[HN Gopher] HSBC to Buy UK Arm of Silicon Valley Bank
___________________________________________________________________
HSBC to Buy UK Arm of Silicon Valley Bank
Author : concerto
Score : 253 points
Date : 2023-03-13 07:10 UTC (15 hours ago)
(HTM) web link (www.bbc.co.uk)
(TXT) w3m dump (www.bbc.co.uk)
| Am4TIfIsER0ppos wrote:
| So from one group of crooks to a larger group of crooks.
| communism wrote:
| I think we should socialize the deposits of the depositors of the
| svb. viva communismo
| kriro wrote:
| Great play by HSBC. It's very interesting because some banks will
| make out very nicely in the comming weeks and some will be
| dragged down a lot by the general pull of the market. HSBC
| already found some "free money" right away. I think at least one
| of the big US banks will also print some money (I'd bet on JPM).
| kasey_junk wrote:
| The US regulators really frown on the big banks snatching up
| failed bank assets. They allow it when they have to but the
| median regulator driven take over is done by banks in the same
| tier as the one acquired.
|
| I actually wonder if that's why the uk arm of svb was able to
| be purchased but the US one wasn't. It's probably just the
| relative size differences but I'm curious if the fdic got no
| bids for svb or didn't get any it liked.
| tankerkiller wrote:
| The FDIC generally doesn't do "bids" based on this article
| https://www.npr.org/2009/03/26/102384657/anatomy-of-a-
| bank-t... it seems that the FDIC basically just shows up at a
| competing bank, tells them their buying the failed bank, and
| that's the end of it.
| kasey_junk wrote:
| That's not what they did with svb.
|
| https://www.bloomberg.com/news/articles/2023-03-12/fdic-
| auct...
| russnewcomer wrote:
| My father, controller at a mid-sized regional bank, was
| involved in a couple of these when I was growing up, and
| worked at the FDIC as an examiner in the 80s. My memory
| from the last takeover he did shortly after this NPR
| article was that the FDIC had given him the vaguest of
| hints that his bank was on a list that could be selected to
| takeover a bank in the next month or so, then called him on
| a Wednesday afternoon, told him he needed to be half a
| state over by Friday morning (which I also gathered was a
| little out of norm but the FDIC person was someone my Dad
| had dealt with for a while and there was mutual trust) for
| a meeting, and then they took over the bank on Friday.
| There was the impression from my dad that they could have
| tried to refuse, but his bank wanted to expand in that area
| anyway, the FDIC knew that, and decided it would be best to
| have a larger, not-in-the-market-but-near-it bank take over
| this smaller community bank.
|
| My dad also was the lead in his bank purchasing other banks
| in the 90s, and that was a months long, tiring and
| stressful process that they knew how to manage, and he said
| that receiving a bank from the FDIC was a different level
| of acute stress.
|
| _Edit_ Just unlocked a memory, I think one of the reasons
| that my dad 's bank got selected was also that they ran the
| same backend banking software, since it was going to be a
| crash acquisition.
| shapefrog wrote:
| > got selected was also that they ran the same backend
| banking software
|
| It can not be overstated just how important this would
| have been. These backed systems are complex, expensive
| and horrible. Implementing a (mondern) new backend at a
| bank is a multi year multi $10million process.
| russnewcomer wrote:
| My dad's bank switched to $COMPANY in the late 90s and to
| this day, when I run into people who work for them (which
| happens from time to time since they have offices in my
| city), I have to suppress my inclination to dislike them,
| since it was such a brutal two years for our family when
| dad was working 70+ hours unendingly.
| bognition wrote:
| What is "free money" and how does a big bank print money?
| short_sells_poo wrote:
| They acquired a bunch of client assets for 1 GBP. Those
| client assets will generate money for them in the long term.
| For HSBC this is a great deal. For the clients too, come to
| think of it. On Friday the future of their money was
| uncertain, whereas today they can relax a bit because a big
| bank is backing them.
