HSBC UK is looking to buy Silicon Valley Bank UK for a symbolic £1 after a tense weekend of desperate negotiations by the UK government, regulators and a string of other potential suitors.
The deal was a huge relief for the UK tech sector, which was heavily exposed to the collapse of the SVB and its UK sector, and was seen as bolstering confidence in the financial system.
HSBC said the transaction would be “immediately completed”. The acquisition will be funded from existing resources. In a statement, the bank added:
“As of 10 March 2023, SVB UK had approximately £5.5 billion in loans and approximately £6.7 billion in deposits. We recorded a pre-tax profit of £1.5bn. SVB UK’s tangible shareholders’ equity is expected to be around £1.4bn. A final calculation of the profit arising from the acquisition will be provided in due course.”
The Bank of England said all SVB-UK depositors’ funds are safe and the transaction ensures the continuity of banking services.
This means SVB UK will not go into bankruptcy.
Prime Minister Jeremy Hunt said: Deposits are protected and there is no taxpayer support.
BoE said in a statement:
“SVBUK’s business will continue to operate as normal with SVBUK. All services will continue to operate as normal and customers should not notice any changes.
Customers can continue to contact SVBUK through normal channels and borrowers should make loan repayments to SVBUK as usual. SVBUK staff continue to be employed by his SVBUK and SVBUK continues to be a PRA/FCA accredited bank.
Today’s announcement supersedes the bank’s March 10 statement that it intends to apply to the courts to place SVBUK in bank insolvency proceedings in the absence of meaningful additional information. Given the emergence of credible buyers for SVBUK, the Bank decided that it was appropriate to exercise its resolution powers to stabilize failed banks.
Other UK banks will not be directly materially affected by these measures or by the SVBUK’s US parent bank resolution. The wider UK banking system is safe, sound and well capitalized. “
HSBC Group CEO Noel Quinn issued a statement welcoming Silicon Valley Bank UK customers, saying they can continue banking as usual.
“This acquisition is of great strategic importance to our business in the UK. enhanced ability to serve the
We look forward to welcoming SVB UK clients to HSBC and helping them grow in the UK and around the world. SVB UK customers can safely continue banking as usual knowing that their deposits are backed by the strength, safety and security of his HSBC. We warmly welcome his SVB UK colleagues to his HSBC and are excited to start working with them. “
Dom Hallas, executive director of Coadec, a UK non-profit that works with governments on behalf of tech start-ups, said: From the top, to the Treasury Department who understood the challenge and seized it, and to the vast numbers of civil servants who probably haven’t slept since Friday. They have saved hundreds of the UK’s most innovative companies today. “
The sale would mean the UK would no longer have to put in place the system-wide support of the US Treasury that it was forced to put in place today to protect depositors. It also reduces the risk of “moral hazard”, assuming that failing banks and depositors will always be bailed out. The main victims are his SVBUK shareholders, who will lose their shares in the bank.
