Tag: HSBC Holdings PLC

HSBC net profit more than doubles in the first half, announces $2 billion share buyback
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HSBC’s net profit more than doubled to $18.1 billion in the six months ended June, a sharp spike compared to the $9 billion in the same period a year before.

The bank’s profit before tax rose 147% year-on-year to $21.7 billion, up from $8.78 billion in the first half of 2022.

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This figure included a $2.1 billion reversal of an impairment relating to the planned sale of its retail banking operations in France, as well as a provisional gain of $1.5 billion on the acquisition of Silicon Valley Bank UK.

In light of the strong results, HSBC’s board approved a second interim dividend of $0.10 per share, and announced a further share buyback of up to $2 billion, which “we expect to commence shortly and complete within three months.”

An HSBC Holdings bank branch in Hong Kong on May 24, 2022. A Hong Kong-based trade platform launched by HSBC Holdings three years ago with much fanfare has shut down after failing to build a commercially viable business.

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Asked when the bank’s dividend might return to pre-pandemic levels, CEO Noel Quinn told CNBC’s “Capital Connection” that “if all goes to plan this year, we should be above our pre-pandemic dividend level.”

HSBC paid out a total dividend of $0.51 in 2018, and $0.30 in 2019.

For 2022, the bank has already declared two interim dividends of $0.10 each, bringing the total amount of dividends paid to $0.20. Quinn said that “our final interim dividend at the end of the year, will be the balance to get us to a 50% payout ratio.”

In March, the U.K. arm of HSBC — Europe’s largest bank by assets — bought SVB U.K. for £1 ($1.21), in a deal that excludes the assets and liabilities of SVB U.K.’s parent company.

Revenue increased by 50% year-on-year to $36.9 billion in the first half, which HSBC said was driven by higher net interest income across all its global businesses due to interest rate rises.

My job is to diversify the revenue. And I believe we’re starting to show evidence of that and we will continue to invest for diversification of revenue.

Noel Quinn

CEO of HSBC Holdings

Net interest income for the first half stood at $18.3 billion, 36% higher year-on-year, while net interest margin came in 46 basis points higher at 1.70%.

The strong performance was due to strong revenue growth across all business lines and all product areas, the CEO said. “Certainly, there’s an element of interest rates in there. But there’s also good growth in our fee income and trading income.”

Solid second quarter

For the second quarter alone, HSBC beat analysts’ expectations to report an 89% jump in pre-tax profit in the second quarter.

Pre-tax profit for the quarter ended in June was $8.77 billion, beating expectations of $7.96 billion.

Net profit was $6.64 billion, beating the $6.35 billion expected in analysts’ estimates compiled by the bank, jumping 27% compared to the same period a year before.

Total revenue for the second quarter came in at $16.71 billion, 38% higher than the $12.1 billion seen in the same period a year ago.

HSBC’s Hong Kong-listed shares rose 1.23% after the announcement.

Here are other highlights of the bank’s financial report card:

Net interest income came in at $9.3 billion in the second quarter, compared to $6.9 billion in the same period a year ago.

Net interest margin, a measure of lending profitability, rose 43 basis points year on year to 1.72% in the second quarter of 2023.

Moving forward, HSBC has also raised a key performance target, forecasting a near term return on tangible equity of 12%, compared to its previous target of 9.9%.

In fact, Quinn said that in the next two years, HSBC is expecting a “mid-teens” return on tangible equity, adding that “this is a broad-based delivery of profit and return.”

He sees future growth for HSBC coming from corporate banking, as well as international wealth and international retail banking for the affluent.

“We’re investing in areas that will drive growth beyond the interest rate regime there exists today. My job is to diversify the revenue. And I believe we’re starting to show evidence of that and we will continue to invest for diversification of revenue.”

Correction: This story has been updated to reflect that net interest margin rose 43 basis points in the second quarter of 2023. An earlier version misstated the year.
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July 31, 2023
A U.S. recession is coming this year, HSBC warns — with Europe to follow in 2024

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Hong Kong observation wheel, and the Hong Kong and Shanghai Bank, HSBC building, Victoria harbor, Hong Kong, China.