| Teandw wrote:
| They didn't acquire client assets for PS1. That's not quite
| how it works.
| noobermin wrote:
| Assuming of course clients don't fucking pull out the
| moment they can when svb uk reopens.
| actionablefiber wrote:
| If you had deposits with SVB's UK arm before, congrats,
| you're now an HSBC customer.
|
| There is a much lower chance HSBC experiences a bank run.
| Not to jinx it but the _most likely_ outcome is that most
| customers are satisfied that HSBC is a well-capitalized
| bank and keep their money there, while HSBC gets to use
| their deposits and the bank 's assets to sit comfy
| earning yield.
| naijaboiler wrote:
| Um "client assets" are liabilities to a bank
| [deleted]
| [deleted]
| [deleted]
| dan-robertson wrote:
| One point is that hsbc might not be acquiring all of the
| liabilities - they might mostly get customer deposits but not
| eg some unsecured loan or bond issue. Regulators could be ok
| with such an outcome because a bunch of businesses losing
| bank deposits may be seen as worse than a single company
| defaulting on its debt.
|
| Another is that SVB UK could be solvent so long as they don't
| have to sell assets at a loss. Being part of hsbc stops the
| assets needing to be sold at a loss. And a separate thing is
| that even if the assets net liabilities are negative, the
| customer relationships could be valuable enough to hsbc to
| counteract that. Hsbc get a load of growing companies whom
| they can try sell banking services to. That assumes customers
| don't all flee, but I don't think they would because there
| isn't a particular reason to fear hsbc in the way there was
| for SVB.
|
| I don't know what the commenter meant about JPM printing
| money.
| shapefrog wrote:
| > Being part of hsbc stops the assets needing to be sold at
| a loss
|
| Borrowing in the maket at 5% so you can keep the bonds
| paying 1% for the next 10 years might not seem like a
| "loss" but it is a loss.
| dan-robertson wrote:
| For sure that's a reasonable possibility. But even if
| this in particular is -ve, I think it could still be a
| good deal for hsbc for the reasons given above and below.
| wslh wrote:
| I read ARM... cognitive effects.
| luckylion wrote:
| HSBC is buying the UK one of the arms of SVB. I wonder who buys
| the legs.
| labster wrote:
| I'm afraid SVB no longer has a leg to stand on.
| MagicMoonlight wrote:
| They bought it for PS1 and will make a billion from it. What a
| stupid deal
| k1t wrote:
| The fools! I would have given them PS2!
| ornornor wrote:
| That's what I don't get. Sounds like there is a billion or two
| of free money in there. How did they buy it for ONE pound?
| joe__f wrote:
| Yeah right, I might've put in a bid for a tenner if they'd
| asked me
| elAhmo wrote:
| Wasn't SVB UK fine and unaffected by events in US?
|
| In the sea of information about this, other than 'all is good', I
| didn't know UK branch was being taken over and sold as well.
| helsinkiandrew wrote:
| Yes but its parent/owning company had gone bust. Lehman
| Brothers UK arm was also solvent (I think they had roughly PS8B
| of assets after everything was wound up and the administrators
| bills were paid) but had no cash after the parent company went
| bust.
| LatteLazy wrote:
| Wholly owned subsidiaries can have their assets swallowed up by
| their parent companies debts. So the bad debt can effectively
| "trickle down" as the assets are liquidated and passed up the
| structure. By forcing a sale now the BoE prevents American
| creditors from leapfrogging British ones...
| fredoralive wrote:
| 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
| how things need to be done to sort the situation.
| rvnx wrote:
| 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 ?
| shoo_pl wrote:
| It's not a multi-billion company, it a bank that has
| billions of loans and deposits (assets and liabilities).
| Yes, its a profitable bank but on order of magitude lower
| scale:
|
| > It also logged a pretax profit of PS88 million ($106.5
| million) in its last fiscal year ended December.
