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HSBC Takes Over Silicon Valley Bank UK In Rescue Deal

HSBC Holdings Plc, a swiss private bank, has acquired Silicon Valley Bank UK Limited (SVB UK) for £1 ($1.2)

SBV UK is a subsidiary of Silicon Valley Bank, a financial institution that specialises in lending to technology companies in the U.S.

On Friday, the bank was shut down by the Federal Deposit Insurance Corporation (FDIC) after experiencing a loss of $1.8 billion.

SVB said the money was lost to the sale of treasuries and securities, thereby leading to a bank run without customers getting a clear understanding of how the loss would affect them.

A bank run occurs when a large number of customers of a bank or other financial institution withdraw their deposits simultaneously over concerns about the bank’s solvency.

A few days following the collapse, HSBC in a statement on Monday said it has acquired the UK arm of SBV.

It said the move was to strategically strengthen its banking franchise in the UK.

“As at 10 March 2023, SVB UK had loans of around £5.5 billion and deposits of around £6.7 billion. For the financial year ending 31 December 2022, SVB UK recorded a profit before tax of £88 million,” the statement reads.

“SVB UK’s tangible equity is expected to be around £1.4 billion. The 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. The transaction completes immediately. The acquisition will be funded from existing resources.”

Further speaking on the acquisition, Noel Quinn, chief executive officer (CEO) of HSBC Group, said the bank would serve as a lifesaver to tech firms, adding that customers are welcome to continue enjoying its services.

“This acquisition makes excellent strategic sense for our business in the UK. It strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life-science sectors, in the UK and internationally, ” Quinn said.

“We welcome SVB UK’s customers to HSBC and look forward to helping them grow in the UK and around the world. SVB UK customers can continue to bank as usual, safe in the knowledge that their deposits are backed by the strength, safety and security of HSBC. We warmly welcome SVB UK colleagues to HSBC, we are excited to start working with them.”

In the statement, HSBC said it would update shareholders on the acquisition in its first quarter (Q1) 2023 results on  May 2, 2023.

Source: cable



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