Silicon Valley Bank's UK arm bought by HSBC for 1 British pound in rescue deal
- Reference: 1678717931
- News link: https://www.theregister.co.uk/2023/03/13/svb_uk_hsbc/
- Source link:
Yet its officials instead spent a dirty rainy weekend with Prime Minister Rishi Sunak, Chancellor Jeremy Hunt, senior Treasury folks and HSBC, sorting out a deal where the latter snapped it up for a quid.
The limited company's sale was private - and the price paid a token - but it took place at speed and with little friction due to "powers granted by the Banking Act 2009" born of post-crisis banking reforms, with the idea that it would prevent banking failures and associated depositor runs like those seen in the US last week that caused SVB's collapse, forcing it to sell treasuries and other assets at a loss.
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London-listed tech companies that hold money at the lender included payments SaaS outfit [2]PCI-Pal , for which it was the principal bank, and auction tech biz [3]ATG . AIG said in an update it had no "material exposure" to the collapse of SVB this morning, while PCI-Pal confirmed its deposits were safe as a result of US and UK actions. Several AIM companies including [4]Dianomi issued market updates reassuring investors.
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Potentially most affected would have been Diaceutics, a Brit tech provider to the pharma industry, which earlier [7]temporarily suspended trading on AIM but resumed trading at [8]1010 UTC this morning after earlier warnings of "material uncertainty" over its ability to service its working capital in the short term. Most of its £22.2 million ($26.8 million) in cash was in SVB UK accounts.
It wasn't just British companies that held money at the SVB UK arm. Danish reviews and rankings outfit Trustpilot [9]revealed this morning that the UK limited company was its "principal banking partner." It added, however, that its board was "confident" about Trustpilot's "liquidity position and resilience" and was encouraged by regulator and government moves on both sides of the pond.
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The [11]collapse of Silicon Valley Bank on March 10 and the appointment of the Federal Deposit Insurance Corporation as receiver has dominated tech media headlines over the past few days. Silicon Valley Bank UK, however, is actually in "reasonable financial health," meaning the deal Hunt, Sunak and co hammered out over the last 48 hours is a pretty sweet one for HSBC.
The chief executive of [12]$51.7 billion revenue HSBC, Noel Quinn, said the acquisition made "excellent strategic sense" for HSBC.
As of March 8, SVB UK had loans of around £5.5 billion ($6.7 billion) and deposits of around £6.7 billion ($8.1 billion). HSBC said in its [13]statement that the move being taken quickly represented an "emergency backstop to contain SVB contagion risk."
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HSBC said: "SVB UK's tangible equity is expected to be around £1.4bn. Final calculation of the gain arising from the acquisition will be provided in due course. The assets and liabilities of the parent companies of SVB UK are excluded from the transaction."
Meanwhile, over in the States, where the financial industry and tech sector are still reeling, its parent company's woes are being addressed by the US Federal Reserve, Treasury Department and Federal Deposit Insurance Corporation, which jointly announced emergency measures last night to "backstop banks and assure depositors in the latest move to contain contagion from the fallout of SVB." The Fed said [15]yesterday the central bank will create a new Bank Term Funding Program to safeguard institutions impacted by the collapse of SVB. US president Joe Biden said the "solution" they have come up with would ensure "taxpayer dollars are not put at risk."
[16]US government says Silicon Valley Bank depositors can get their cash on Monday
[17]Silicon Valley Bank seized by officials after imploding: How this happened and why
[18]Two tech-centric banks strike trouble, spooking markets
[19]94% of Brit tech bosses just can't get the staff these days, claims bank
Around half of US venture-backed tech and life sciences companies bank with SVB, the bank itself [20]estimates on its website . Prior to the deposit run, the company had already been affected by the current global slowdown in VC funding as risk for appetite diminishes and fear of recession increases. HSBC said it did not think the bank's turmoil indicated intrinsic stability issues in the American banking sector more generally (though it would say that; European banks were also affected in the market turmoil last week).
HSBC said in a statement: "While most of SVB's loans were technology and VC-related, most US regional and big banks have a much better diversified loan portfolio, across commercial, real estate, credit card and mortgage businesses."
The Bank of England [21]said this morning: "This action has been taken to stabilise SVBUK, ensuring the continuity of banking services, minimising disruption to the UK technology sector and supporting confidence in the financial system. The Bank and His Majesty's Treasury can confirm that all depositors' money with SVBUK is safe and secure as a result of this transaction.