| Teandw wrote:
| You can't have a profitable bank that's insolvent. That
| doesn't make sense.
|
| The company has gone insolvent because it's no longer
| profitable.
| ClumsyPilot wrote:
| banks are not 'normal' companies.
|
| Their Liabilities and assets outmatch their 'profit' by
| 100x.
|
| They could be making a handy profit yesterday and be
| bancrupt today because the market has moved. Normal
| companies can't go bancrupt in one day
| Teandw wrote:
| I'm not sure you understand what's happening here or the
| basics of business and liquidation.
|
| "Normal companies can't go bankrupt in one day" - They
| didn't go bankrupt. They went into liquidation. Massively
| different thing. You can have a company with billions of
| quid saved up in the bank that goes into liquidation.
|
| Liquidation is quite common and happens daily in the UK
| to 'normal' companies. Companies that were profitable
| last week and no longer can operate as they're not
| profitable enough to pay their debts/what they owe.
|
| I think your issue here is you don't understand what
| liquidation is/means and basic principles of business
| profits. The most important part is that while a company
| may be profitable at the 'end of year' -- They have to
| first get to the end of the year.
| schrodinger wrote:
| Off topic, but did the slang quid come from liquid as in
| assets?
| Teandw wrote:
| Never thought about that. According to Mr Google;
| believed to come from the Latin phrase "quid pro quo,"
| which translates into "something for something," or an
| equal exchange for goods or services.
| mattmanser wrote:
| To me it sounds like you don't understand them either?
|
| What you seem to be talking about about is cashflow
| insolvency. You can have a wildly profitable contract
| that pays in 120 days, but have no cash on hand to pay
| debtors. The work you are doing is profitable, you just
| can't afford to pay your debtors right now.
|
| Profit != cashflow, that's why it's called cashflow
| insolvency instead of profit insolvency. You seem to be
| mixing up profit and cashflow.
|
| But you're also talking about the wrong thing. These
| banks are not in cashflow insolvency. As far as I can
| see, these banks are going through what is called balance
| sheet insolvency. Their assets are worth less than their
| liabilities.
|
| However, the assets are weird as the $100 bond they have
| is presently worth $78 even though in 10 years time it
| will be worth $100 again.This is because the interest the
| bonds pay is so low, no-one wants to buy it right now.
|
| So their balance sheet doesn't add up, and as people
| started taking money out, they couldn't cover their
| liabilities. It LOOKED like their balance sheet was fine
| as they were valuing them at $100, but then they were
| forced to sell them and suddenly they have a big hole in
| their balance sheet.
|
| So they're insolvent not because they've got a cashflow
| problem, but because their balance sheet doesn't balance.
| And the regulators stepped in to stop some creditors
| getting all their money out before that bank essentially
| went bust, leaving other creditors with nothing.
|
| And now the regulators seem to be saying "we're going to
| guarantee that $100 bond is worth $100 even if you can
| only sell it for $78". By loaning people money up to $100
| against it if they have one.
|
| And they are claiming it won't cost the tax payer
| anything. But they're making 0% loans to banks when high
| inflation is happening, so the money they get back is
| going to be worth less than if they spent it on roads or
| healthcare, or whatever.
|
| Maybe I'm wrong, and happy to be corrected, but it does
| seem what you're saying is wrong.
| freeone3000 wrote:
| The money that they lose is going to be assessed on all
| FDIC banks. It doesn't come out of general government
| funds. So it'll probably be paid for by increasing bank
| fees on customers.
| mattmanser wrote:
| According to the news reports the Fed are guaranteeing
| the loans, not the FDIC. I think you're talking about the
| stuff that they were originally saying over the weekend.
| ClumsyPilot wrote:
| > And they are claiming it won't cost the tax payer
| anything. But they're making 0% loans to banks when high
| inflation is happening
|
| I can think of a few methods to turn a profit with a
| zero-interest loan. There is definately opportunity cost.
