HSBC Holdings is set to buy the UK arm of Silicon Valley Bank, the culmination of a frantic weekend where ministers and bankers explored various ways to avert the SVB unit’s collapse.
The London-listed lender’s “ring-fenced subsidiary, HSBC UK Bank plc, is acquiring Silicon Valley Bank UK Limited (SVB UK) for £1,” HSBC said in a statement Monday. The deal completes immediately and will be funded from existing resources.
“This acquisition makes excellent strategic sense for our business in the UK,” Chief Executive Officer Noel Quinn said in the statement. “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.”
The Bank of England said in a statement Monday that “all depositors’ money with SVB UK is safe and secure as a result of this transaction. The central bank said all SVB services “will continue to operate as normal and customers should not notice any changes,” and “no other UK banks are directly materially affected by these actions.”
SVB UK staff remain employed and the lender continues to be authorized by UK regulators, the BOE also said in its statement.
“This represents a good solution for all,” Shore Capital analyst Gary Greenwood said in a note, noting the impact on HSBC’s forecasts is likely to be immaterial.
SVB financials
SVB’s UK unit had loans of around £5.5 billion ($6.7 billion) and deposits of around £6.7 billion as of March 10, according to the HSBC statement. In 2022, SVB UK recorded a profit before tax of £88 million and its tangible equity is expected to be around £1.4 billion.
A final calculation of the gain arising from the acquisition will be provided in due course, HSBC said. The assets and liabilities of the parent companies of SVB UK are excluded from the transaction.
The acquisition comes as HSBC prunes some of its global footprint. It sold its Canadian arm in November, and disposed of its French and US retail operations in 2021. Quinn said at the time of the Canada sale that that the money raised from the transaction would provide it with financial muscle to “invest in growing our core businesses,” in addition to potentially funding dividends and buybacks.
Ministers and officials had spent the weekend drawing up plans to ringfence the UK’s technology and life sciences industries, following warnings that they would be crippled without intervention.
Though small compared to the UK’s largest banks, SVB has an outsized role in the world of startups, describing itself as “the go-to banking partner for founders, entrepreneurs and investors.”
A host of lenders were mooted as possible buyers. Chancellor of the Exchequer Jeremy Hunt said SVB’s depositors will be protected with no taxpayer support.
“We could have seen some of our most important companies, our most strategic companies wiped out, and that would’ve been very dangerous,” Hunt said.
“The Bank of England is very clear the UK banking system is extremely secure. It’s well capitalized. And I think we demonstrated that resilience by what was happening over the weekend and the fact that we were able to come up with a solution so quickly.”
Nascent clearing bank Bank of London Group Ltd. said in a statement on Sunday that it submitted a formal proposal to the Treasury, Bank of England and the board of SVB UK. Royal Group, an investment firm controlled by a top Abu Dhabi royal, and SoftBank Group Corp.-backed lender OakNorth were also among those considering a takeover, Bloomberg reported earlier Sunday.
Another plan was for lenders to take on depositors from SVB Financial Group’s British arm. Under the plan, several big banks would have taken on SVB’s depositors, offering them access to money until their funds are released from the lender.
The leaders of roughly 180 tech companies had said in an open letter to Hunt seen by Bloomberg that the loss of deposits at SVB would have the potential to cripple the sector and set the ecosystem back 20 years.
Michael Moore, head of the British Private Equity and Venture Capital Association, said on Bloomberg Television that his group did a survey of 1,000 portfolio companies and one-third banked with SVB. Of those, 40% are facing immediate difficulties, such as not making payroll, he said before the sale announcement.
The agreement comes after US financial regulators moved on Sunday to assure all depositors their money is safe following the collapse of SVB and set up a new lending program offered by the Federal Reserve with funds from the Treasury Department.
Bloomberg