- US authorities support depositors
- UK deal ends hectic weekend talks
- UK Treasury Secretary: Deposits safe
LONDON (Portal) – HSBC (HSBA.L) on Monday bought the UK arm of ailing Silicon Valley Bank for a symbolic pound, bailing out a key lender to tech start-ups in the UK and helping stem the fallout of the country’s biggest bank collapse since the financial crash.
The move comes after US authorities took action to support depositors and stem broader contagion from the sudden collapse of parent company Silicon Valley Bank (SIVB.O).
The deal, which will see one of the world’s largest banks with $2.9 trillion in assets take the tech lender’s doomed UK arm under its wing, ends frantic weekend talks between government, regulators and potential buyers.
“HSBC is Europe’s largest bank and SVB UK clients should feel reassured by the strength and security they bring,” said UK Treasury Secretary Jeremy Hunt.
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“We were faced with a situation where we could have seen some of our most important businesses — our most strategic businesses — wiped out, and that would have been extremely dangerous,” Hunt told reporters.
When asked about the role of HSBC’s white knight, Hunt said the Treasury’s priority had been to avoid using British taxpayers’ money. A pound is worth $1.21.
The Bank of England said it organized the sale to boost confidence in the financial system and minimize the fallout for British tech companies.
It said deposits at the bank were safe as a result of the sale and that the broader banking system was safe.
Britain’s blue-chip FTSE 100 stock index fell 1% in early trade after falling 1.7% on Friday amid broader global market turmoil sparked by the collapse of SVB. HSBC shares lost 1.7%.
“On the face of it, it looks like a good deal,” said Richard Marwood, senior fund manager and HSBC investor at Royal London Asset Management. “SVB lacked liquidity and depositor confidence – HSBC has both in abundance.”
SVB UK is shielded from the US group and HSBC said the parent company’s assets and liabilities were excluded from the transaction.
“This acquisition makes a lot of strategic sense for our UK business,” HSBC CEO Noel Quinn said in a statement.
SVB UK has around £5.5 billion in loans and around £6.7 billion in deposits, HSBC said, adding the takeover would close immediately.
The Bank of England said SVB UK had a total balance sheet size of around £8.8 billion.
Unlike the United States, the UK has not announced any major liquidity measures for the banking system.
Dozens of listed UK companies issued statements of their involvement in SVB UK on Monday to reassure or, in some cases, warn investors, just as news of the bailout agreement broke.
THG (THG.L), an online retail platform, map maker Moonpig (MOONM.L) and Naked Wines (WINEW.L) issued statements saying they were either not exposed or did not expect to be affected. Diaceutics (DXRX.L) had warned that its liquidity would be affected.
Others had also considered buying the bank. The Bank of London said on Sunday it had submitted a formal proposal. SoftBank-owned lender OakNorth Bank has also been weighing an offer, a person with knowledge of the talks told Portal.
According to media reports, the state-backed investment vehicle ADQ from Abu Dhabi was also looking.
($1 = 0.8273 pounds)
Additional reporting from Sinead Cruise, Sarah Young and Kate Holton in London and Yadarisa Shabong in Bengaluru; Edited by John O’Donnell, Jason Neely and Catherine Evans
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