HSBC UK is acquiring Silicon Valley Bank UK for a symbolic £1 after a tense weekend of frantic negotiations by the UK government, regulators and a range of other would-be suitors.
The deal is a huge relief to the UK tech sector, which was heavily exposed to the collapse of SVB and its UK arm, and will have bolstered confidence in the financial system.
HSBC said the transaction will be “completed immediately”. The acquisition will be financed from existing resources. The bank added in a statement:
“At 10 March 2023, SVB UK had loans of approximately £5.5 billion and deposits of approximately £6.7 billion. For the financial year ended 31 December 2022, SVB UK recorded a pre-tax profit of £88 million. SVB UK’s tangible equity is expected to be around £1.4 billion. The final calculation of the gains resulting from the acquisition will be provided in due course.”
The Bank of England said the money of all depositors at SVB-UK is safe, with the deal ensuring continuity of banking services.
It means that SVB UK will not go bankrupt now.
Chancellor Jeremy Hunt said: “This morning the Government and the Bank of England facilitated a private sale of Silicon Valley Bank UK to HSBC. Deposits are protected, without taxpayer support.
In a statement, the BoE said:
“SVBUK’s business will continue to be carried out as normal by SVBUK. All services will continue to operate normally and customers will not notice any changes.
Customers can continue to contact SVBUK through the usual channels and borrowers should repay all loans to SVBUK as usual. SVBUK staff will continue to be employed by SVBUK and SVBUK will remain a PRA/FCA authorized bank.
Today’s announcement supersedes the Bank’s March 10 statement that, in the absence of any meaningful further information, it intended to ask the court to place SVBUK in bank insolvency proceedings. Given the emergence of a credible buyer for SVBUK, the Bank has determined that it is appropriate to use its resolution powers to stabilize failing banks.
No other UK bank is directly materially affected by these actions, or by the resolution of SVBUK’s US parent bank. The wider UK banking system remains safe, sound and well capitalised.”
Noel Quinn, CEO of HSBC Group, welcomed Silicon Valley Bank UK customers in a statement and said they could continue banking as usual:
“This acquisition makes great strategic sense for our UK business. It strengthens our merchant banking franchise and enhances our ability to serve innovative and high-growth companies, including in the technology and life sciences sectors, in the UK and internationally.
We welcome SVB UK clients to HSBC and look forward to helping them grow in the UK and around the world. SVB UK customers can continue to bank, knowing that their deposits are backed by the strength, safety and security of HSBC. We would like to welcome SVB UK colleagues to HSBC, we are delighted to be working with them.”
Dom Hallas, executive director of Coadec, the UK non-profit that lobbies the government on behalf of tech startups, said: “The government deserves huge credit. From the top, to HM Treasury who understood and rose to the challenge, to the huge number of officials who probably haven’t slept since Friday. They saved hundreds of the UK’s most innovative companies today.”
The sale saves the UK from having to introduce the system-wide support that the US Treasury had to introduce today to protect savers. It also reduces the ‘moral hazard’ risk where failing banks and depositors assume they will always be bailed out. SVBUK shareholders are the biggest victims and will lose their assets in the bank.