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The U.S. will enter a downturn in the fourth quarter, followed by a “year of contraction and a European recession in 2024,” according to HSBC Asset Management.

In its mid-year outlook, the British banking giant’s asset manager said recession warnings are “flashing red” for many economies, while fiscal and monetary policies are out of sync with stock and bond markets.

Global Chief Strategist Joseph Little said while some parts of the economy have remained resilient thus far, the balance of risks “points to high recession risk now,” with Europe lagging the U.S. but the macro trajectory generally “aligned.”

“We are already in a mild profit recession, and corporate defaults have started to creep up too,” Little said in the report seen by CNBC.

“The silver lining is that we expect high inflation to moderate relatively quickly. That will create an opportunity for policymakers to cut rates.”

Despite the hawkish tone adopted by central bankers and the apparent stickiness of inflation, particularly at the core level, HSBC Asset Management expects the U.S. Federal Reserve to cut interest rates before the end of 2023, with the European Central Bank and the Bank of England following suit next year.

The Fed paused its monetary tightening cycle at its June meeting, leaving its Fed funds rate target range at between 5% and 5.25%, but signaled that two further hikes can be expected this year. Market pricing narrowly anticipates the Fed funds rates to be a quarter percentage point higher in December of this year, according to CME Group’s FedWatch tool.

HSBC’s Little acknowledged that central bankers will not be able to cut rates if inflation remains significantly above target — as it is in many major economies — and said it is therefore important that the recession “doesn’t come too early” and cause disinflation.

“The coming recession scenario will be more like the early 1990s recession, with our central scenario being a 1-2% drawdown in GDP,” Little added.

HSBC expects the recession in Western economies to result in a “difficult, choppy outlook for markets” for two reasons.

“First, we have the rapid tightening of financial conditions that’s caused a downturn in the credit cycle. Second, markets do not appear to be pricing a particularly pessimistic view of the world,” Little said.

“We think the incoming news flow over the next six months could be tough to digest for a market that’s pricing a ‘soft landing’.”

Little suggested that this recession will not be sufficient to “purge” all inflation pressures from the system, and therefore developed economies face a regime of “somewhat higher inflation and interest rates over time.”

“As a result, we take a cautious overall view on risk and cyclicality in portfolios. Interest rate exposure is appealing — particularly the Treasury curve — the front end and mid part of the curve,” Little said, adding that the firm sees “some value” in European bonds too.

“In credit, we are selective and focus on higher quality credits in investment grade over speculative investment grade credits. We are cautious on developed market stocks.”

Backing China and India

As China emerges from several years of stringent Covid-19 lockdown measures, HSBC believes that high levels of domestic household savings should continue to support domestic demand, while problems in the property sector are bottoming out and government fiscal efforts should create jobs.

Little also suggested that comparatively low inflation — consumer prices rose by a two-year monthly low of 0.1% in May as the economy struggles to get back firing on all cylinders — means further monetary policy easing is possible and GDP growth “should easily exceed” the government’s modest 5% target this year.

HSBC remains overweight on Chinese stocks for this reason, and Little said the “diversification of Chinese equities shouldn’t be underestimated.”

“For example, value is outperforming growth in China and Asia. That’s the opposite of developed stock markets,” he added.

Along with China, Little noted that India is the “main macro growth story in 2023” as the economy has recovered strongly from the pandemic on the back of resurgent consumer spending and a robust services sector.

“In India, recent upward growth surprises and downward surprises on inflation are creating something of a ‘Goldilocks’ economic mix,” Little said.

“Improved corporate and bank balance sheets have also been boosted by government subsidies. All the while, the structural, long run investment story for India remains intact.”

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June 27, 2023
HSBC builds innovation division from the bones of collapsed SVB UK

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HSBC UK CEO tells CNBC how the bank bought Silicon Valley Bank’s UK unit.

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U.K. banking titan HSBC unveiled a new HSBC Innovation Banking unit Monday, as it seeks to push into the technology sector following its eleventh-hour rescue of the U.K. subsidiary of failed Silicon Valley Bank (SVB) in March.

