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HSBC To Buy UK Arm of Silicon Valley Bank For $1.2 (bbc.com) 165

Posted by msmash from the breaking-news dept.
HSBC, in a stock exchange filing: HSBC Holdings plc announces that its UK ring-fenced subsidiary, HSBC UK Bank plc, is acquiring Silicon Valley Bank UK Limited (SVB UK) for 1 pound ($1.2). As at 10 March 2023, SVB UK had loans of around $6.6 bn and deposits of around $8.1bn. 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. 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."
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HSBC To Buy UK Arm of Silicon Valley Bank For $1.2 More

HSBC To Buy UK Arm of Silicon Valley Bank For $1.2

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    • Offtopic? I've decided that the Kiffness is my personal savior. Or maybe personal shopper. His rendition of Levya's Polka https://www.youtube.com/watch?... [youtube.com] is creditable. The more Levya's versions you know, the more HSBCs you'll want. And the fish? 6 for 5 sounds good to me.

  • A Bank is a Bank is Bank (Score:5, Insightful)

    by Canberra1 ( 3475749 ) on Monday March 13, 2023 @03:46AM (#63365493)
    All straight up banks are the same, bar the ones profiting from banking secrecy or tax evasion scams or liar loans that Merchant bankers won't touch. Subject to regulation in its base country (in theory). People shopping should just shop for the best rate. Banks have a mile to paperwork to do. But in this case, they get a list of depositors (lazy money) and an established debt book. Sure looks like a bargain - including any saved up tax losses. Sounds too cheap.

    • Re: (Score:2)

      by Malc ( 1751 )

      All straight up banks are the same, bar the ones profiting from banking secrecy or tax evasion scams or liar loans that Merchant bankers won't touch

      I'm hoping you really wrote that in Cockney rhyming slang. They are all wankers.

    • Comment removed based on user account deletion

  • There should have been a bidding process (Score:5, Interesting)

    by dynamo ( 6127 ) on Monday March 13, 2023 @04:37AM (#63365555) Journal

    I mean, I would have paid at least 2 pounds.

    • Re:There should have been a bidding process (Score:5, Informative)

      by thegarbz ( 1787294 ) on Monday March 13, 2023 @05:31AM (#63365607)

      I mean, I would have paid at least 2 pounds.

      That would have been a bad move unless you have a way to hege your purchase against something else. Reminder: what HSBC bought was a liability. Not being funny with language here, but an actual financial liability on it's balance sheet. The $1.2 was only handed over as many contracts require the exchange of "consideration" to lock the contract in place. In this case it was 1 pound and what they got for it has a paper worth of a negative fuckton pounds

      • Re:There should have been a bidding process (Score:4, Funny)

        by bill_mcgonigle ( 4333 ) * on Monday March 13, 2023 @07:05AM (#63365797) Homepage Journal

        > a negative fuckton pounds

        Another useful case for Imperial Units.

      • Not really a liability. Just a cash flow problem due to underperforming assets.

        • A cash flow problem is a liability. If I owe $1 now, it doesn't help me if I have $10 in bonds that mature in a few years or that I can't sell. What I have is a fiscal liability I can't address.

          • But the bank has assets too. Assets enough to cover all liabilities. So the company's equity is still positive and is thus an asset overall, not a liability.

            • I'm guessing that the Bank of England uses a different valuation methodology than the US Federal Reserve, and the UK branches were either going to hold up a sale, or favors could be arranged where it was in the interest of the Fed to sell the UK branches to HSBC for 1 pound sterling. All that HSBC was purchasing was "branding". Still, it seems like a ridiculously generous price if HSBC gets the UK loan portfolio.

      • That would have been a bad move unless you have a way to hege your purchase against something else. Reminder: what HSBC bought was a liability. Not being funny with language here, but an actual financial liability on it's balance sheet

        What HSBC bought was effectively a zero balance sheet. All of SVB's investors are out of luck, completely. HSBC owes them nothing. And even most of SVB's creditors will take a loss. The FDIC structures the deals this way because otherwise no one would buy failed banks, which would have to go through bankruptcy proceedings, meaning creditors would get stiffed anyway, the FDIC might have to pay out, and confidence in the banking system would be shaken. Instead, the acquiring bank gets to simply wipe away most

      • As per the summary above :
        As at 10 March 2023, SVB UK had loans of around $6.6 bn and deposits of around $8.1bn

        I understand SVB has enough assets to cover the deposits - it's only a matter of liquidity.