| mytailorisrich wrote:
| If HSBC bought it for PS1 (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).
| amriksohata wrote:
| Related, Hindenburg got trolled in India for not spotting this
| earlier on.
|
| https://www.indiatimes.com/worth/news/hindenburg-trolled-for...
| al_be_back wrote:
| Surprised Goldmans didn't buy them - and position it as Marcus
| for Startups.
| ulfw wrote:
| sorry I was misinformed
| toyg wrote:
| 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.
| rich_sasha wrote:
| Marcus is meant to focus on proper retail, which is a very
| different business to this. Buying SVB doesn't really achieve
| what Goldman wants from Marcus.
| joosters wrote:
| They're already losing enough money with Marcus right now, why
| risk losing some more? Goldman needs to figure out how to
| properly run their existing consumer bank first.
| dan-robertson wrote:
| Aren't Goldman thinking about winding down / selling off their
| retail stuff?
| kylehotchkiss wrote:
| Does that include the Apple Card?
| cjrp wrote:
| Seems like a great deal for HSBC? Presumably the competition
| regulator gives deals like this a free pass.
|
| > As at 10 March 2023, SVB UK had loans of around PS5.5bn and
| deposits of around PS6.7bn. For the financial year ending 31
| December 2022, SVB UK recorded a profit before tax of PS88m.
| collectedparts wrote:
| 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.
| alasdair_ wrote:
| A Narrow Bank can survive a full bank run.
| shawabawa3 wrote:
| > 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]
| HWR_14 wrote:
| The line is a little blurry. You can be underwater in mark-
| to-market terms on a bond portfolio, but be fine if you
| guess the timeline for redemption and can hold them to
| maturity. Banks estimate what percentage of their assets
| will be held to maturity. So needing extra liquidity causes
| insolvency.
| dragonwriter wrote:
| > 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
|
| That was not the case in the US for banks with HTM assets
| until the backstop program announced by the Fed in the wake
| of the SVB collapse.
|
| > But banks should not hit insolvency issues like SVB did
|
| SVB's liquidity issues turned into solvency issues because
| of the absence of a liquidity backstop.
| evancox100 wrote:
| Treasuries are some of the most liquid instruments
| available, it is not a "liquidity" issue like "How do I
| line up buyers for all these weird, hard-to-price
| assets".
|
| And the measure put in place by the Fed is not a
| liquidity back stop, it is a value/solvency bailout, or
| kind of capital infusion. This is what SVB was trying to
| do on Wednesday, raise capital. That should tell you it
| is not a liquidity problem.
| s1artibartfast wrote:
| I think you may be confusing FDIC actions.
|
| One of the actions was a program to loan against the full
| value of long term assets at term price instead of
| current market value.
|
| Maybe we are just quibbling over the definition of
| liquidity. long term treasuries and MBS can be easily
| sold, but you may take a substantial loss in doing so
| instead of holding to maturity.
| evancox100 wrote:
| Not confusing the two, and maybe it is quibbling but
| changes in market value have nothing to do with liquidity
| as that term is used in finance.
|
| Just because you can't sell a bond at par doesn't mean it
| is an illiquid market.
| vatsalaggarwal wrote:
| 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.
| helsinkiandrew wrote:
| What made SVB even worse was that its customers were
| flush with VC cash and didn't need to borrow, so it
| looked elsewhere to make a return on the cash.
| kyrra wrote:
| There's a certain amount of risk with all lending and
| investment that banks do with deposit funds. This can be
| home loans, government bonds, and other relatively safe
| products.
|
| I don't think it should be up to the government to back
| these risks, because if banks think the government will
| always rescue them, they don't need to care as much about
| risky investments.