HSBC acquired the London-based SVB unit for £1 after its parent company suffered a run on its assets fueled by customer fears over the bank’s solvency. SVB was one of several U.S. and European lenders that met their downfall earlier this year as broader turmoil rattled the global banking sector.

The U.K. government and Bank of England facilitated the purchase in a bid to protect deposits, as Britain separately struggles to retain its position as an international tech capital.

Some have questioned whether traditional financial institution HSBC is well placed to take over the legacy of SVB and finance tech-focused startups and small businesses.

The criticism was shot down last week by HSBC UK CEO Ian Stuart, who told CNBC’s Arjun Kharpal that the bank would take its activity “from seed funding all the way through to IPO, customers will never have to go outside of that network to meet their funding requirements.”

HSBC said Monday that its Innovation Banking unit, launched at London Tech Week, will bring together SVB UK and freshly formed teams in the U.S., Israel and Hong Kong as it focuses on tech and life science enterprises.

“The UK’s world-leading technology and life sciences sectors are central to growing the UK economy and boosting global exports,” HSBC Group Chief Executive Noel Quinn said in a Monday statement.

“HSBC now has a world-class team focused on innovation companies, their founders and their investors. We will protect this specialisms and take it to the next level.”

British Prime Minister Rishi Sunak said that the new HSBC division will assist innovative businesses and create additional jobs, “supporting my priority to grow the UK economy and cement our position as a science and tech superpower.”

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June 12, 2023
HSBC pulls some UK mortgage deals as fears of rising rates hits home buyers once more

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“Persistently high inflation and the recent spike in lending rates will trigger a correction in the UK (Aa3 negative) housing market,” Moody’s Investor Service said in a report.

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LONDON – The U.K.’s biggest bank temporarily withdrew mortgage deals via broker services on Thursday, as the effect of higher interest rates ripples through the British housing market.

HSBC told CNBC Friday that it was reviewing the situation regularly, but did not specify whether the new deals would differ from its previous offerings. Higher rates are a possibility, given that the Bank of England is continuing to increase interest rates.

It comes eight months after hundreds of mortgage deal offers were pulled in one day after market chaos at the time sparked concerns about rising base rates.

In a statement issued Friday, HSBC said: “We occasionally need to limit the amount of new business we can take each day via brokers. All products and rates for existing customers are still available, and we continue to review the situation regularly.”

The banking group said the protocol was in order to ensure it meets “customer service commitments” and stressed that it remains open to new mortgage business.

Soaring rates

The HSBC decision comes as analysts expect mortgage rates to soar and housing prices to plummet in response to the increased base rate.

A large number of fixed-rate mortgage deals is set to expire this year, leaving homeowners vulnerable to the impact of interest rate hikes, according to economic research company Capital Economics.

The organization made an upward revision to its mortgage rate forecasts, which showed borrowers would be “subject to a larger interest rate shock than … previously envisaged.”

“Those coming to the end of a 2-year fix will see a particularly large increase in the cost of their mortgage. While those refinancing a 5-year fix this month may see their mortgage rate jump from 2.1% to 4.9%, those on a 2-year fix will see an increase from 1.4% to 5.2%,” Capital Economics said in a note published Thursday.

There are also warnings that house prices will tumble in the next two years, with credit ratings agency Moody’s forecasting a 10% decline.

“Persistently high inflation and the recent spike in lending rates will trigger a correction in the UK (Aa3 negative) housing market,” Moody’s Investor Service said in a report.

The Halifax House Price Index showed that U.K. house prices were flat in May after a 0.4% fall in April, while the average U.K. property now costs £286,532 ($360,000).

In February, U.K. house prices experienced their sharpest contraction since November 2012, according to building society Nationwide.

Prices tumbled 1.1% year-on-year, logging their first annual decline since June 2020.

The Bank of England raised its interest rate to 4.5% from 4.25% as the central bank attempts to tackle high inflation that currently sits well above the 2% target, at 8.7%.

The Organization for Economic Cooperation and Development predicts the U.K. will have the highest inflation rate out of all advanced economies this year.