"All services will continue to operate as normal and customers should not notice any changes."
As for what precipitated the Bank of England's about-face on the insolvency – which it vowed to put into action "absent any meaningful further information" – we can only speculate, but it seems to have been linked to the promise of some of the implicated British startups. Chancellor Hunt told the BBC's [22]Laura Kuenssberg that while there's no risk to the UK's financial system as a whole, "there is a serious risk to some of our most promising companies in technology and life sciences."
"These are very important companies to the UK, a very important part of our future."
It's the kind of quick action many wish had been taken on Arm, [23]acquired by SoftBank in 2016 , which incidentally – at least for now – turned down the chance to dual-list on the LSE in favor of a sole listing on [24]Nasdaq earlier this month.
Analyst Megabuyte opined that "importantly for those exposed," deposits at the UK arm of the bank can now "be able to be accessed as normal." It noted: "Several publicly listed tech companies (circa 18) reported on any SVB exposure this morning, most confirming that they had access to sufficient deposits elsewhere. Diagnostic testing solutions provider Diaceutics was the main exception, with £22.0m out of £22.2m in cash and equivalents held in SVB accounts due to the requirement of its revolving credit facility, but these funds should now be accessible following HSBC's acquisition."
Josep Alvarez-Perez, head of Bip xTech in the UK, commented: "This swift resolution to the crisis will be welcome relief for technology companies that bank with SVB and the wider sector which has spent the weekend worrying about contagion risk. The 'strong bank buys distressed bank with government backing' move is straight out of the financial crisis playbook and UK tech sector founders and investors will be hoping that this is the end of the crisis rather than the end of the beginning." ®
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[1] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2ZA9Wvyqr-mopC3XBZDbGmgAAAJM&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[2] https://www.londonstockexchange.com/news-article/PCIP/svb-update/15872216
[3] https://polaris.brighterir.com/public/auction_technology_group/news/rns/story/rnkp4nr
[4] https://polaris.brighterir.com/public/dianomi/news/rns/story/xleqd7w
[5] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZA9Wvyqr-mopC3XBZDbGmgAAAJM&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
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[7] https://otp.tools.investis.com/clients/uk/diaceutics/rns/regulatory-story.aspx?newsid=1674003&cid=2562
[8] https://otp.tools.investis.com/clients/uk/diaceutics/rns/regulatory-story.aspx?newsid=1674041&cid=2562
[9] https://polaris.brighterir.com/public/trustpilot/news/rns_widget/story/xzjmepw
[10] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44ZA9Wvyqr-mopC3XBZDbGmgAAAJM&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[11] https://www.theregister.com/2023/03/10/svb_silvergate_banking_fdic/?td=rt-3a
[12] https://www.hsbc.co.uk/wealth/insights/macro-outlook/global-event/2023-03-13/
[13] https://www.hsbc.co.uk/wealth/insights/macro-outlook/global-event/2023-03-13/
[14] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_offbeat/legal&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33ZA9Wvyqr-mopC3XBZDbGmgAAAJM&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[15] https://www.theregister.com/2023/03/13/svb_deposits_all_available_monday
[16] https://www.theregister.com/2023/03/13/svb_deposits_all_available_monday/
[17] https://www.theregister.com/2023/03/10/svb_silvergate_banking_fdic/
[18] https://www.theregister.com/2023/03/10/silicon_valley_tech_bank_troubles/
[19] https://www.theregister.com/2014/04/28/silicon_valley_bank_employment_report/
[20] https://www.svb.com/investor-solutions/corporate-venture-capital#:~:text=SVB%20Capital:%20Your%20gateway%20to%20the%20innovation%20economy&text=Through%20our%20relationships%20with%20more,to%20this%20unique%20asset%20class.
[21] https://www.bankofengland.co.uk/news/2023/march/statement-on-silicon-valley-bank
[22] https://www.bbc.co.uk/programmes/m001bv01
[23] https://www.theregister.com/2016/07/18/softbank_to_buy_arm_holdings_say_reports/
[24] https://www.theregister.com/2023/03/03/arm_nasdaq_listing/
[25] https://whitepapers.theregister.com/
Don’t get worked up about all that, it’s only a quid they’ve spent on the bailout.
This isn't a bailout, and neither the government, nurses, doctors, teachers or you have spent a penny on it.
HSBC bought the (profitable) SVB UK business for £1 - https://www.bbc.co.uk/news/business-64937251
"Silicon Valley Bank UK was in reasonable financial health when it was bought for £1 by HSBC. It had adequate capital and was making reasonable profits."
