HSBC has announced to buy the UK arm of the collapsed US tech startup lender Silicon Valey Bank, securing the deposits of thousands of British tech firms that hold money there. Europe’s largest bank has acquired SVB for a symbolic £1, excluding its assets and liabilities. The all-night talk for the bid was led by Prime Minister Rishi Sunak and the Bank of England. Rothschilds advised on the sale.
SVB is the largest bank to fail since the 2008 financial crisis. California banking regulators shut down the bank on Friday and appointed the Federal Deposit Insurance Corporation (FDIC) as the entity responsible for handling and selling off its assets in the future. As it tried to raise capital to compensate for the departing deposits, SVB incurred a loss of $1.8bn on Treasury bonds. The value of these bonds was negatively impacted b the rate hikes implemented by the Fed.
SVB UK has 3,300 UK clients, including start-ups,venture-backed companies and funds. If there was no buyer found, SVB UK would have been placed into solvency by the Bank of England after the collapse of its parent. Insolvency would have left customers with only depositors worth up to £85,000 (or £170,000 for joint accounts) guaranteed. The sale therefore was a preferred choice of chancellor Jeremy Hunt, to avoid significant government intervention to protect depositors.
HSBC CEO Noel Quinn said the acquisition “strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including the technology and life-science sectors, in the UK and internationally”. As of Friday 10th March, SVB UK had loans of around £5.5bn and deposits of around £6.7bn, HSBC highlighted. The bank anticipates SVB UK’s tangible equity to be around £1.4bn but added that the actual gain resulting from the deal will be disclosed at a later time.
HSBC’s London-listed shares fell by 3.4% around 9:30 am today following the announcement. The Stoxx Europe 600 banking index, which tracks 42 big EU and UK banks also experienced a 5.6% downturn in this morning's trading.
Written by: Quynh Chi Le
Sources: CNBC, CNN, Financial Times
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