HSBC acquires failed SVB in UK for £1
The HSBC Holdings Plc on Monday, announced that it has acquired the Silicon Valley Bank UK Limited for £1.
In a statement released on Monday, the HSBC said that the acquisition would strengthen its operations in the UK and that the transaction “completes immediately. The acquisition will be funded from existing resources.”
HSBC Group CEO, Noel Quinn, said, “This acquisition makes excellent strategic sense for our business in the UK. It strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life- science sectors, in the UK and internationally.
“We welcome SVB UK’s customers to HSBC and look forward to helping them grow in the UK and around the world. SVB UK customers can continue to bank as usual, safe in the knowledge that their deposits are backed by the strength, safety and security of HSBC. We warmly welcome SVB UK colleagues to HSBC, we are excited to start working with them.”
The statement also revealed that “as of 10 March 2023, SVB UK had loans of around £5.5bn and deposits of around £6.7bn. For the financial year ending 31 December 2022, SVB UK recorded a profit before tax of £88m. SVB UK’s tangible equity is expected to be around £1.4bn.
“Final calculation of the gain arising from the acquisition will be provided in due course. The assets and liabilities of the parent companies of SVB UK are excluded from the transaction.”
HSBC added that it would update shareholders on the acquisition at its 1Q 2023 results on 2 May 2023.
Regulators closed SVB Financial Group and its subsidiary Silicon Valley Bank on Friday and seized its deposits in what was the largest US banking failure since the 2008 financial crisis and the second-largest ever.
The beginning of the end for SVB started on Wednesday, when it surprised investors with news that it needed to raise $2.25bn to shore up its balance sheet. According to a California regulatory filing, customers withdrew $42bn of deposits by the end of Thursday.
The US Treasury Secretary Janet Yellen on Sunday said the government wanted to avoid financial “contagion” from the implosion of the Silicon Valley Bank but ruled out a bailout of the institution.
“We want to make sure that the troubles that exist at one bank don’t create contagion to others that are sound,” Yellen said during an interview with CBS.
On Friday, US regulators pulled the plug on SVB — a key lender to US startups since the 1980s — after a run on deposits made it no longer tenable for the medium-sized bank to stay afloat on its own.
Following SVB’s disclosure on Wednesday, investors punished the banking sector in total on Thursday, but by Friday, shares in some larger banks posted gains.
However, regional lenders remained under pressure, including First Republic Bank, which slumped nearly 30 per cent in two sessions on Thursday and Friday, and Signature Bank, a cryptocurrency-exposed lender, which has lost a third of its value since Wednesday evening.
Yellen said on Sunday that the government was working with the US deposit guarantee agency, the FDIC, on a “resolution” of the situation at SVB, where approximately 96 per cent of deposits are not covered by the FDIC’s reimbursement guarantee.
“I’m sure they (the FDIC) are considering a wide range of available options that include acquisitions,” she said.
Yellen said reforms made after the 2008 financial crisis meant the government was not considering a bailout for SVB.
“During the financial crisis, there were investors and owners of systemic large banks that were bailed out and the reforms that have been put in place means that we’re not going to do that again,” she said.