Bank of Bermuda investors are set to vote on Monday for or against the sale of the Island's largest financial services organisation to multinational banking giant HSBC.

Although there has been widespread speculation that the vote will go through - with it known that a number of large shareholdings are to be voted in favour of the deal including those owned by the Bank of Bermuda Foundation (3.16 million shares) and those held by bank executives and directors including David Gutteridge with 720,757 shares - the fate of the bank remains in the hands of shareholders and the pending, but shortly expected, regulatory decision from the Bermuda Monetary Authority.

On Monday, the bank must secure a yes vote from 75 percent of one-third of the shares outstanding in order for the deal to go through. Some shares will already have been voted by proxy. Although the proxy deadline was February 1, the bank declined to say how many shares had already been cast.

Today The Royal Gazette looks at some of the pros and the cons of the proposed sale.

Pros:

- HSBC's interest touted by bank executives, Government and Bermuda's business sector as an endorsement of the Island's standing as an international business sector. The deal is called a "pivotal event in our continuing efforts to develop our country as a world class capital market" by the late Finance Minister Eugene Cox. HSBC group general manager Iain Stewart says Bermuda is seen by HSBC as a "pre-eminent offshore banking centre and blue-chip jurisdiction"

- Supporters of the sale, including the bank's management, say the $45 per share price ($1.3 billion total price, and representing a 16.3 percent premium over the Nasdaq average closing price in the previous three months) being paid out to investors in the sale "captures" the value the bank has built up over the last 114 years

- Potential for some growth of the bank, especially on the trust side with the announcement by HSBC that it would move that part of its business to the Island

- Bank executives say there is potential to capture significantly more of the business of the Island's international business sector, particularly the re/insurance sector, with HSBC's larger capital base

- Both the bank and HSBC management have said there could be a wealth of training opportunities available to Bank of Bermuda staff throughout HSBC's global network spanning 79 countries

- The Bank of Bermuda Foundation, as one of the Island's leading charitable organisations (it gave a total of $3.7 billion to Island charities in 2002), will reportedly receive the same level of financial support under HSBC as they did from the bank. Management say they cannot say whether HSBC will also allow staff to give the same amount of time to charitable work through the foundation, as it does now

- Bank of Bermuda customers will now have access to HSBC's global network giving one access to HSBC offices when travelling or relocating

- Access to HSBC mutual funds and other investments

- Key employees are given the thumbs up by HSBC, saying it wants to try and retain these top and mid-level managers. An example was HSBC's announcement that it would appoint the current head of Global Fund Services, Paul Smith, to run its fund administration business

Cons:

- The Bank of Bermuda is one of the Island's leading and oldest institutions (it was established 114 years ago), it is the Island's largest bank and the largest private sector employer, and carries great sentimental value for Bermudians. The idea of selling 'our bank' to a foreign institution does not sit well with many on the Island, precisely for those sentimental reasons

- There are also worry over the bank's sale to HSBC effectively meaning that 251,000 square feet of prime Bermuda property will now be held by a foreign institution - and that they will acquire this land without paying stamp duty, which was confirmed by Government

- Concern follows the bank saying there could be "meaningful" job cuts with up to 250 positions axed in Bermuda in the next three years, although they said the job losses would have happened even without a sale as the bank struggled to compete against other larger, more streamlined rivals. There are also fears that back office jobs could be cut by HSBC which has a history of outsourcing jobs, for example a significant number of UK jobs being cut with the establishment of call centre's in India. There are assurances that client-facing positions, including teller services, will be kept.

- Top bank executives are set to get millions in bonus payments if they meet job cut targets (150 positions) in the first year while keeping 70 percent of staff defined as 'key'

- Staff morale knocked due to job uncertainty and executive bonus (see above)

- Some investors cry foul over the bank being sold for $45 per share. They say the price does not represent fair value and argue the bank failed to promote itself with foreign investors after the secondary listing on the Nasdaq, which they said could have pushed the share price into the $50 range.The bank backs the price with a fairness opinion from Merrill Lynch (for which it will pay out $10.8 million should the sale be agreed), but critics cite a possible conflict of interest between ML and HSBC. HSBC refutes any close association with the investment firm

- Investors lose what has been a long-standing investment for many in a local and well-known business, including the loss of the bank's quarterly dividend

- Some fear the Bank of Bermuda will lose its identity. HSBC pledges to keep the bank's name and Bermudian management and board intact. But the bank's name will be used in tandem with the HSBC hexagon logo, and the guarantee for continued use of the Bank of Bermuda name is only given for five years

- The Bermuda Stock Exchange Index sees its daily volume of trading fall off significantly after the bank - historically the company that saw the largest volume of daily trading announces its sale. Trading continues on the Nasdaq but with the exception of a day's trading virtually ceases to see any activity on the BSX

- Questions and fears over the inflationary impact the sale could have, with an estimate of $900 million or more of the bank's stock being held by local residents, were Bermuda shareholders to spend (real estate, luxury items) a significant portion of the sale's proceeds rather than reinvesting it. Some also fear the bubble effect it could have if those same investors put their money into local stock, leading to over-valuation

- The Bank of Bermuda, which has been able to grow itself into a global bank including a leading funds administration business, will see its global operations absorbed into HSBC's network. After the sale it will no longer be global (with $11.8 billion in assets under administration and 3,000 staff throughout its offices), but effectively be a branch of the world's second largest bank by market capital. Staff numbers, taking into account the 250 job cuts, could drop from its current force of 1,183 employees in Bermuda to below 1,000.