HSBC rescues British arm of stricken Silicon Valley bank

  • US officials support depositors
  • The UK deal ends a hectic weekend of talks
  • British Finance Minister: Deposits are safe

LONDON, March 13 (Reuters) – HSBC ( HSBA.L ) bought the UK unit of the biggest Silicon Valley bank for a pound on Monday, reviving a major lender to technology start-ups in Britain. Bank collapse from the financial crisis.

The move comes after U.S. authorities moved to shore up deposits and prevent any widespread contagion from the sudden collapse of its parent Silicon Valley Bank ( SIVB.O ).

The deal, one of the world’s biggest banks with $2.9 trillion in assets, will take the moribund British arm of the tech lender under its wing, ending a tense weekend of talks between the government, regulators and prospective buyers.

“HSBC is Europe’s biggest bank and SVB UK customers should be reassured by the strength, safety and security it brings them,” said Jeremy Hunt, Britain’s finance minister.

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“We faced a situation where we could see some of our most important companies — our most strategic companies — destroyed, and that would have been very dangerous,” Hunt told reporters.

Asked about HSBC’s white-knight role, Hunt said the Treasury’s priority was to avoid using British taxpayers’ money. A pound is worth $1.21.

The Bank of England said it had arranged the sale to bolster confidence in the financial system and cushion the blow to British tech companies.

It said deposits in the bank are safe as a result of the sale and the wider banking system is safe.

Britain’s blue-chip FTSE 100 shares fell 1% in early trade, falling 1.7% on Friday amid global market jitters sparked by SVB’s collapse. HSBC shares fell 1.7%.

“It looks like a good deal,” said Richard Marwood, senior fund manager at Royal London Asset Management and an HSBC investor. “SVB lacks liquidity and depositor confidence – HSBC has both in spades.”

SVB UK has been demerged from the US group, and HSBC said the assets and liabilities of the parent company were excluded from the transaction.

“This acquisition makes excellent strategic sense for our business in the UK,” HSBC CEO Noel Quinn said in a statement.

HSBC said SVB UK has about £5.5bn of debt and about £6.7bn of deposits, with the acquisition expected to close immediately.

The Bank of England said SVB UK has a total balance sheet size of around £8.8 billion.

Unlike the US, Britain has not announced broad liquidity measures for the banking system.

Dozens of listed British companies issued statements on Monday about exposure to SVB UK, seeking to reassure investors, or in some cases warn them, after news of the rescue deal was announced.

Online retail platform THG ( THG.L ), card maker Moonpig ( MOONM.L ) and Naked Wines ( WINW.L ) issued statements saying they were not exposed or expected to be affected. Diaceutics ( DXRX.L ) warned that its cash flow would suffer.

Others also explored buying the bank. The London bank submitted a formal proposal on Sunday. SoftBank-owned creditor OakNorth Bank is also weighing a bid, a person familiar with the talks told Reuters.

Abu Dhabi state-backed investment vehicle ADQ is also looking, according to media reports.

($1 = 0.8273 pounds)

Additional reporting by Sinead Cruise, Sarah Young and Kate Holden in London and Yatarisa Shabong in Bangalore; Editing by John O’Donnell, Jason Neely and Catherine Evans

Our Standards: Thomson Reuters Trust Principles.

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