        HSBC may have enough liquidity to cover even if 100% of the deposits are withdrawn. I mean they are a much larger bank, so 8B is possibly something they can afford to pay up front if needed (all of SVB clients do a bank run and withdraw the 8B in a few days) while they slowly wait for the bond / investments m

        • I understand SVB has enough assets to cover the deposits - it's only a matter of liquidity.

          Non liquid assets at a time of debt forcing your balance sheet negative is very much a liability by definition in the financial world. That was my point. It makes sense for HSBC to acquire them as they have enough liquid assets themselves to cover the deposits. This is the reason the purchase cost was so low compared to the total value.

    • Re: (Score:3, Informative)

      by swillden ( 191260 )

      I mean, I would have paid at least 2 pounds.

      FWIW, this is standard procedure, and actually happens all the time. Banks fail every week. Mostly they don't make the news because they're not as big or newsworthy as SVB, but it's a common occurrence. And the way the FDIC is handling it is normal, too.

      Standard procedure is that the failing bank shuts down on Friday, the FDIC arranges a "sale" for essentially nothing to another, healthy bank, which typically retains most of the staff and opens its doors at 9 AM on Monday morning. Depositors don't lose an

      • Except in thise cases you don't hear the White House getting involved. SVB was sitting on 20% unrealized losses in long term bonds. The government bailed out a certain narrow class of people and set a precedent.

  • After the 2008 crash I thought the rules had changed so that banks had to be less exposed to market fluctuations and have a greater reserve in order to compensate for 1 or more investments going belly up. So WTF happeneed with SVB? Are the rules lax or did they not bother following them and some C-suites will be facing charges?

    • Re:Why is this still happening? (Score:5, Informative)

      by Tx ( 96709 ) on Monday March 13, 2023 @05:17AM (#63365597) Journal

      This is not like the previous financial crisis, we're not talking junk investments like CDOs etc. SVB (and plenty of other banks) put a lot of their deposits in to "safe" long term government bonds. However, one effect of the Fed's rate hiking to fight inflation is to reduce the value of long term bonds - you can get higher yield on short term bonds right now (the so-called "yield curve inversion"), so who wants to lock up their funds for ten years when you can get higher yield over two years. That means that if they are forced to sell those bonds *right now*, as opposed to holding them for the duration, then their holdings are worth a lot less in actuality than they are on paper, and they're going to get wrecked.

      It's hard to argue that investing in long-term government bonds is a reckless move, as they're generally considered one of the safest, most conservative options. Nobody foresaw the Fed hiking rates so far so fast as they have done, and decisions taken against a backdrop of many years of stable, low interest rates, are starting to look a bit different now. Many analysts have predicted that these interest rate hikes are going to break stuff, and we're seeing that now. Let's hope this is not just the tip of the iceberg.

      • may I offer you an explanation, it is mine from 11 years ago, but I think it shows a line of reasoning that should make sense to you especially given what happened just now.

        https://slashdot.org/comments.... [slashdot.org]

        Real inflation in USA is huge, it caused the depression of 1921, the Great Depression, the stagflation of the seventies, all of the bubbles that happened in the meantime, including the stock market bubble of the nineties and the housing bubble, and the largest bubble of all bubbles, the credit bubble, the bubble in government, in US debt and dollars

        some are being sarcastic, saying that obviously nobody would ever believe that government debt (bonds, bills, dollars themselves) can be a 'risky investment'. I believed it to be the riskiest of investments for about 20 years now. I am talking about inflation that the governments create - money printin

        • Re:Why is this still happening? (Score:5, Interesting)

          by jabuzz ( 182671 ) on Monday March 13, 2023 @05:54AM (#63365653) Homepage

          Government bonds from stable countries like the USA, UK etc. are extremely safe. The UK for example has *NEVER* failed to pay out on a bond *EVER*. The bonds that SVB purchased *WILL* be paid out in full when they mature. The problem is if you need the money tied up in the bond *BEFORE* it matures. Then you might have to sell the bond for a fraction of the price you paid for it and lose money. SVB brought long-term bonds which was probably very stupid. These are the territory of pension funds and the like, not banks tying up depositor's money.

          • The UK for example has *NEVER* failed to pay out on a bond *EVER*.

            I know it's not what's going on here, but just to point out that until the national socialists took over, the weimar republic didn't fail to pay out a bond either.

            Using the argument that they are safe because they've never defaulted doesn't really make sense for a sovereign currency issuer. Really, they are just considered safer because nobody expects the UK productive capacity to collapse.

