HSBC pays £1 to rescue UK arm of Silicon Valley Bank after all-night talks

LONDON — HSBC on Monday announced a deal to buy the U.K. subsidiary of collapsed U.S. tech startup lender Silicon Valley Bank, following all-night talks.

HSBC confirmed that its U.K. ring-fenced subsidiary, HSBC UK Bank, had agreed to acquire SVB U.K. for £1 ($1.21). The assets and liabilities of SVB U.K.’s parent company are excluded from the transaction.

The acquisition “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 U.K. and internationally,” said HSBC Group CEO Noel Quinn.

“SVB U.K. customers can continue to bank as usual, safe in the knowledge that their deposits are backed by the strength, safety and security of HSBC.”

As of Friday, SVB U.K. had loans of around £5.5 billion and deposits of around £6.7 billion, with £88 million of full-year profit before tax in 2022, HSBC highlighted in the Monday statement. The bank expects SVB U.K.’s tangible equity to be around £1.4 billion, but added that “final calculation of the gain arising from the acquisition will be provided in due course.”

The sale, facilitated by the Bank of England in consultation with the U.K. Treasury, will protect the deposits of SVB U.K. clients, the Treasury said in a statement.

Shares of HSBC were down 3.4% around 9:30 a.m. London time, following the announcement of the transaction.

British Finance Minister Jeremy Hunt stressed that the deal “ensures customer deposits are protected and can bank as normal, with no taxpayer support.”

“The U.K.’s tech sector is genuinely world-leading and of huge importance to the British economy, supporting hundreds of thousands of jobs,” he added.

Hunt had on Sunday said that the U.K. administration and the Bank of England were working to “avoid or minimize” potential damage resulting from the U.K. branch of SVB.

In parallel, U.S. regulators on Sunday approved plans to backstop depositors and financial institutions linked with U.S. parent company SVB.

The U.S. Treasury Department designated both SVB and New York-based Signature Bank, which was shuttered Sunday over similar contagion fears, as systemic risks, enabling it to unwind both institutions in a way that protects depositors.

‘Big sigh of relief’ for UK tech startups

Toby Mather, CEO and co-founder of startup children’s education platform Lingumi, has been a customer of SVB for the last seven years, depositing 85% of the company’s cash with the stricken lender.

He told CNBC on Monday that the HSBC acquisition caused a “big sigh of relief” for British startups.

“I think I speak on behalf of UK startups when we say this is a huge relief and we can look our teams in the eye at 9 o’clock in our all-hands calls, which were going to be pretty nerve-racking this morning and say, not only will we be able to make the next payroll, but we can continue business as usual, continue innovating, doing our research and development and building the future of U.K. technology growth,” he said.

“HSBC is a great outcome … for the bank to go to a really large household name that has hundreds of years of history, I think is one of the best outcomes we could have had to feel like we can now stay with the new SVB, which has been such an important partner to the startup ecosystem, here and in the U.S. for decades now, so we feel confident.”

Bids in

A host of potential buyers had submitted proposals to purchase SVB U.K. since the Friday failure of its U.S. parent company, amid widespread concern over the immediate futures of many British tech and life sciences startups.

The Bank of London said that a consortium of private equity firms that it led had also submitted a formal proposal to the U.K. Treasury and the Prudential Regulation Authority at the Bank of England.

Bank of London CEO Anthony Watson said SVB “cannot be allowed to fail given the vital community it serves.”

“This is a unique opportunity to ensure the U.K. has a more diversified banking sector, whilst allowing continuity of service to SVB’s U.K. client base. It would be deeply disappointing for this moment to lead to further consolidation of power among big banks.”

The Bank of England confirmed that no other U.K. banks are “directly materially affected by these actions, or by the resolution of SVBUK’s U.S. parent bank,” adding that the wider British banking system remains “safe, sound and well capitalised.”