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HSBC to Buy UK Arm of Silicon Valley Bank

bbc.co.uk

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Re: HSBC to Buy UK Arm of Silicon Valley Bank

#41

Post by fredoralive »

rvnx wrote: post #35
simonbarker87 wrote: post #22

Earlier quoted context omitted.

Buying for £1 is a common thing in the UK for companies in distress. In reality it’s worthless so should be £0 due to the mountain of worth and risk they need to wade through to realise the value, but UK contract law requires some kind of consideration (I think that’s the right term, my contract law for engineers module was a while ago now) for both sides otherwise it’s not a valid contract.

But all weekend SVB UK has been claiming that SVB UK has no issue and is totally safe. So if sold for 1 GBP, it's literally a steal.

They were only saying that on Friday, by Saturday it was "following discussions with the regulators, we intend to enter liquidation on Sunday evening".

Re: HSBC to Buy UK Arm of Silicon Valley Bank

#42

Post by [deleted] »

shawabawa3 wrote: post #33
collectedparts wrote: post #28

Earlier quoted context omitted.

It's said that no bank (even the best-managed) can withstand a fullscale bank run. So to the extent that the US side of things created a crisis of confidence, that might have been enough to topple SVB UK, even if all of its fundamentals were OK.

> It's said that no bank (even the best-managed) can withstand a fullscale bank run I keep reading this but this should not be true Any bank will hit liquidity issues on a full-on bank run, as not 100% of a banks assets will be marketable, but central banks will provide emergency liquidity in these situations But banks should not hit insolvency issues like SVB did

[deleted]

Re: HSBC to Buy UK Arm of Silicon Valley Bank

#43

Post by rtpg »

shapefrog wrote: post #37
rtpg wrote: post #10

Earlier quoted context omitted.

Somebody at HSBC will be able to wine and dine off of this for the rest of their life.

They bought £5bn of assets and liabilities and bunch of admin work integrating it all. I highly doubt anyone is bothering to break out the champagne for this one - it is a rounding error at best. This isn't 4d giga brain chess stuff, its adults walking into the room. A meaningless tiny bank with assets and liabilities broadly matched has gone under - the regulator has stepped in, phoned around the market and somebody…

"We just got 3,000 new business accounts" feels like a good deal to me! Gotta open accounts somehow.

And yeah, 80 million pounds of profit last year. I'd buy that for a dollar

Re: HSBC to Buy UK Arm of Silicon Valley Bank

#44

Post by toyg »

ulfw wrote: post #30
al_be_back wrote: post #24

Surprised Goldmans didn't buy them - and position it as Marcus for Startups.

sorry I was misinformed

Because they do serve the UK, parent mentioned Marcus which is one of their UK consumer products. I don't know if they want to leave retail, but that's the sort of thing that can be different by region.

Re: HSBC to Buy UK Arm of Silicon Valley Bank

#45

Post by neilwilson »

rvnx wrote: post #35
simonbarker87 wrote: post #22

Earlier quoted context omitted.

Buying for £1 is a common thing in the UK for companies in distress. In reality it’s worthless so should be £0 due to the mountain of worth and risk they need to wade through to realise the value, but UK contract law requires some kind of consideration (I think that’s the right term, my contract law for engineers module was a while ago now) for both sides otherwise it’s not a valid contract.

But all weekend SVB UK has been claiming that SVB UK has no issue and is totally safe. So if sold for 1 GBP, it's literally a steal.

It's was totally safe until Monday morning when all the depositors would leave.

HSBC has a huge Sterling reserve buffer that can easily accommodate that exodus. (Essentially HSBC UK becomes the depositor of last resort in SVB UK).

Remember that the issue with SVB was that it was taking duration risk when it hadn't the deposits to match that duration. The HSBC parent company can easily provide that duration.

Cashflow issues kill profitable operations. They kill banks in double quick time.

Re: HSBC to Buy UK Arm of Silicon Valley Bank

#46

Post by mytailorisrich »

rvnx wrote: post #34
fredoralive wrote: post #26

Earlier quoted context omitted.

The public messaging on Friday from SVB UK was that they were entirely ring-fenced, all is well etc. But behind the scenes they were going to the Bank of England asking for emergency funding. So by Saturday the wheels were turning on the insolvency processes. I guess the US media was focussed on the US side of things, in the UK there has been a lot of noise about lots of UK startups having money tied up in SVB UK and…

HSBC made a deal too good to be true, that it sounds like it may be hiding something. Nobody can buy a profitable, stable, multi-billion company for 1 GBP, without a good cause. Yes, SVB UK is legally fenced, but in terms of management and daily practices, why wouldn't they have the same issues as their parent ?

