The HSBC bank, the largest in Europe, bought the British subsidiary of Silicon Valley Bank on Monday for a symbolic price of one pound, thus rescuing a key player for emerging technology companies in the United Kingdom and helping to curb the consequences of the largest bank crash since the 2008 financial crisis.
In a statement sent to the Hong Kong Stock Exchange, where it is listed, HSBC estimates the tangible capital of the SVB’s British subsidiary at around 1,400 million pounds (1,694 million dollars, 1,581 million dollars).
The operation comes after US authorities moved to prop up deposits and stem any broader contagion from the sudden failure of its parent, Silicon Valley Bank.
The deal, which sees HSBC, one of the world’s largest banks with assets worth $2.9 trillion, take over the UK arm of the tech sector bank, ends frantic talks over the weekend. the week between the UK government, regulators and potential buyers.
“HSBC is the largest bank in Europe, SVB UK customers should take comfort in the strength, security and protection it provides them,” said UK Chancellor of the Exchequer, Jeremy Hunt.
“We were faced with a situation where we could have seen some of our most important companies – our most strategic companies – disappear, that would have been extremely dangerous,” Hunt told reporters.
Asked about HSBC’s “white knight” role, Hunt said the Finance Ministry’s priority had been to avoid the use of British taxpayers’ money. One pound, the symbolic price of the operation, is worth $1.21.
The Bank of England said it arranged the sale to bolster confidence in the financial system and minimize the fallout for British technology companies.
The monetary institution said that deposits in the bank are safe as a result of the sale, adding that the banking system in general is safe.
Harriett Baldwin MP, the head of the Treasury Select Committee, welcomed the sale agreement as the “best possible outcome in these difficult circumstances.”
“Thank you to all who have worked tirelessly to achieve this. I look forward to the opportunity to ask questions in the UK Parliament later on,” Baldwin tweeted.
Britain’s FTSE 100 index was down 1% in early trading on Monday, after falling 1.7% on Friday as global markets turmoil sparked by the SVB bankruptcy. HSBC shares were down 1.7%.
“On the face of it, it looks like a good deal,” said Richard Marwood, a fund manager and investor in HSBC at Royal London Asset Management. “SVB lacked liquidity and depositor confidence; HSBC has both in spades”.
SVB UK is separate from the US group. HSBC said the assets and liabilities of the parent company were excluded from the transaction.
“This acquisition makes excellent strategic sense for our UK business,” HSBC CEO Noel Quinn said in a statement.
SVB UK has loans of about 5.5 billion pounds and deposits of about 6.7 billion pounds, HSBC said, adding that the acquisition has been completed immediately.
According to the Bank of England, SVB UK has a total balance sheet of about £8.8bn.
Unlike the United States, the United Kingdom has not announced broader liquidity measures for its banking system.
Dozens of publicly traded British companies issued statements on Monday about their exposure to SVB UK, trying to reassure investors, or in some cases warn them, just as news of the bailout deal broke.
THG, an online retail platform, card maker Moonpig and Naked Wines issued statements saying they are not exposed or expect to be affected by the situation. Diaceutics warned that its liquidity will be affected.
Other companies had also studied the possibility of buying the bank. Bank of London said on Sunday that it had submitted a formal proposal. OakNorth Bank, owned by SoftBank, was also weighing an offer, a person with knowledge of the talks told Reuters.
