HSBC has today announced that they have bought the UK arm of Silicon Valley Bank for a symbolic one pound, rescuing a key lender for technology start-ups in Britain.
The deal, which sees one of the world’s biggest banks, with $2.9 trillion of assets, take the doomed British arm of the tech lender under its wing, brought to an end frantic weekend talks between the government, regulators, and prospective buyers.
The rescue of SVB UK was welcomed by British government ministers, regulators and technology start-ups, who said customers would be able to bank as normal.
A big bail out
“HSBC is Europe’s largest bank, and SVB UK customers should feel reassured by the strength, safety and security that brings them,” Britain’s finance minister Jeremy Hunt said.
“We were faced with a situation where we could have seen some of our most important companies – our most strategic companies – wiped out, and that would have been extremely dangerous,” Hunt told reporters.
Asked about HSBC’s white-knight role, Hunt said his priority had been to avoid using British taxpayers’ money. One pound is worth $1.21.
The Bank of England said it had organised the sale to underpin confidence in the financial system and minimise any fallout for British technology firms.
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It said deposits at the bank were safe as a result of the sale, and that the wider banking system was safe.
A billion dollar balance sheet
“On the face of it appears a good deal,” Richard Marwood, senior fund manager and HSBC investor at Royal London Asset Management, said. “SVB lacked liquidity and depositor confidence – HSBC has both of those in spades.”
“This acquisition makes excellent strategic sense for our business in the UK,” HSBC CEO Noel Quinn said in a statement.
SVB UK has loans of around 5.5 billion pounds and deposits of around 6.7 billion pounds, HSBC said, adding the takeover completes immediately.
The Bank of England said SVB UK had a total balance sheet size of around 8.8 billion pounds.
Unlike the United States, Britain has not announced broader liquidity measures for the banking system.
Startups seeking reassurance
Dozens of listed British companies issued statements on Monday about their exposure to SVB UK, seeking to reassure investors – or in some cases warn them – just as news of the rescue deal was announced.
Industry bodies representing start-ups welcomed the takeover deal for shielding them from financial turmoil, including the biotech sector where about 40% of companies banked with SVB UK.
“[We] knew that this was absolutely crucial for our sector and companies would be going down this morning if there wasn’t a solution,” Steve Bates, chief executive of Britain’s BioIndustry Association told Reuters.
Other potential buyers for SVB UK had included Bank of London, which said on Sunday it had submitted a formal proposal. SoftBank-owned lender OakNorth Bank also considered bidding, a person with knowledge of the talks told Reuters.
Source: Reuters