            • Re: (Score:2)

              by jabuzz ( 182671 )

              In the case of the UK we are talking many hundreds of years of never defaulting on bonds. I suspect the USA is the same. The Weimar republic barely had 50 years of history of bond payments when Germany defaulted in the 1920's.

              It's why in the financial crash of 2007 the UK was able to issue bonds at a lower rate that it was offering as an interest rate on loans to the Irish government to bail them out. Eventually there was a fuss about it and we stopped making money on the deal, which I think was the wrong a

          • The loss on longer-date notes isn't nearly as much as one would expect. The 3.5% note is selling for 99 9/32. You take less than a 1% loss if you have to sell. Banks (like SVB) are leveraged. Assuming a 5% tier 1 requirement, they are leveraged 20:1 so a 1/2 percent drop is a lot of money and might wipe out shareholders. But the bonds aren't trading low enough to not be able to redeem deposits.

          • SVB brought long-term bonds which was probably very stupid. These are the territory of pension funds and the like, not banks tying up depositor's money.

            In their defenses, the Federal Reserve itself projected interest rates of 0.1% through September 2023 [federalreserve.gov].

            It has now set the rate at ~50x that.

            Certainly SVB's decision was not as a prescient as it could have been. But I don't think it was as obviously foolhardy as some are declaring either (or where did they call SVB out at the time?). Some amount of blame has to belong with the government that minimized concern about inflation while they were getting their desired inflationary legislation passed and reacted wi

          • SVB brought long-term bonds which was probably very stupid.

            The duration of the bonds depends as you rightfully said on when you need money. *Most* banks invest a considerable portion of their holdings in long term bonds. The issue here is SVB's customer base is somewhat uniquely affected by the shitfuckery that went on the last 3 years which put quite a bit of pressure on them to have more liquid holdings than normal for a bank. Combine that with several prominent customers (e.g. Thiel) advising others to pull out all their deposits and you have an instant crisis o

      • SVB (and plenty of other banks) put a lot of their deposits in to "safe" long term government bonds.

        That's not accurate at all. I don't know what the capitalisation ratio requirements were for them, but it would have been a mere fraction of depositors funds that were in govt bonds. Most of the funds would have their loan book secured against them.

        And that's really where the trouble has occurred, since, as you pointed out, all other banks have the same problem with falling bond prices, yet they aren't having bank runs.

        People got a sniff that their loan book was going bad, and started bailing. Apparently it

        • Re: (Score:2)

          by Tx ( 96709 )

          Their website says $74B total loans, $342B total client funds, so most of the funds being secured against their loan book doesn't stack up. The Financial Times article on SVBs demise says "Searching for yield in an era of ultra-low interest rates, it ramped up investment in a $120bn portfolio of highly rated government-backed securities, $91bn of these in fixed-rate mortgage bonds carrying an average interest rate of just 1.64 per cent. While slightly higher than the meagre returns it could earn from short-

      • Nobody foresaw the Fed hiking rates so far so fast as they have done,

        Bullshit. The US has been experiencing skyrocketing inflation for almost two years. The Fed has only one tool to combat it; hiking rates. Fuck the greedy, dumbass bankers that don't know how to run a bank properly and manage liquidity issues.

    • Re:Why is this still happening? (Score:5, Informative)

      by Can'tNot ( 5553824 ) on Monday March 13, 2023 @05:31AM (#63365605)
      Well, this [theintercept.com] is part of the answer to your question. The other part is that none of the, currently, three banks that have gone belly up in the last week have made bad investments. Two of the three have been crypto banks, but they did not invest in crypto themselves. Instead they serviced crypto-related companies and when those companies all started going bad and needed to withdraw their money it caused runs on those banks. These banks were particularly vulnerable to runs thanks to the change in regulation that I linked above.

      The remaining bank, SVB, didn't have any real crypto connections. They did service tech-sector companies, and there's been a slowdown in the tech sector recently... I don't know, maybe we can blame Peter Thiel for this one. He seems to have instigated the run on SVB, and SVB was likewise vulnerable for the same reason as above.

      The vulnerability is also related to the sudden increase in interest rates around the world, raised in an effort to combat inflation.

      The reason why this isn't costing tax payers anything is because these banks haven't lost substantial money on investments. Their assets do cover the full value of their customers' accounts, it's just liquidity that they lack. It seems unlikely that anyone will be criminally charged for any of this. They really didn't do anything wrong, though perhaps they made some mistakes. Non-criminal mistakes.

