13th Mar 2023 17:23
(Alliance News) - HSBC Holdings PLC on Monday confirmed it has bought the UK arm of the failed US lender Silicon Valley Bank.
The Asia-focused lender said its ring-fenced UK subsidiary, HSBC UK Bank PLC has acquired Silicon Valley Bank UK Ltd, for the nominal price of GBP1.
On Friday, SVB UK's Californian parent company collapsed, with US regulators seizing its assets. The Bank of England then ordered its UK arm into insolvency on Sunday night.
A number of buyers were said to be considering the acquisition of SVB UK, with Sky News reporting that JPMorgan Chase & Co also was exploring the possibility.
Victoria Scholar, head of investment at interactive investor, said HSBC's acquisition of SVB UK would be a "welcomed development" for its depositors and the wider banking system.
"It means that SVB UK will avoid insolvency proceedings and its customers will be able to access deposits and banking services as normal from today. It will be interesting to see whether the start-up friendly style of lending offered by SVB and not the larger more traditional banking behemoths, will continue to be possible under the HSBC umbrella," she said.
Russ Mould, investment director at AJ Bell, dubbed HSBC a "white knight" for buying of the UK arm but warned that failures in the financial sector are "often revealing of sensitivities to which investors had previously not given a huge amount of thought".
"SVB's sudden collapse was a reminder that many banks are sitting on large unrealised losses in their bond portfolios," he said, though he added that as most big banks don't have the liquidity problems SVB does, this does not look like "anything on a par with the credit crunch in 2007."
According to HSBC, as of Friday, SVB UK had loans of around GBP5.5 billion, with deposits of around GBP6.7 billion. Its tangible equity is expected to be around GBP1.4 billion.
"Final calculation of the gain arising from the acquisition will be provided in due course," HSBC said.
The bank confirmed that any assets and liabilities of SVB UK's parent company were excluded from the transaction.
"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, said Chief Executive Officer Noel Quinn.
Shore Capital Analyst Gary Greenwood said the acquisition represented a "good solution for all."
"HSBC gains access to new customers in a fast-growing part of the market on attractive financial terms. Depositors will presumably be protected on the basis they are now part of a much larger and stable bank, which should provide comfort and access to much needed funds. Finally, this removes a headache for the UK regulator, demonstrating its ability to execute a swift resolution and so removing further risks to financial stability," Greenwood explained.
Nonetheless, HSBC closed 4.1% lower at 568.60 pence on Monday in London.
Hargreaves Lansdown's Susannah Streeter explained that shareholders were still "highly uncertain about the implications of the takeover given the concern surrounding the tech sector right now and the losses which had mounted up for its bond portfolio."
"HSBC shareholders may have some concerns about the bank snapping up assets which have been under such a cloud of uncertainty, particularly the exposure to bonds."
Over the past 12-months, the stock is 16% higher.
By Heather Rydings, Alliance News senior economics reporter
Comments and questions to [email protected]
Copyright 2023 Alliance News Ltd. All Rights Reserved.
Related Shares:
HSBC Holdings