|
| You could argue that it is depositor money, so they're not
| really saving the bank, they're saving customers. But if
| banks don't have to care about their risk profile,
| customers will deposit their money in whatever bank is
| offering the greatest interest rates, which will likely be
| those that are making the riskiest investments, which could
| lead to more bank failures with market swings.
| Ntrails wrote:
| > I don't think it should be up to the government to back
| these risks, because if banks think the government will
| always rescue them, they don't need to care as much about
| risky investments.
|
| Counterpoint - if depositors had known that the bank
| could not lose their money, because the government will
| back it, there would be no run on the bank. Why bother?
| It's _safe_ by design. I do agree with the general point,
| and there are huge questions around capitalisation and
| marking with long term debt etc.
|
| What's most interesting here to me is the inaction within
| SVB when they could have been fixing these problems for
| survivable losses early, but instead tried to ride the
| storm.
|
| I'd love to read some of those meeting minutes...
| mywittyname wrote:
| This isn't really feasible. Bank executives will fill
| fight the regulations that stabilize their bank against
| market swings, and citizens will demand that the
| government do something when irresponsible bank
| executives lose their life savings. Banking regulations,
| like most regulations, are written in blood, but for some
| reason, the banking sector is the most adept at getting
| regulations overturned.
|
| So the resulting system is a patchwork of solutions that
| force the government into the role of rescuer. It's just
| too difficult to get most regulations to stick long
| enough to prevent another banking crisis. Barring a
| Constitutional amendment to create a banking "tsar" with
| broad authority and who reports to no-one (i.e., non-
| political), the best solution we have is to have the
| government step in when banks inevitably fail.
| _rm wrote:
| Small doors?
| mytailorisrich wrote:
| If the BoE took them over and HSBC bought them for PS1 you can
| be sure that those numbers do not reflect the current
| situation.
| joosters wrote:
| Oddly, it had been reported that the bidding process for the
| bank was 'competitive' and that there were several interested
| parties. I can't see how that could have been true if the
| final price was a token PS1 ?
| _rm wrote:
| I imagine it was "which one of you wants this steaming
| mess?".
|
| HSBC: [sigh], ok fine why not
|
| The token is just to make the sale contract binding
| sebzim4500 wrote:
| Maybe other bidders weren't willing or able to guarantee
| all deposits?
| mytailorisrich wrote:
| PS1, plus all deposits, plus all other liabilities (from
| what I understand).
|
| Maybe the other bidders were not offering that much...
| dkjaudyeqooe wrote:
| Usually the "buyer" is being paid to take it off the
| regulator's hands, so the actual price is negative. The
| token (positive) amount is to make it easier to deal with
| in a legal sense.
|
| Thus the bids are for the lowest subsidy instead of the
| highest price.
| fredoralive wrote:
| Possibly the other bidders were seen as less robust and
| able to absorb the liabilities of SVB UK?
| Teandw wrote:
| The token PS1 is just a payment requirement for ownership.
| The bidding process for insolvent companies is essentially
| who will take on the most "problems" for the best outcomes
| for the business.
|
| So one company may bid saying they want to acquire X parts
| of the company but can not take on the advertising arm or
| the quality assurance part of the company; which means jobs
| losses etc. Another company may say we'll acquire all of
| the company but not the freehold properties the business
| owns.
|
| The liquidation team then have to decide which bid offers
| the best likely outcome for the creditors/business. The PS1
| isn't technically what they're paying for the company, as
| they're taking on debt, leaseholds, pension funds etc.
| Their bid is technically tens or hundreds of millions
| depending on the situation.
| [deleted]
| nprateem wrote:
| Thank god we've got a PM who's a grown up again.
| kdkwsndne wrote:
| How was he involved? How did he help this situation?
|
| The US also did it over the weekend. Kinda had to be done.
| kmlx wrote:
| > HSBC on Monday averted a crisis in Britain's tech sector by
| rescuing Silicon Valley Bank's UK arm, a dramatic fire sale
| concluded after all-night talks led by Prime Minister Rishi
| Sunak and the Bank of England.