      • They really didn't do anything wrong, though perhaps they made some mistakes. Non-criminal mistakes.

        Well, paying out millions in bonuses just hours before the FDIC seizure [cnbc.com] and the CEO dumping $3.6 million of SVB stock weeks before the collapse [forbes.com] might or might not be technically criminal, but most reasonable people would consider it not only "wrong," but downright slimy and immoral behavior. I hope these fuckers do some jail time, or at the very least are never allowed anywhere near a bank management posit

        • Oh, well yeah. All right. I don't know about the bonuses, but the stock dump does look like it might be insider trading.

          • I don't know about the bonuses, but the stock dump does look like it might be insider trading.

            The "stock dump" was an automatic sale of some of his options that had been programmed and locked in far in advance (to avoid any hint of insider trading), while the bank was solvent and appeared to be in good shape up to the last week or so.

            High officers of corporations generally get a lot - sometimes all - of their pay as stock options. That way they get paid a bunch more if the stockholders do well, so they hav

      • They have lost substantial money on investments. So much so that the bank's own investors are wiped out. But not so much as that deposits can't be redeemed.
        • Those were not money losing investments, they were very safe investments. It's just that they were long-term investments, so they lost money on lack of liquidity when everyone started withdrawing from their accounts.

          The difference between this and a failed investment is that the money is still there, so the FDIC can pay out people's accounts without spending any taxpayer dollars.
          • I think you are confusing different words. If you buy the US treasury bond for $1.00 and sell it for $0.82, you've lost $0.18. It doesn't matter how "safe" the investment was. US treasury bonds are very safe and very liquid but that doesn't mean they can't lose value. The FDIC won't be able to sell the notes for any more than SVB would have been able to get themselves. If the amount lost is less than the bank owners' equity, there will be enough money to pay everyone in full. If not, there wont' be.
            • It absolutely matters how safe the investment was. The FDIC doesn't have to sell the bonds at all, they can just wait for the bonds to mature. Something that the banks would have done if they had the opportunity.

              SVB didn't have treasury bonds, they had about $80b in mortgage-backed securities. Silvergate had treasury bonds. Not that the difference really matters in this case.
              • If the FDIC pays out now and then waits for bonds to mature, the FDIC is essentially giving out interest-free loans. The result is the same. The FDIC has to get the money from somewhere which would be from the US treasury that has to borrow the money. So the US government will pay interest to the FDIC who has pre-paid it to consumers. The net result is the FDIC is out the prepaid interest.
                • First, I'm not saying that the FDIC will wait for the bonds to mature. I don't know what they'll do, but they could do that. They at least have the potential to do so.

                  Second, I'm not entirely sure what you mean by interest-free loans. In the above case the FDIC is essentially purchasing the assets at face value and then using the money from that purchase to pay out the accounts of depositors. And if the FDIC were an investor this would incur an opportunity cost, since those assets will pay out at a lower
        • Oh, hang on. I think I responded to what you said here the wrong way and that caused an unnecessary conversational tangent.

          I said above that they hadn't lost substantial money on investments, and here you're contradicting me. That depends on how you look at it, but what I was really getting at was that this is not what wiped out their investors in the way that you'd expect from a typical bank failure.

          That's all really.
    • I am not so sure that it would be good to have a goal of ensuring no bank would ever go out of business. A healthy market has hirings and firings and startup companies and bankruptcies. Otherwise the bottom X% is not getting pruned. Requiring banks to operate so conservatively that they never tanked would forego so much potential investment that it would be worse overall.

      (My comment may age badly if this evolves into a general banking crisis)

  • Buying a bank that has collapsed due to loans at the start of a global recession (and the start of a UK-specific recession*) doesn't smack of great thinking. The chances are, the liabilities will grow rapidly due to an accelerating failure of startups that they've lent money to, and that the liabilities will grow a lot faster than HSBC is anticipating.

    *Between Brexit and the bonfire of UK treaties, laws, and even parliament itself that is currently being voted on is causing the UK to contract, outside of an

  • Why... when HSBC has been censured and find for MONEY LAUNDERING.

  • It is NOT $1.2 or even $1.20

    It IS ONE POUND. Or £1.00 ( if Slashdot doesn't fark up the symbol ).
  • I'd gladly pay a dollar and twenty cents for it. Real good deal-o.

    • I'd gladly pay a dollar and twenty cents for it. Real good deal-o.

      HSBC has billions of dollars of assets to cover this short term liquidity problem, and experience (and a license) in banking. Do you?

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