March 31, 2023
HSBC (00005) in mid-March announced the acquisition of the U.K. branch of Silicon Valley Bank (SVB UK), which had collapsed in the United States. Noel Quinn, chief executive of HSBC, retorted that the acquisition will help HSBC expand the new economic customer segment in the long run, and the transaction will let the market know the group’s determination to develop new technology company customers. From Silicon Valley Bank (SVB) to HSBC accounts in the US, UK and Hong Kong.
Personally submit a no-regret decision to the central bank
Qi Yaonian pointed out that the purchase of 1.4 billion pounds (about 13.594 billion Hong Kong dollars) of SVB UK tangible assets at a price of 1 pound (about 9.71 Hong Kong dollars) brought huge contingent capital to HSBC. When assessing the assets of 1 client, the potential loss ratio (loss ratio) has been assessed, and the potential risk (blackholes) has not been seen; at the same time, 1,300 of the accounts only use a single bank, and the remaining 2,300 clients hold multiple bank accounts, some of which are also HSBC customers can improve the audit work efficiency.
As for the background of the acquisition, Qi Yaonian recalled that SVB had a serious liquidity problem on a Wednesday (8th) in March, and was taken over by the US regulator on Friday (10th). On the same day, SVB UK was also taken over by the Bank of England. “So SVB UK has become a central bank asset”.
On the morning of Saturday (11th), he took the initiative to express his willingness to acquire to the British regulators. At that time, he was approached by the “number two of BOE”. The board of directors proposed a plan and received support, and finally bought it at a price of 1 pound. The Bank of England’s request was only to “ensure the stability of the customer accounts of technology companies”, and the bidding was completed. He said that he has no regrets in making this suggestion to the board of directors.
HSBC later announced the deployment of 2 billion pounds (approximately HK$19.42 billion) to SVB UK. Qi Yaonian said that it was only to “maintain market confidence” and asserted that there would be no need to inject additional capital into SVB UK in the future. At this stage, it is necessary to study how to assist the UK The technology company has developed into a multinational company and rebranded SVB UK. There are plans to change its name to a brand with HSBC colors, and even said with a smile that it hopes to have the iconic hexagonal logo of HSBC.
Slightly affected by Credit Suisse AT1 bond write-offs
It has been more than two weeks since the acquisition. Qi Yaonian revealed that SVB UK has already returned a large amount of deposits, which is more effective in promoting HSBC’s goal of expanding technology and enterprise customers. In the past few weeks, there have been Chinese-funded customers of Silicon Valley Bank in the United States. To diversify risks and hope to open accounts in HSBC’s various branches.
Shortly after the SVB incident, UBS made a quick decision to acquire the troubled Credit Suisse, and Swiss regulators immediately wrote off Credit Suisse’s additional Tier 1 capital bonds (AT1). Qi Yaonian believes that the impact of the incident on HSBC is also quite slight. He said that the sharp drop in global AT1 bond prices that day reflected the market’s concerns about the uncertain outlook of related assets. However, the AT1 bonds issued by HSBC have returned to the level before the incident, and HSBC has not held any AT1 bonds issued by Credit Suisse. Debt, only a small amount of bonds held by clients, with a total amount of about several million U.S. dollars, emphasizing that the above events will not affect HSBC’s gradual dividend policy, and still confident that it can achieve about 50 cents per share (about 3.9 Hong Kong dollars) this year dividend distribution.
Confident in maintaining a progressive dividend policy
Recently, it was the turn of Deutsche Bank to report the risk of debt default. Qi Yaonian bluntly said that he has confidence in the bank. He also observed that the capital level of large international banks is sufficient, and he does not agree that it will trigger a large-scale financial crisis. In addition, it is expected that local regulatory agencies will strengthen risk management. ” The incident at SVB UK is unlikely to be repeated in other regions.”