If HSBC bought it for £1 (which is a minimal amount in order to have a binding contract) it does not mean that the deal is too good to be true. It means that the company actually has a negative net value, i.e. more liabilities than assets, and of course HSBC will take those liabilities on.

It's a bit like if you want to buy a house that has a mortgage and the deal is that to buy the house you have to take the mortgage on as well. How much cash would you be willing to pay for that? Potentially 0 (i.e. taking the mortgage on is enough for you).

Re: HSBC to Buy UK Arm of Silicon Valley Bank

#47

Post by shrikant »

simonbarker87 wrote: post #22
eCa wrote: post #15

Earlier quoted context omitted.

As anyone who has played Civ4 knows, everything is worth what its purchaser will pay for it. But yeah, they surely should have been able to find someone willing to pay 100-10000% more than that.

Buying for £1 is a common thing in the UK for companies in distress. In reality it’s worthless so should be £0 due to the mountain of worth and risk they need to wade through to realise the value, but UK contract law requires some kind of consideration (I think that’s the right term, my contract law for engineers module was a while ago now) for both sides otherwise it’s not a valid contract.

You may be thinking of this? https://en.wikipedia.org/wiki/Peppercorn_(law)

Re: HSBC to Buy UK Arm of Silicon Valley Bank

#48

Post by vatsalaggarwal »

shawabawa3 wrote: post #33
collectedparts wrote: post #28

Earlier quoted context omitted.

It's said that no bank (even the best-managed) can withstand a fullscale bank run. So to the extent that the US side of things created a crisis of confidence, that might have been enough to topple SVB UK, even if all of its fundamentals were OK.

> It's said that no bank (even the best-managed) can withstand a fullscale bank run I keep reading this but this should not be true Any bank will hit liquidity issues on a full-on bank run, as not 100% of a banks assets will be marketable, but central banks will provide emergency liquidity in these situations But banks should not hit insolvency issues like SVB did

I think what made it worse here is that depositors of SVB were undiversified... If you had a bank that held deposits from various kinds of people, it's less likely that all of them would want their money out at the same time unless there was some of kind of widespread change in sentiment towards the overall financial system.

Re: HSBC to Buy UK Arm of Silicon Valley Bank

#49

Post by toyg »

rvnx wrote: post #35
simonbarker87 wrote: post #22

Earlier quoted context omitted.

Buying for £1 is a common thing in the UK for companies in distress. In reality it’s worthless so should be £0 due to the mountain of worth and risk they need to wade through to realise the value, but UK contract law requires some kind of consideration (I think that’s the right term, my contract law for engineers module was a while ago now) for both sides otherwise it’s not a valid contract.

But all weekend SVB UK has been claiming that SVB UK has no issue and is totally safe. So if sold for 1 GBP, it's literally a steal.

The assets might be worth something, but the brand is shot - kept alone, it would have suffered the same sort of bank run that killed the parent entity. HSBC is buying their books and hoping that SVB UK customers will be assuaged into not asking for the money back, now that HSBC is looking after it. Eventually I expect all SVB UK accounts to be moved to HSBC equivalents.

Banks, at the end of the day, are just that: brands built on the belief that they will survive long enough to not lose your money. Once that belief goes, once the brand is over, a bank run is automatic and the bank dies.

Re: HSBC to Buy UK Arm of Silicon Valley Bank

#50

Post by shapefrog »

rtpg wrote: post #43
shapefrog wrote: post #37

Earlier quoted context omitted.

They bought £5bn of assets and liabilities and bunch of admin work integrating it all. I highly doubt anyone is bothering to break out the champagne for this one - it is a rounding error at best. This isn't 4d giga brain chess stuff, its adults walking into the room. A meaningless tiny bank with assets and liabilities broadly matched has gone under - the regulator has stepped in, phoned around the market and somebody…

"We just got 3,000 new business accounts" feels like a good deal to me! Gotta open accounts somehow. And yeah, 80 million pounds of profit last year. I'd buy that for a dollar

SVB parent group made 1.8bn last year - they are insolvent now.

From here HSBC will spend ~10mil on just the purchase legals. Then they will spend 100s mil when inevitably the equity / bond holders of SVB parent co sue them looking to adjust up the price, and their opening ask will be £1bn+.

All 3,000 business accounts (if there were that many) were up for grabs anyway so they could have had many using a photocopier and handing out flyers at silicon roundabout without any of the hassle.

HSBC looked at their own existing liabilities - looked at how many customers of theirs were paid from SVB (and paid their HSBC mortgages with the proceeds) and did the BoE a favour, and there will be a quid pro quo for that quid they paid at some point.

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