The Silicon Valley Bank (SVB) logo is seen through a rain-covered window.
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LONDON — HSBC announced a deal on Monday to buy the UK subsidiary of collapsed US tech startup lender Silicon Valley Bank, following overnight talks.
HSBC confirmed that its ring-fenced UK subsidiary, HSBC UK Bank, had agreed to acquire SVB UK for £1 ($1.21). The assets and liabilities of SVB UK’s parent company are excluded from the transaction.
The acquisition “strengthens our commercial banking franchise and enhances our ability to serve innovative and high-growth businesses, including in the technology and life sciences sectors, in the UK and internationally,” said Noel Quinn, CEO of the HSBC Group.
“SVB UK customers can continue to bank, knowing that their deposits are backed by the strength, safety and security of HSBC.”
As of Friday, SVB UK had loans of around £5.5bn and deposits of around £6.7bn, with £88m in pre-tax annual profits in 2022, HSBC stressed in Monday’s statement. The bank expects SVB UK’s tangible equity to be around £1.4bn, but added that “the final calculation of profits arising from the acquisition will be provided in due course.”
The sale, facilitated by the Bank of England in consultation with the UK Treasury, will protect the deposits of SVB UK customers, the Treasury said in a statement.
Shares of HSBC fell 3.4% at around 9.30am London time following the announcement of the transaction.
UK Chancellor of the Exchequer Jeremy Hunt stressed that the deal “ensures customer deposits are protected and can bank normally, without taxpayer support”.
“The UK technology sector is truly world leading and hugely important to the UK economy supporting hundreds of thousands of jobs,” he added.
Hunt had said on Sunday that the UK government and the Bank of England were working to “avoid or minimize” any potential damage from SVB’s UK arm.
At the same time, US regulators on Sunday approved plans to kick back savers and financial institutions associated with US parent company SVB.
The U.S. Treasury Department has designated both the SVB and the New York branch signature bankwhich closed on Sunday over similar contagion fears as systemic risks, allowing it to dissolve both institutions in a way that protects depositors.
‘Big sigh of relief’ for UK tech startups
Toby Mather, CEO and co-founder of start-up children’s education platform Lingumi, has been a customer of SVB for seven years and deposited 85% of the company’s money with the stricken lender.
He told CNBC on Monday that the acquisition of HSBC caused a “great sigh of relief” among British startups.
“I think I speak on behalf of UK startups when we say that this is a huge relief and that we can look our teams in the eye at 9am during our all-hands talks, which were going to get pretty nerve-wracking this morning. And say we’re not will only be able to earn the next payroll, but that we can just keep going, keep innovating, do our research and development and build for the future of UK technology growth,” he said.
“HSBC is a great result…for the bank to go to a really big household name with a hundreds of years of history I think it’s one of the best results we could have had to feel like we’re now at the new SVB, which has been such an important partner to the startup ecosystem for decades, here and in the US, so we’re confident.”
A large number of potential buyers had put forward proposals to buy SVB UK since it filed for bankruptcy from its US parent company on Friday amid widespread concern over the immediate future of many UK tech and life sciences startups.
The Bank of London said a consortium of private equity firms it led had also submitted a formal proposal to the UK Treasury and the Bank of England’s Prudential Regulation Authority.
Bank of London CEO Anthony Watson said SVB “cannot fail given the vital community it serves.”
“This is a unique opportunity to ensure that the UK has a more diversified banking sector, while enabling continuity of service to SVB’s UK customer base. It would be very disappointing at this point if this led to a further consolidation of the power of the big banks.”
The Bank of England confirmed that no other UK banks are “directly materially affected by these actions, or by the resolution of SVBUK’s US parent bank”, adding that the wider UK banking system remains “safe, sound and well capitalised”.