Lenders and homeowners will be watching the central bank closely for its next base rate decision on June 22. It is widely expected the bank will agree its thirteenth consecutive increase.

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June 9, 2023
It’s a ‘breathing out’ for HSBC shareholders to know spin-off proposal was denied: Asset management firm

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Dan Scott of Vontobel Asset Management says HSBC shares are continuing to do well and “it’s business as usual.”

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May 7, 2023
HSBC defeats proposal to spin off its Asian business at contentious shareholder meeting

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Noel Quinn, chief executive officer of HSBC Holdings Plc, right, Mark Tucker, chairman, center, and Peter Wong, deputy chairman, during the bank’s shareholders meeting in Hong Kong, China, on Monday, April 3, 2023. HSBC’s senior executives faced its Hong Kong shareholders from retirees to taxi drivers as the lender seeks to fend off a push in Asia to split the bank. Photographer: Paul Yeung/Bloomberg via Getty Images

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Banking giant HSBC on Friday defeated a proposal, backed by its largest stakeholder Chinese insurer Ping An, to consider spinning off its Asia business into a Hong Kong-listed entity.

Investors cast their votes on the proposal at the bank’s annual general meeting in Birmingham in central England, but its supporters ultimately failed to get the majority required.

Resolution 17 and 18 on the agenda, tabled by a group of investors led by Ken Lui, called for a “strategic review” of the company, including the spinoff proposal and fixed dividends. These motions had received support Ping An Insurance, which expressed similar views to Lui in a statement.

In March, HSBC advised investors to reject the two resolutions, a stance that was supported by investor advisory firms ISS and Glass Lewis. HSBC Chairman Mark Tucker warned at Friday’s meeting that a proposal to split up the bank would undermine its global strategy and hamper its revenue.

“The indicative results of all votes today are fully in line with the board’s recommendations. Based on these indicative results, resolutions one to 15 have passed and resolutions 16, 17 and 18, which were requisitioned by shareholders, have failed,” Tucker said.

“I’m delighted that the large majority of HSBC shareholders have voted overwhelmingly to support the bank’s strategy and draw a line under the debates on the structure of the bank. The votes will now be scrutinized, validated and the final results will be released after the meeting,” he added.

Like Barclays’ annual investor meeting in central London earlier this week, HSBC’s AGM was disrupted by environmental campaigners, with protestors repeatedly and vociferously challenging the bank’s climate strategy.

Earlier this week, HSBC reported a better-than-expected set of first-quarter results and restored its quarterly dividend.

Speaking to CNBC’s Emily Tan on Friday ahead of the meeting, Lui said that “some of the actions I took put pressure on management, so it delivered a better-than-expected report. I’m satisfied with the performance this quarter. We’ll continue to monitor the conduct of the management.”

However, HSBC CEO Noel Quinn has pushed back on Lui’s resolutions, previously telling CNBC on April 14 he does not believe that fixed dividends are “wise corporate governance and wise capital management for a bank.” He said a dividend payout ratio is more balanced and “is the model of the industry.”

Last month, HSBC said spinning off its Asian business “would result in material loss of value for HSBC shareholders.”

Quinn said management is already improving the performance of the bank and is on a “very good trajectory.”

The “special resolutions” require 75% of votes to pass, but Lui expressed confidence.

“When I submitted these resolutions, I was very confident that both of them will be passed because they can stimulate the share price to go up. As a shareholder of HSBC, even if you don’t support it, you also shouldn’t vote against it,” he said.

Michael Makdad, senior equity analyst at Morningstar, said before the vote that he did not personally expect the resolutions to clear the 75% hurdle. But he told CNBC’s “Squawk Box Asia” that the proposals reflect a longer-term issue “that’s not likely to go away for HSBC.” He predicted the bank will continue to see activist or leading shareholders putting pressure on management going forward.

Makdad said a lot of the pressure comes from the fact that HSBC operates in many countries around the world, but derives most of its profitability from its Hong Kong and the U.K. units.

“It would make sense to simplify the structure. However, as a bank, it’s not easy to simplify it,” he said.

