HSBC announced that its UK subsidiary, HSBC UK Bank, is acquiring Silicon Valley Bank UK Limited (invested in Lieberis) for £1, securing the deposits of more than 3,000 customers worth £6.7 billion.
As of 10 March 2023, SVB UK had loans of around £5.5 billion, and for the financial year ending 31 December 2022, SVB UK recorded a profit before tax of £88 million.
SVB UK’s tangible equity is expected to be around £1.4 billion, says HSBC.
Further, HSBC said that the acquisition will be funded from existing resources. According to a statement from the Treasury, the sale does not involve any funds from taxpayers.
Noel Quinn, HSBC Group CEO, said, “This acquisition makes excellent strategic sense for our business in the UK. 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 UK and internationally.
The acquisition comes after the recent collapse of SVB Financial Group, which primarily serves tech startups.
“We welcome SVB UK’s customers to HSBC and look forward to helping them grow in the UK and around the world. SVB UK customers can continue to bank as usual, safe in the knowledge that their deposits are backed by the strength, safety, and security of HSBC. We warmly welcome SVB UK colleagues to HSBC, we are excited to start working with them,” adds Noel Quinn.
Posed significant risk for the UK tech firms
The collapse of Silicon Valley Bank (SVB) sent shockwaves across the global tech sector, with the British government grappling over the weekend to limit the repercussions on the UK’s SME arena. Undoubtedly, the effects of the collapse will have a significant fallout on some of the UK’s most promising companies, mitigated to some extent by HSBC’s intervention. According to experts, it was a major event in the United States, comparable to the 2008 crisis.
Additionally, it posed a significant risk to UK-based tech companies, with more than 250 considering SVB’s collapse an “existential threat.” “A number of our most promising and important technology and life science companies had their money with Silicon Valley Bank in the UK branch”, said Chancellor Jeremy Hunt.
However, an official from the Bank of England stated that the banking system in the United Kingdom is secure, stable, and adequately funded, report Sky News.
“Some of them only had bank accounts with Silicon Valley Bank UK. And so for that reason, we were faced with a situation where we could have seen some of our most important companies, our most strategic companies wiped out, and that would have been extremely dangerous,” he added.
British government ministers, regulators and tech startups welcomed the acquisition move by HSBC UK, stating that customers would be able to bank normally.
“HSBC is Europe’s largest bank, and SVB UK customers should feel reassured by the strength, safety, and security that brings them,” concludes Hunt.
Aman Behzad, founder and Managing Partner of fintech advisory Royal Park Partners:
“A great outcome today with HSBC stepping in to buy SVB UK. With 100% of deposits guaranteed, all founders with money at SVB can now go and get some rest after having their hearts in their mouths this weekend.
“Tech underpins the UK, and indeed global, economic ecosystem and it is a relief that an existential crisis has been averted. It’s inspiring to see the government working closely with the industry to find a timely solution, and safeguard the innovative businesses that are vital to our economy’s growth.
“No doubt an important test, this signals a commitment to safeguarding those building our future, and I hope to see greater support for innovators going forward.”
At the same time, Haakon Overli, General Partner of Dawn Capital commented: “On behalf of our Dawn companies with 2,400 employees in the UK, we welcome the hugely positive news of HSBC’s acquisition of the UK arm of SVB announced this morning. The scale and magnitude of the crisis which has been averted in the UK tech sector shouldn’t be underestimated.”
Further, Check Warner MBE, Founding Partner at Ada Ventures and Co-founder of Diversity VC added, “While we are delighted that the UK Government and Bank of England have moved so quickly to facilitate the sale of SVB to HSBC, the unique needs of diverse founders and the organisations that support them must not be forgotten. We call on HSBC UK to take up SVB UK’s mantle by supporting programmes and initiatives that empower diverse founders. SVB UK played a critical role – for example sponsoring and promoting the non-profits Diversity VC and Colourintech, as well as hosting targeted ecosystem events such as one on “Parents in Tech” only a few weeks ago. Diverse founders are critical to the future of the UK economy and I hope that HSBC will step into the shoes of SVB in providing much more than just banking services to the tech community.”
With inputs from Akansha Dimri