HSBC Acquires Silicon Valley Bank's UK Arm For £1
HSBC on Monday announced that it had acquired the UK arm of the California-based Silicon Valley Bank (SVB) for one pound. This is the biggest development following the collapse of the SVB and the furore that followed.
In an official statement, the HSBC said, “HSBC Holdings plc announces that its UK ring-fenced subsidiary, HSBC UK Bank plc, is acquiring Silicon Valley Bank UK Limited (SVB UK) for £1.”
SVB had loans amounting to £5.5bn and deposits of around £6.7bn as of March 10, 2023. SVB UK had recorded a profit before tax of £88m for the financial year ending December 31, 2022. The statement mentioned that 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. The transaction completes immediately. The acquisition will be funded from existing resources, it read.
The HSBC also said that it will update shareholders on the acquisition at its 1Q 2023 results on May 2, 2023.
HSBC Group CEO Noel Quinn said, “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.”
“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,” he further added.
The Silicon Valley Bank crisis
On March 10, the Federal Deposit Insurance Corporation (FDIC) had said that the financial regulators have Silicon Valley Bank, the 16th largest bank in the United States.
The California Department of Financial Protection and Innovation closed SVB and named the FDIC as the receiver. The FDIC in turn created the Deposit Insurance National Bank of Santa Clara, which now holds insured deposits from SVB, a press release from the regulators mentioned.
Major relief for SVB depositors
On March 12, after getting recommendations from the boards of the FDIC and the Federal Reserve and having consulted with the president, Treasury Secretary Janet Yellen approved the actions enabling the FDIC to complete its resolution of the Silicon Valley Bank, Santa Clara, California, in such a way so as to protect all depositors, a statement mentioned.
It read, “Depositors will have access to all of their money starting Monday, March 13. No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer.”
The Federal Reserve Board on Sunday finally announced that it will make additional funding available to eligible depository institutions to help assure banks have the ability to meet the needs of all their depositors, added the statement.