He pointed to HSBC’s attempts to sell its French retail unit as well as its Canadian operations. “If that goes through, that’ll be great. But all of these things take time, and it’s not simple.”

In light of the banking sector’s recent woes in the U.S. and Europe, Makdad was quick to add that these do not mean that HSBC is a troubled bank.

“It’s just a bank that has some great operations [in] Hong Kong, and other places. It has some very profitable, very strong operations. And then it has other operations that maybe it doesn’t need,” he said.

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May 4, 2023
HSBC spin-off proposal reflects a longer-term issue that’s not likely to go away, says analyst

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Michael Makdad of Morningstar explains why he doesn't expect the resolutions will be passed.

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May 4, 2023
HSBC spin-off: Even if you don’t support it, you shouldn’t vote against it, says activist shareholder

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HSBC activist shareholder Ken Lui says he’s confident that Resolutions 17 and 18 will be passed because they can stimulate the bank’s share price.

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May 4, 2023
Morgan Stanley says HSBC is a ‘top pick’ despite the bank’s shareholder troubles

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April 23, 2023
‘Utterly irresponsible’: SVB failure was caused by a banking — not tech — crisis, top VC says

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LONDON — The collapse of Silicon Valley Bank was the result of a crisis in banking rather than technology, according to a top venture capitalist.

Anne Glover, CEO and co-founder of Amadeus Capital, said Friday that the SVB crisis was caused by “utterly irresponsible” practices by Silicon Valley Bank and its management — namely, taking short-term deposits from VCs and investing them in long-maturity debt.

“It is a banking one-on-one failure, unbelievably irresponsible frankly by the senior management of SVB in California,” said Glover, speaking at a tech investor showcase in east London. A spokesperson for SVB wasn’t immediately available for comment when contacted by CNBC.

SVB was shut down and taken over by the U.S. government after a slew of startups and venture capitalists withdrew their money en masse amid fears over its financial health.

The firm had earlier tried to raise $2.25 billion of capital to plug a $1.8 billion hole in its balance sheet caused by the sale of $21 billion worth of bonds at a loss. The bank was a crucial pillar of the tech industry, offering financing for firms often turned away by the traditional banks.

“They took cash deposits from VCs and hedge funds and put them into first-year mortgage bonds that fell in value when the interest rates went up,” Glover added.

“They didn’t hedge the interest rate. This is really basic banking, it’s nothing to do with the tech community. The tech community was impacted.”

Across the Atlantic, SVB’s U.K. arm was sold to British bank HSBC for £1, in a government and Bank of England-facilitated deal that protected £6.7 billion ($8.3 billion) in deposits.

Glover, who serves on the Bank of England’s board as a non-executive director, said the central bank “did a phenomenal job in delivering a resolution that was satisfactory to the U.K., much better than the U.S. did.”

Banks more broadly have been under immense strain due to a rise in interest rates, which has made debt more expensive. While on the one hand it is now more profitable for banks to lend, they are also holding government bonds on their balance sheet. When interest rates rise, those assets become less valuable.

Credit Suisse is the most notable failure in the sector to date. The Swiss banking giant was rescued by rival lender UBS in a cut-price deal coordinated by the Swiss government.

Glover, a prolific tech investor, joined Amadeus after previously running Apax Ventures. She co-founded Amadeus in 1997 with Hermann Hauser, who was instrumental in the development of the first Arm processor.

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April 21, 2023
House Oversight Committee quietly issues several new subpoenas as part of Biden family probe | CNN Politics

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House Oversight Chairman James Comer has quietly issued several subpoenas for documents and bank records as part of the Republican-led investigation into the financial dealings of President Joe Biden’s family, according to an internal memo shared among Democrats on the panel.

The memo, obtained by CNN, reveals new details about the subpoenas issued by Comer as part of the ongoing probe, which has stoked the ire of Democratic members who have accused the Kentucky Republican of covertly investigating business dealings by the president’s son, Hunter Biden.

“This memorandum serves to ensure that Committee Democrats have access to all relevant information, including the six document subpoenas issued to date,” it says.

