HSBC on Monday said it is acquiring the UK subsidiary of Silicon Valley Bank for 1 pound. HSBC CEO Noel Quinn said the acquisition makes excellent strategic sense for our business in the UK. The UK government also said deposits will be protected with no taxpayer support.
“This morning, the Government and the Bank of England facilitated a private sale of Silicon Valley Bank UK to HSBC. Deposits will be protected, with no taxpayer support. I said yesterday that we would look after our tech sector, and we have worked urgently to deliver that promise,” British finance minister Jeremy Hunt tweeted on Monday.
The move by HSBC comes after US authorities moved to shore up deposits and stem any wider fallout from the sudden collapse of its parent, tech start-up lender Silicon Valley Bank. As of March 10, Silicon Valley Bank UK Limited had loans of around 5.5 billion pounds and deposits of around 6.7 billion pounds, HSBC said.
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.”
HSBC said SVB UK’s tangible equity is expected to be around 1.4 billion pounds. The transaction completes immediately and will be funded from existing resources.
The collapse of Silicon Valley Bank, also know as SVB, is being termed as the biggest bank failure since the crisis at Washington Mutual in 2008 or the global financial crisis. This was the 16th biggest lender in the US and was the go-to bank for several startups across the world.
The bank failed after clients — many of them venture capital firms and VC-backed companies that the bank had cultivated over time — began pulling out their deposits, creating a run on the bank. The SVB collapse led investors to speculate that the Fed would now hesitate to hike interest rates by a super-sized 50 basis points this month.
SVB’s regulatory filing last week showed that it has a negative cash balance of $958 million. SVB’s shares plunge 41 per cent, its biggest slump since 1998. “Despite the bank being in sound financial condition prior to March 9th, investors and depositors reacted by withdrawing $42 billion of deposits, causing a run on the bank,” said the filing.
(With Inputs From Reuters)
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