HSBC buys SVB’s UK business for just over $1
Hong Kong/London (CNN) HSBC has taken over the UK arm of the failed Silicon Valley Bank and secured the deposits of thousands of UK tech firms holding money with lenders.
If no buyer had been found, it would have been SVB UK bankruptcy of the Bank of England following the surprise collapse of its parent company in the United States. The bankruptcy would only have guaranteed customers up to £85,000 ($100,000) worth of deposits – or £170,000 ($200,000) for joint accounts.
In a statement, the central bank said it could “confirm that all depositors’ money at SVB UK is safe and secure as a result of this transaction”.
HSBC, Europe’s biggest bank, announced the £1 ($1.2) deal early Monday morning and said it would take effect “immediately”.
The acquisition is intended to “end the nightmare that thousands of tech firms have been experiencing in recent days,” Susannah Streeter, head of money and markets at investment platform Hargreaves Lansdown, said in a statement.
SVB UK is a key banking partner for the UK tech sector and the failure of the parent company prompted tech executives to figure out how to get their money out to pay staff and cover operating costs.
The rescue of HSBC is “fantastic news” for the UK startup ecosystem, said Piotr Pisarz, the CEO of Uncapped, a fintech startup that makes loans to other startups. “I think we can all relax a bit today,” he told CNN.
Uncapped launched an emergency funding program on Saturday to help companies meet payroll and other obligations. According to Pisarz, “hundreds” of applications had been received by Monday from British and US firms willing to support companies affected by the SVB collapse. Uncapped also offers longer-term bridging loans to support working capital.
Pisarz said that as a result of this event, startup companies would likely seek to diversify their banking relationships. It is an “unhealthy situation” to have around half of the UK start-up ecosystem in a single institution, he added.
In a statement, HSBC CEO Noel Quinn said the acquisition means that “SVB UK customers can continue their banking as usual, safe in the knowledge that their deposits are backed by the strength and security of HSBC.”
“This acquisition makes a lot of strategic sense for our UK business,” he said. “It strengthens our commercial banking franchise and improves our ability to serve innovative and fast-growing businesses, including in technology and life sciences, in the UK and internationally.”
Bank stocks slide
London-listed HSBC shares fell after the market opened, down 3.6% in morning trade. The Stoxx Europe 600 banking index, which tracks 42 major banks from the European Union and the United Kingdom, also suffered a slump, down 5.6%.
UK Treasury Secretary Jeremy Hunt tried to reassure investors about the health of the country’s broader banking system.
“The UK banking system is extremely safe, it’s well capitalised,” he told reporters, according to Reuters.
SVB UK had around £5.5 billion ($6.7 billion) in loans and around £6.7 billion ($8.1 billion) in deposits as of last Friday, according to HSBC’s statement. The company also reported pre-tax profit of £88 million ($106.5 million) for the most recent financial year ended December.
SVB, a lender best known for providing financing to startups, has been struggling with liquidity problems in the United States, sparking a huge bank run last week. That finally led to the collapse of the second largest financial institution in US history on Friday.
US financial regulators were quick to respond to contagion concerns over the weekend, announcing customers of the failed bank would be able to access all their money from Monday.
Authorities have also guaranteed deposits for customers at Signature Bank, a regional US lender that regulators have shut down after facing financial troubles in recent days.
— Hanna Ziady contributed reporting.