HSBC rescues UK arm of collapsed start-up lender

HSBC says it is acquiring the UK subsidiary of stricken Silicon Valley Bank for 1 (HK$9.46), but its shares edged down in Hong Kong.

"This acquisition makes excellent strategic sense for our business in the UK," chief executive Noel Quinn said.

The move comes after US authorities moved to shore up deposits and stem any wider fallout from the collapse of its parent, tech start-up lender SVB.

After the announcement, the Bank of England said Britain's banking system was sound.

"No other UK banks are directly, materially affected by these actions, or by the resolution of SVB UK's parent bank. The wider UK banking system remains safe, sound and well capitalized."

SVB UK is ring-fenced from the US group, and HSBC said the assets and liabilities of the parent company were excluded from the transaction.

"This represents a good solution for all," Shore Capital analyst Gary Greenwood said, noting the impact on HSBC's forecasts is likely to be immaterial.

By March 10, SVB UK had loans of about 5.5 billion and deposits of about 6.7 billion, HSBC said.

SVB UK's tangible equity is expected to be around 1.4 billion, HSBC said.

Shares of HSBC in Hong Kong ended 0.18 percent lower at HK$56.30 apiece, after once dipping 2 percent in the morning on the news that it could bid for SVB UK.

Though small compared to the UK's largest banks, SVB has an outsized role in the world of start-ups, describing itself as "the go-to banking partner for founders, entrepreneurs and investors."

A host of lenders were mooted as possible buyers. Chancellor of the Exchequer Jeremy Hunt said SVB's depositors will be protected with no taxpayer support.

Royal Group, an investment firm controlled by a top Abu Dhabi royal, and OakNorth, backed by SoftBank Group Corp, were among those considering a takeover, Bloomberg reported.

Meanwhile, state regulators closed New York-based Signature Bank on Sunday, the third-largest failure in US banking history, but Paul Krugman said it will not lead to a systemic risk as in 2008.

The Federal Deposit Insurance Corp took control of Signature, which had US$110.36 billion (HK$860.8 billion) in assets and US$88.59 in deposits at the end of last year, said New York state's Department of Financial Services.

All of the depositors of Signature Bank and SVB will be protected and no losses will be borne by the taxpayer, the US Treasury Department said.

First Republic Bank's shares halved in premarket trading yesterday as news of fresh financing failed to reassure investors.

First Republic secured additional financing from JPMorgan Chase and increased borrowing facility with the Federal Reserve, but faced deposit outflow risk after SVB's bank run.