|
| > A sale of SVB UK, which has 3,300 UK clients, including
| start-ups, venture-backed companies and funds, was the
| preferred choice of chancellor Jeremy Hunt, avoiding a big
| government intervention to protect depositors.
|
| source: https://www.ft.com/content/216b193d-62b3-4e5e-8f67-e8
| eb3d96e...
| nprateem wrote:
| Sunak was apparently very hands on according to the FT.
| kzrdude wrote:
| He has a finance background
| varispeed wrote:
| Yes, he was doing books for his parents' pharmacy.
| harvey9 wrote:
| Whatever you think of the bloke, there's a bit more to
| his CV than that.
| mnw21cam wrote:
| Yeah, he tripped and threw the curry he was trying to
| serve over my wife's shoes. It's all she talks about
| whenever she sees him on TV.
| varispeed wrote:
| Is that when he was working at Indian restaurant "for
| fun"?
|
| edit: "Chancellor Rishi Sunak 'did shifts for fun' in
| Southampton Indian restaurant"
|
| https://www.dailyecho.co.uk/news/18237824.chancellor-
| rishi-s...
| substation13 wrote:
| Do we? His style is more school-boy debate club than anything
| else. It doesn't matter what the reality is, so long as you get
| some zingers in.
| distcs wrote:
| It is really sad to see comment threads like this that
| devolve into shallow and petty dismissals devoid of any
| actual content or substance!
| substation13 wrote:
| Fair point, so I will flesh this out a bit. The typical
| pattern we see in PMQs every week is this:
| 1. Valid concern from the opposition 2. Rishi
| ignores the concern 3. Rishi says something
| about "the member from Islington North" 4.
| Jeering from the back benches (both sides) 5.
| Opposition moves on to another topic
|
| Or perhaps this: 1. Government back-bencher
| asks "Does the PM agree that we are doing a fantastic job
| on X?" 2. Rishi agrees 3. Rishi uses
| the time to grandstand about some other unrelated
| accomplishment
|
| Perhaps this is more a criticism of the system than Rishi?
|
| Still, I see no evidence that he is using his position of
| power to improve on this.
| dan-robertson wrote:
| I kinda hate PMQs but I also don't think it's very
| relevant. In particular, the style doesn't depend much on
| who is prime minister. If the jeering and cheering can be
| kept to an hour a week and most everything else is
| terribly dry, that feels ok to me. I think it's important
| to judge people based on what they do that matters and
| not the things they do that don't matter but are easy to
| point out and deride.
| jeromegv wrote:
| I don't know about the UK parliament, but the Canadian
| parliament is quite similar in political structure and
| the "debates" at the chamber are a bit of a clown show as
| well. Just someone doing a speech and zingers, the same
| side applaud, the other side boos, and it goes on and on
| for a few hours. If the population actually saw what was
| happening over there, they wouldn't be too impressed. The
| medias tend to only feature a couple questions and a
| couple (empty) answers, but they typically avoid showing
| us the circus.
|
| But this has been like that forever, not very specific to
| any party or any PM.
| xen2xen1 wrote:
| So the Canadian parliament isn't directly elected by the
| people, like the British one? That's what everyone says
| is the difference. Seems to make the parliament members
| more "hype men" than lawmakers.
| mnw21cam wrote:
| People who love sausages, respect the law, and work with
| IT standards shouldn't watch any of them being made. --
| Peter Gutmann
| blibble wrote:
| PMQs is supposed to be theatre
|
| the real work happens in the boring debates and
| committees which aren't all over the press
| mrguyorama wrote:
| This is just what PMQs are. It's part of the system and
| not any parliament member specifically.
|
| https://www.youtube.com/watch?v=CLSq1h7AvkE
| joe__f wrote:
| I've seen him a few times on PMQs and I thought this
| comment was a reasonable description
| przemub wrote:
| Supporting his father in law comes first.
