HSBC has lured ‘billions of deposits’ from global tech startups since its £1 deal for Silicon Valley Bank unit, CEO says
- The £1 deal for a £1.4 billion (US$1.7 billion) business offers a lot of comfort margin for any contingency in asset quality, CEO Quinn says in Hong Kong interview
- ‘We now have given a very clear signal that we are a bank that wants to be heavily involved in the tech in the innovation sector,’ he says
HSBC, Europe’s biggest lender by assets, has attracted “billions” of deposits since swooping in to buy the UK unit of Silicon Valley Bank (SVB) for £1 (US$1.23) earlier this month and helping restore confidence among global technology start-ups, CEO Noel Quinn said.
“We’ve had significant inflows in the US from SVB’s US clients and investors, and by significant, I mean billions,” he said in a group media briefing on Thursday in Hong Kong. The clients that had had their money in the US and around the world are starting to move their money to us.”
As a result, Quinn said the wider HSBC group is also enjoying an influx of deposits in the UK and across Asia, including Hong Kong and mainland China, since sealing the SVB purchase on March 13 after a weekend of talks with the Bank of England.
“They like the fact that we are stable, with strong capital and liquidity.”
The acquisition came days after US regulators seized SVB to stem a banking crisis from spreading after the California-based lender collapsed under a classic run on deposits following big losses on its investment portfolio.
Quinn said the UK unit offers a strategic fit by enhancing HSBC’s ability to serve innovative and fast-growing companies in the technology and life-science sectors.
“We now have given a very clear signal that we are a bank that wants to be heavily involved in the tech in the innovation sector,” he said.
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The SVB UK unit had a loan book of about £5.5 billion and £6.7 billion of deposits on March 10, according to HSBC’s stock exchange filing.
The unit recorded a pre-tax profit of £88 million and had a tangible equity worth about £1.4 billion, “a big discount” or margin of comfort in case of problems with its asset quality.
“I didn’t do it just to be cheap,” Quinn said. “I did it because even though you do due diligence for a day, you need to make sure you’ve got comfort, if anything does emerge.” he said. “But three weeks after buying it, we are not concerned about the asset quality.”
Recalling the weekend leading to the £1 deal, Quinn said he approached the Bank of England hours after SVB collapsed in the US amid a rush to pre-empt a crisis and contagion as the global financial markets prepared to open for business on Monday.
UK government officials raced to find a buyer for the UK arm, fearing a potential crisis among British technology firms if they were unable to access capital and pay their staff following the bank’s closure.
“The Bank of England did it because they wanted to stabilise the business,” Quinn added.
“The UK business of SVB did not have a problem until the US parent had a problem. It was a problem of confidence. It was a contagion from the US.”
Quinn travelled to Beijing, Guangzhou, Shenzhen and Shanghai last week to gain first-hand insight on the pulse of recovery in mainland China.
He is in Hong Kong this week for a three-day Enterprise Leadership Programme to brainstorm with more than 100 of HSBC’s senior global executives on green finance, technology and other developments.
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Many of them have not visited Hong Kong over the past three years due to the coronavirus pandemic, and Quinn said he wanted them to experience the situation on the ground that the city is back to business as usual.
“My most senior leadership from the Middle East, Americas and Europe are here,” he said.
“I wanted to send a vote of confidence in Hong Kong and a positive signal to Hong Kong. To be honest, I want it to bring business to Hong Kong.”
Separately, a shareholder action group in Hong Kong will attend an informal shareholder meeting on Monday to push HSBC to break up its Asian business to create more value to investors, as well as clamour for higher dividend payout.
Quinn reiterated that the idea of splitting the bank will be too expensive and risky, and that dividend payout at 50 per cent of its earnings remains “reasonable” for shareholders.
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Ken Lui Yu-kin, the leader of the “Spin Off HSBC Asia Concern Group”, said he has submitted two resolutions to the London-based bank and asked that shareholders be allowed to vote on them at the bank’s May 3 annual general meeting.
The resolutions call for HSBC to pay an annual dividend of at least 51 cents a share – its pre-pandemic level – and provide a quarterly report on its plan to increase the value of its Asian businesses, “including but not limited to spinning off, strategic reorganisation and restructuring its Asia businesses”.