing any conflicts that could arise. "One has to wait for developments. It is easy to speculate on the possible outcomes but the regulator's position will surely clarify what will happen," the source said.

Credit Commercial de France acquired the shareholding in Lombard Bank on 25 February 1998. Through its Swiss holding company CCF Holding (Suisse) SA, it purchased shares previously held by Malaysian entrepreneur Robert Tan Hua Choon and also took a seat on the board of directors of Lombard Bank. The shares are estimated to have been sold at a price of Lm2.10 per share.

News of the merger between HSBC and CCF surfaced over the weekend and surprised French bankers. The deal is the most significant cross-border acquisition of a European bank to date and the first purchase of a Paris-listed bank by a foreign institution. The bid is worth 11 billion euros (US$10bn). HSBC is offering 150 euros cash, or 13 of its shares worth 160.6 euros (last Friday's figure) for each CCF share.

HSBC said the other major shareholder, Swiss Life, with 15 per cent of shares, has committed to accept its offer in exchange for shares of HSBC. HSBC said that it had also agreed to acquire, for cash, the Credit Commercial shareholdings of KBC Bancassurances/Kredietbank Luxembourg, The Taiyo Mutual Life Insurance Company, Lafarge and SMABTP - amounting in aggregate to 24.3 per cent of the French bank's share capital.

Credit Commercial's headquarters will remain in Paris and its board and management will continue to direct its affairs. Credit Commercial has 650 branches in France and has funds under management of 57 billion euros (US$55 bn), HSBC said. It is a leading foreign bank in Brazil and Egypt.

HSBC was advised by HSBC Investment Bank Plc and Goldman Sachs International, while CCF was advised by CCF Charterhouse, Rothschild & Cie. and Morgan Stanley Dean Witter.