| realjhol wrote:
| Sunak was as supportive as anyone of the lockdowns and other
| hysterical COVID madness that lead to economic turmoil that
| precipitated this situation in the first place.
| yieldcrv wrote:
| > HSBC announced it had acquired the UK subsidiary of SVB for
| PS1.
|
| What.
|
| Well, honestly, well done everybody. This was resolved over a
| weekend. And shows that it can be resolved.
| damagednoob wrote:
| But how? Surely it was worth more than that?
| rtpg wrote:
| Somebody at HSBC will be able to wine and dine off of this
| for the rest of their life.
| yieldcrv wrote:
| Oligarch level play. Firesell of distressed assets, get all
| the real value of revenue forever after.
| shapefrog wrote:
| They bought PS5bn 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 had
| to take it. PS1 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.
| rtpg wrote:
| "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
| shapefrog wrote:
| 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
| PS1bn+.
|
| 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.
| Teandw wrote:
| "And yeah, 80 million pounds of profit last year. I'd buy
| that for a dollar"
|
| 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.
| dan1234 wrote:
| They'll be taking on some debt too.
|
| They've paid PS1 (symbolic purchase price) but it'll cost
| them a lot more.
| phire wrote:
| Well, it might be more accurate to say they are taking on
| risk.
|
| 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.
| NoboruWataya wrote:
| Over the long term SVB may have a positive net value, but
| unlocking that is likely to require short term cash
| injections to meet current liabilities (not to mention
| restaffing/integrating the bank). Those costs are the real
| price that HSBC is paying for SVB.
| jpgvm wrote:
| Worth mentioning that HSBC recently announced an absolutely
| banging quarter and are in a great position to take
| advantage of this situation.
|
| This is pretty much the old Berkshire playbook, buy
| distressed assets at giant discounts.
| [deleted]
| eCa wrote:
| 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.
| simonbarker87 wrote:
| Buying for PS1 is a common thing in the UK for companies in
| distress. In reality it's worthless so should be PS0 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.
| shrikant wrote:
| You may be thinking of this?
| https://en.wikipedia.org/wiki/Peppercorn_(law)
| rvnx wrote:
| 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.
| fredoralive wrote:
| They were only saying that on Friday, by Saturday it was
| "following discussions with the regulators, we intend to
| enter liquidation on Sunday evening".
| neilwilson wrote:
| 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.
| martinald wrote:
| As far as I understand SVB UK did not have a duration
| risk like the parent co.
| toyg wrote:
| 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.
| shjake wrote:
| So between PS100 and PS10000?
| arcticbull wrote:
| Too bad HSBC USA didn't take the US arm. HSBC have been exiting
| the US market for a while and more competition is always
| better.
| dmix wrote:
| We don't know who bought SVB yet it will likely be announced
| tomorrow (EST/PST timezone) probably. The US gov announcing
| the full confidence of deposits wasn't merely an altruistic
| move, they likely had a buyer at the time of announcement and
| maybe a secondary commitment to support the mortgage debt
| which caused the whole thing.
| mdasen wrote:
| The announcement from Treasury, the Fed, and the FDIC was
| that depositors would be made whole and that there would be
| an assessment on banks to cover it. As such, I'd assume
| that there was no buyer.
|
| 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.
| shapefrog wrote:
| > will then pass along those costs to their customers
| seems like a roundabout way of taxpayers paying
|
| By that logic the cup of coffee I bought earlier was paid
| for by _the taxpayer_ because I _a taxpayer_ paid for it.
| TMWNN wrote:
| You may be right, but the news coverage I've seen implies
| that the full backstop of all deposits regardless of size
| was announced because there is no buyer for SVB. Basically,
| there just wasn't enough time for buyers to feel
| comfortable with pulling the trigger.
