HSBC, Europe’s largest bank, has acquired the UK arm of Silicon Valley Bank (SVB) in a deal worth £1 ($1.2) that secures the future of thousands of UK tech companies. The move comes after SVB’s US parent collapsed, forcing its UK arm to look for a buyer or be placed in insolvency by the Bank of England. In response to the acquisition, the Bank of England stated that “all SVB UK depositors’ funds are safe”.
SVB UK is a significant banking partner in the UK tech sector, and its parent company’s collapse left many tech executives scrambling to find ways to raise cash to pay their employees and cover operating expenses. HSBC’s acquisition is therefore “great news” for the UK startup ecosystem, according to Piotr Pisarz, CEO of fintech startup Uncapped, which provides lending to other startups. “I think everyone can relax a little bit today,” he told CNN.
In addition to its emergency fundraising program, Uncapped offers long-term bridge loans to help with working capital. Pisarz predicts that startups are likely to diversify their banking ties following this event, as it was an “unsound situation” for about half of the UK tech ecosystem to bank with a single institution.
HSBC CEO Noel Quinn has stated that the acquisition “will be a great success for SVB UK customers because they know their deposits are backed by HSBC’s strength, safety, and security.” He added that the acquisition will strengthen HSBC’s commercial banking franchise and its ability to serve innovative and fast-growing companies in the UK and internationally, particularly in the technology and life sciences sectors.
SVB UK had approximately £5.5bn ($6.7bn) in loans and around £6.7bn ($8.1bn) in deposits as of last Friday. HSBC, on the other hand, posted a pre-tax profit of £88 million ($106.5 million) in its final financial year, which ended in December.
The acquisition is expected to have significant strategic value for HSBC’s business in the UK. It will enable the bank to continue to serve its existing customers, while also allowing it to expand its footprint in the tech sector. This move comes as HSBC has recently shifted its focus towards Asia, where it sees more potential for growth.
However, the acquisition has not been well-received by the market, with HSBC’s London-listed shares falling 2.9% in morning trading. The STOXX Europe 600 Bank Index also traded 4% lower.
Despite the initial market response, the acquisition is likely to have a positive impact on the UK startup ecosystem, which has been hit hard by the pandemic. With the backing of a major global bank like HSBC, UK tech companies will be better equipped to weather future economic challenges and continue to innovate and grow.