HSBC UK Bank Acquires Silicon Valley Bank UK in Rescue Deal

• HSBC Holdings plc’s HSBC UK Bank has announced Silicon Valley Bank UK LTD acquisition.
• SVB Financial Group is in discussions for acquisition but excludes the commercial bank under US control.
• Kim Dotcom warns of significant risk in the banking sector, US Treasury actions only temporary.

HSBC Holdings plc has announced that its UK ring-fenced subsidiary, HSBC UK Bank plc, has acquired Silicon Valley Bank UK Limited (SVB UK) for a nominal consideration of £1. SVB UK had loans of approximately £5.5bn and deposits of approximately £6.7bn as of March 10, 2023. For the financial year ending December 31, 2022, SVB UK recorded a profit before tax of £88m, and its tangible equity is expected to be around £1.4bn

HSBC Group CEO, Noel Quinn added:

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.

On the other hand, sources have reported that J.P. Morgan and PNC are also in talks to acquire SVB Financial Group, but the deal would not involve the commercial bank currently under the control of the U.S. government.

According to recent reports from Reuters, potential bidders for SVB Bank have started losing interest in the process. Meanwhile, the U.S. regulators intervened by providing support to the bank on Sunday night.

Entrepreneur Kim Dotcom tweeted on March 13 that the banking sector currently faces a significant risk due to unrealized losses amounting to $620 billion, despite having overall equity of 2.2 trillion dollars. In the event of a bank run, even large institutions such as JP Morgan and Citi could be severely affected, potentially leading to fatal consequences. The crisis is far from over, and the US Treasury’s actions have only temporarily mitigated the risks.

Additionally, Apollo Management and Morgan Stanley are also reportedly involved in the talks around the holding company, with Apollo potentially interested in financing a transaction or acquiring parts of the business. The three smaller entities within SVB Financial Group are significantly smaller than SVB Bank, which is currently under Federal Deposit Insurance Corporation (FDIC) control, according to the company’s 2022, 10K report.

Meanwhile, the Bank of London has submitted a proposal to acquire Silicon Valley Bank UK, which is a subsidiary of SVB Financial Group. The company announced on Sunday that it has sent the offer to British authorities, including the Treasury and the Bank of England.