| dmix wrote:
| Ah that's very possible. It makes sense their main
| objective was calming the market given other banks
| failing, committing ahead of time to finding a long term
| holder to the $90B mortgage security (in addition to the
| large set of stable depositor assets they held) was
| probably a much safer bet than the other options,
| regardless if a buyer fully committed to either asset
| group.
| kasey_junk wrote:
| I'd guess (and it's purely a guess) that it was their
| loan portfolio that made assessing their balance sheet
| hard to price. MBS' and long term bonds can be priced
| using very standard techniques. Loans secured with
| startup equity warrants on the other hand are tough.
| neom wrote:
| HSBC just restructured, I've been an HSBC US customer for 10
| years including business banking, they're not going anywhere,
| just only serving high net worth and business now. I agree it
| would have been nice if they bought SVB, they'v been great
| for me with my startups, they're really good at business
| banking.
| thiago_fm wrote:
| I want to build a business someday, and have always been
| interested on what to watch for when looking for a business
| bank as a founder.
|
| 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?
| neom wrote:
| For me: Strong account manager who takes the time to
| understand the business, doesn't send you forms to fill
| in that don't have basic info already filled in for you,
| mostly don't bother you, when there are issues does most
| of the work to resolve them and only rely on you to do
| the last leg, don't offer products or services unless
| they're relevant, uses online tools like docusign or
| their internal equivalent, has good online banking,
| mostly doesn't bother you.
| arcticbull wrote:
| I've also been an HSBC US customer for like 6-7 years, and
| quite happy with them. They decided to keep me too haha.
| neom wrote:
| HAH! I remember calling my account manager asking if I
| was being kicked to Citizens lol... felt nice when they
| told me I could stay!! :)
| realworldperson wrote:
| [dead]
| donw wrote:
| I read this as "HSBC to Arm Silicon Valley Bank", which is an
| entirely different customer-management strategy.
| abofh wrote:
| We... would like you to leave your deposits here with us.
| salawat wrote:
| In the UK, the bobbies may not be packing, but the bankers sure
| are.
|
| Somehow, though, I could actually see that being a thing.
| fredoralive wrote:
| Well, during grouse season there are probably going to be a
| fair few armed bankers about.
| 22SAS wrote:
| Hope they fire SVB UK's head of risk assessment. They definitely
| don't want total wokesters like her running things.
| js4ever wrote:
| HSBC itself is being sold to other banks, for Eg in Canada it's
| sold to RBC, in France it's sold to another local bank...
| karambahh wrote:
| It's sold to MyMoneyBank, formerly known as GE Moneybank... not
| exactly local :)
| arcticbull wrote:
| Not all of it just a couple of their regional subsidiaries.
| They're the 8th largest bank in the world, just under BNP
| Paribas and Citigroup.
| robjan wrote:
| HSBC is a British bank with most of the profits being made in
| Asia (specifically Hong Kong). They may be selling off their
| unprofitable subsidiaries but the UK operations are pretty
| stable.
| sofixa wrote:
| > HSBC is a British bank with most of the profits being made
| in Asia (specifically Hong Kong)
|
| Funnily that's where their name comes from - Hongkong and
| Shanghai Banking Corporation Limited, HSBC for short (it's
| now the official name, HSBC does no longer stand for
| anything, probably to lessen the obvious imperialistic past
| in it's name).
| robjan wrote:
| The full name is still printed on most of our banknotes
| (alongside Bank of China and Standard Chartered who issue a
| smaller number of notes). I think it's just the parent
| company who deleted the original meaning.
| dan1234 wrote:
| IIRC, it stopped standing for anything when they moved the
| HQ to London in the 90s (following the takeover of Midland
| Bank), and it became HSBC Holdings plc.
| 55555 wrote:
| Article isn't super clear; is HSBC filling the gap?
| [deleted]
| LatteLazy wrote:
| If there is a gap in the UK SVB entity then YES. But they will
| not be doing anything for the rest of the corporation.
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