HSBC says it hopes to capitalise on the success of its takeover of Silicon Valley Bank UK earlier this year by building out the tech side of its business. HSBC profits this quarter increased $1.5bn as a result of the £1 “rescue deal” takeover of SVB, its CEO said earlier today. Noel Quinn said the company plans to invest in SVB UK to “accelerate our growth plans” in life sciences and technology start-ups to “create the businesses of tomorrow”.
The sale of Silicon Valley Bank in the UK was triggered after a multi-billion-dollar shortfall was reported on the balance sheet of the US parent company. This led to a run on the UK division potentially putting thousands of UK start-ups and investors at risk.
It holds more than $6bn in UK deposits from thousands of customers. Despite SVB UK showing a pre-tax profit last year of £88m, HSBC says its purchase of the company will allow it to realise an extra $1.5bn in profits. This is due to the difference between the £1 it paid for the company and the total value of its net assets.
HSBC is pinning its hopes on capitalising on these deposits and the largely entrepreneur-based customer list to create a global tech banking division. The aim, said Quinn, is to use this to be part of the next-generation economy.
“For 158 years, HSBC has banked the entrepreneurs who have created today’s industrial base,” said Quinn. “With the SVB UK acquisition, we have access to more of the entrepreneurs in the technology and life sciences sectors who will create the businesses of tomorrow.”
He added: “We believe they‘re a natural fit for HSBC, and that we‘re uniquely placed to take them global.”
How will HSBC approach the tech sector?
What form this will take isn’t clear but could see HSBC use the network of start-ups and investors it gained access to through the purchase of SVB UK. This would allow it to create something similar to Barclays Eagle Labs, which recently beat out the now-defunct Tech Nation to a government grant used to support technology entrepreneurs.
Speaking to Bloomberg, Quinn said the company has already set up teams in different parts of the world doing similar things to SVB UK, focusing on growing start-ups and scale-outs and giving them access to services not available from other banks. “We bought a business in the UK, but I want to create that capability globally,” he said.
Describing it as an “ecosystem” he said SVB would remain standalone in the UK, supporting those entrepreneurs. “I’m really pleased with the SVB acquisition for what it gives us strategically and it was a wise financial deal,” he said
HSBC has reportedly invested £2bn of liquidity into the business since the purchase last month to stabilise the company and aid in expansion. Its customers include quantum computing start-ups like Universal Quantum, as well as those working in life sciences, artificial intelligence and fintech.
Some of the companies that bank with SVB UK have also previously worked with Tech Nation as part of its efforts to aid start-ups to expand. How that will work now the grant and funding is run by Barclay’s, and deposits sat with an HSBC-owned bank is unclear.