It was force-sold to HSBC to ensure the chaos of its parent bank didn't impact the significant number of tech business that bank with SVB UK.
In other words, this is "A Good Thing" - plenty other political topics for you to get your pants in a twist about.
If it was profitable
It sounds like it was sold at a loss. Show me one other business which is profitable which you can buy for £1.
This smells of corruption.
Re: If it was profitable
I assume they were taking on a lot of debts and liabilities for their £1, in addition to those profits, no?
I am not sure if tax payer money were used to facilitate this rescue operation at this time.
However I don't like that when the rich get in trouble, government drops everything and does all sort of gymnastics to help.
I take it your employer doesn't, at least with your knowledge, bank with them so your job wasn't, at least to your knowledge, in danger.
People need to understand this cost of living crisis is causing problems for everyone. We should all rally round this bank and do whatever is needed to save it for the sake of the shareholders and rich people with dumb startups whose money it holds. The same rich people that took as much as they could before it collapsed.
Seriously though who calls their bank "silicon valley bank". You are pretty much asking for trouble with that name. Anyway I'm off to invest in whatever crypto currency is being promoted on twitter. Wish me luck.
I don't think it's being saved for for shareholders. In fact the shareholders have got exactly £1 from it. That's between them.
If it went had gone various UK firms banking with it might not have been able to pay their staff or their suppliers. Some of the unpaid suppliers may then have not been able to pay their staff or suppliers. The number of people potentially affected could be quite considerable. Who knows, you might have been one of them. Are you one of those rich people?
Ask not for whom the bell tolls./It tolls for thee. How does the next line go?
The Federal Deposit Insurance Corporation received £1 for it, which they will use towards paying US customers of the bank.
"No man is an island" ... what about the Isle of Man?
A pound ? Paid too much.
They should have contacted me, I would have been extremely generous and paid 100% more !
Ah yes. So many British owned banks to choose from that, naturally, the Hong Kong Shanghai Banking corporation had to be the preferred bidder.
Do you have a problem with the name? HSBC owned by HSBC Holdings which is a British bank with a British HQ.
The most important thing was that the businesses beheld to the bank were not strangled.Not some misplaced nationalism.
I was being sarcastic, to be honest - most of the competition are at least as foreign owned as HSBC are. In retrospect, I probably should have made that more obvious.
Hong Kong Shanghai Bank Corp
Well, having dealt with (over the past 40 years or so) :- TSB, Lloyds, NatWest, Halifax, BoS, RBS, Yorkshire/Clydesdale/Virgin and probably some I have rightly forgotten about, then I'm not sure I would want a "british owned" bank to be involved in anything.
I think even The Bank of Musk could do better.
Re: Hong Kong Shanghai Bank Corp
TSB is now a Spanish owned bank. There used to be a British-owned bank called TSB, but the company formerly known as TSB Group is now called Lloyds Banking Group [company no SC095000].
Re: Hong Kong Shanghai Bank Corp
It used to be held in trust (for the savers and debtors) by the government. The government decided it could sell the bank and keep the money. Technically a breach of the trust and illegal, as the Scottish courts determined. But that's okay, because at the time the government could get the House of Lords could overrule any court decision it didn't like. They haven't been able to do that since the Supreme Court was introduced, but the current lot much prefers the law of "do what I say not why I do" and is looking at ways of removing the supremacy of the Supreme Court. And all in the name of democracy, which has come to mean anything we like and nothing you do.
I think the London and Birmingham Banking Corporation would be a more accurate name for that bank.
They moved their HQ from Hong Kong to London before Hong Kong was handed back to the Chinese.
How Simple Becomes Complicated
An apocalypse averted.
How would humanity have survived without Trustpilot?
So HSBC bagged over £1bn of equity for a quid. Nice work if you can get it. Wish I'd got in there quick and offered a fiver.
That would be the Hong Kong & Shanghai Banking Corporation. So how is that policy of not flogging next gen tech to the Chinese going, eh chaps?
Re: An apocalypse averted.
Some investors and shareholders will take a haircut. Which they can they offset against their tax liabilities. Unless they're too poor to able to do that. Their own fault for being poor!
No money for nurses, doctors, teachers, basically every member of staff who perform core functions in the UK.
But the moment a bank goes bump through mismanagement? They get all the money they need.
We've learnt nothing from 2008.