HSBC Holdings, the largest banking institution in the United Kingdom, is set to purchase Silicon Valley Bank UK Limited (SVB UK) for £1 ($1.20). Last week, Silicon Valley Bank revealed liquidity issues and balance sheet holes, prompting venture capital firms to advise investors to withdraw their funds. Unable to raise the necessary capital to stay afloat, the financial regulators of California shut down SVB.
The acquisition of SVB UK by HSBC will include loans of approximately $6.7 billion and deposits of around $8.1 billion as of March 10, 2023. SVB UK ended last year with a profit of $106 million (before tax), while its tangible equity is expected to be nearly $1.7 billion. All assets and liabilities belonging to the parent companies of SVB UK are excluded from the deal.
Noel Quinn, CEO of Britain’s biggest bank, commented that the acquisition makes excellent strategic sense for their business in the UK. He assured that SVB UK clients will be subject to maximum protection and can continue to bank as usual after the agreement. HSBC also vowed to update shareholders on the acquisition when disclosing Q1 results at the beginning of May.
The Bank of England also assured that the UK’s banking system was not harmed after the recent events. They stated that no other UK banks are directly, materially affected by these actions or by the resolution of SVB UK’s US parent bank, and that the wider UK banking system remains safe, sound, and well capitalized.