HSBC Acquires Silicon Valley Bank UK For $1.20 As US SVB Collapses

HSBC, Europe's biggest bank, has acquired the U.K. arm of collapsed U.S. tech startup lender Silicon Valley Bank (SVB) for a symbolic £1 ($1.20), securing the assets of British tech firms.

HSBC made the announcement that its U.K. ring-fenced subsidiary, HSBC U.K. Bank, had agreed to acquire SVB U.K. via a statement Monday after a weekend of negotiations by the U.K. government, regulators and other potential suitors in the wake of SVB U.K. entering insolvency procedures Friday.

As of Friday, SVB U.K. had loans of around £5.5 billion ($6.69 billion), deposits of around £6.7 billion ($8.16 billion), and a recorded profit before tax of £88 million ($107 million) for the financial year ending Dec. 31, 2022, according to HSBC.

The bank said that the assets and liabilities of SVB U.K.'s parent company were excluded from the transaction.

"This acquisition makes excellent strategic sense for our business in the U.K.," HSBC Group CEO Noel Quinn said in a statement. "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 U.K. and internationally."

The sale will protect the deposits of SVB U.K. clients, the U.K. Treasury said in a statement.

The deal was facilitated by the U.K. government and the Bank of England and involved no taxpayer money, according to British Finance Minister Jeremy Hunt.

"Today the government and the Bank of England have facilitated a private sale of Silicon Valley Bank U.K.; this ensures customer deposits are protected and can bank as normal, with no taxpayer support," Hunt said in a statement. "I am pleased we have reached a resolution in such short order."

In a statement, the Bank of England said: "SVB U.K.'s business will continue to be operated normally by SVB U.K. All services will continue to operate as normal and customers should not notice any changes. Customers can continue to contact SVB U.K. through the usual channels and borrowers should make any loan repayments to SVB U.K. as normal. SVB U.K. staff remain employed by SVB U.K., and SVB U.K. continues to be a PRA/FCA authorized bank."

The deal comes amid the collapse of U.S. parent company SVB, which has caused sharp falls in bank share prices globally, according to a BBC report.

Japan's Topix Banks index fell by more than 7% Tuesday, while shares of Mitsubishi UFJ Financial Group, the country's largest lender by assets, were down by 8.1% in mid-day Asian trading.

Further, Spain's Santander and Germany's Commerzbank saw their share prices dive by more than 10% at one point Monday.

Tech startups that are based in China and backed by U.S. venture capitalists are also feeling the effects of the SVB collapse as owners relied on the bank's speedy account opening for startups and visibility for venture capitalists.

In the U.S., regulators have moved to protect SVB depositors, as well as implement wider measures to shore up confidence in the banking system.

The HSBC-SVB U.K. deal is a massive relief to the U.K. technology sector, as it not just saves the sector from collapsing along with SVB, but also shows the government's support to the industry.

"The Government deserves huge credit," Dom Hallas, executive director of Coadec, the U.K. nonprofit that lobbies government on behalf of tech startups, said, according to TechCrunch.

He continued, "From the very top to HM Treasury who understood the challenge and gripped it, to the huge number of civil servants who have likely not slept since Friday. They have saved hundreds of the U.K.'s most innovative companies today."