> HSBC announced it had acquired the UK subsidiary of SVB for £1.
What.
Well, honestly, well done everybody. This was resolved over a weekend. And shows that it can be resolved.
What.
Well, honestly, well done everybody. This was resolved over a weekend. And shows that it can be resolved.
https://home.treasury.gov/news/press-releases/jy1337
> No losses associated with the resolution of Silicon Valley Bank will be borne by the taxpayer... Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.
While they say "no losses will be borne by the taxpayer", making banks pay who will then pass along those costs to their customers seems like a roundabout way of taxpayers paying - or at least a substantial portion of taxpayers who are banking customers. Maybe banks won't be able to pass along the costs through increased fees or lower rates and will have to eat the costs.
By that logic the cup of coffee I bought earlier was paid for by the taxpayer because I a taxpayer paid for it.
Do you mind sharing why do you think HSBC is a good business bank and what are the typical qualities a business needs to have to be great for founders?
This is pretty much the old Berkshire playbook, buy distressed assets at giant discounts.
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 had to take it. £1 is the best they could do - and I expect that it is going to, directly at least, be a loss of money for HSBC all the same.
And yeah, 80 million pounds of profit last year. I'd buy that for a dollar
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.
In business, last years profits are often irrelevant. This is a good example. It's a constant treadmill of trying to stay profitable - which isn't as easy as it sounds.
More so when businesses of this size are usually built on owing large sums of money.
They’ve paid £1 (symbolic purchase price) but it’ll cost them a lot more.
They are getting customers (the deposits owed to those customers is debt), but they will also be getting illiquid assets that should more or less cover the value of those deposits.
They will need to use their own liquid cash in the short term to cover any withdrawals. But in the long term they get to keep some of the customers and they should eventually profit when those illiquid assets mature.
But yeah, they surely should have been able to find someone willing to pay 100-10000% more than that.
So if sold for 1 GBP, it's literally a steal.
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.
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.