The memo comes a day after the committee’s top Democrat, Maryland Rep. Jamie Raskin, criticized committee Republicans for “shielding information” related to the panel’s investigations. House rules mandate that committee materials are shared between the majority and minority.

“Committee Republicans’ decision to conduct this probe behind a veil of secrecy runs counter to the Committee’s traditional commitment to transparency and raises serious questions about the integrity of the investigation,” Democrats wrote in the memo.

According to the Democrats’ memo, subpoenas have been sent to: Bank of America, Cathay Bank, JPMorgan Chase, HSBC USA N.A and Mervyn Yan, a former business associate of Hunter Biden. In most cases the subpoenas to the banks span 14 years and relate to six individuals and 10 different entities, House Democrats say. The business entities covered by the subpoenas include several with ties to China and the energy sector, according to those listed in the memo.

The subpoena to HSBC was initially sent, and later reissued, after the bank requested an updated cover page, according to a person familiar with the matter. A spokesperson for HSBC declined to comment.

CNN has reached out to JP Morgan Chase & Co., and an email address associated with Mervyn Yan for comment.

“Cathay Bank, a NASDAQ-listed, U.S. financial institution for over 60 years, has cooperated with the House Committee on Oversight and Accountability’s request for information,” said a bank spokesperson. “The bank intends to continue to cooperate with the committee.”

CNN first reported on Comer’s subpoena for Bank of America in March to compel the bank to turn over records relating to three of Hunter Biden’s business associates.

The six subpoenas listed do not include “friendly” subpoenas Comer has issued to some witnesses, including former Twitter employees, who have testified before the committee.

“Despite their vast efforts, Committee Republicans have failed to identify any evidence connecting President Biden to or implicating him in the foreign transactions under investigation,” according to the memo from Democrats.

Comer slammed the Democrats’ memo in a statement on Friday. “Ranking Member Raskin has again disclosed Committee’s subpoenas in a cheap attempt to thwart cooperation from other witnesses,” Comer said. “No one should be fooled by Ranking Member Raskin’s games. We have the bank records, and the facts are not good for the Biden family.”

Democrats also laid out what they called “inconsistencies” among the investigations that Comer and the panel’s Republican members are interested in pursuing, arguing they are only interested in probing the Biden family, but not do want to investigate similar issues pertaining to former President Donald Trump and his family.

“To date, Chairman Comer has issued six subpoenas and sent 39 letters in the Biden family investigation alone. Notably, Mr. Comer has failed to issue a single document subpoena in any other Committee investigation this Congress,” Democrats wrote.

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April 7, 2023
We support the proposal to spin off HSBC’s Asia business, says Hong Kong district councilor

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Christine Fong, councilor for Hong Kong’s Sai Kung district, discusses a proposal by an activist shareholder in Hong Kong to spin off HSBC’s Asia business.

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April 3, 2023
‘Nationalizing bond markets’ left central banks unprepared for inflation, top HSBC economist says

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One Canada Square, at the heart of Canary Wharf financial district seen standing between the Citibank building and HSBC building on 14th October 2022 in London, United Kingdom.

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The prolonged period of loose monetary policy after the global financial crisis equated to central banks “nationalizing bond markets,” and meant policymakers were slow off the mark in containing inflation over the past two years, according to HSBC Senior Economic Adviser Stephen King.

Central banks around the world have hiked interest rates aggressively over the past year in a bid to rein in soaring inflation, after a decade of loose financial conditions. The swift rise in interest rates has intensified concerns about a potential recession and exposed flaws in the banking system that have led to the collapse of several regional U.S. banks.

Speaking to CNBC at the Ambrosetti Forum in Italy on Friday, King said that while quantitative easing had benefited economies trying to recover from the 2008 financial crisis, its duration meant that governments were “probably far too relaxed about adding to government debt.”

“Part of the problem with QE was the fact that you’re basically nationalizing bond markets. Bond markets have a very very useful role to play when you’ve got inflation, which is they’re an early warning indicator,” King told CNBC’s Steve Sedgwick.

“It’s a bit like having an enemy bombing raid and you turn off your radar systems — you can’t see the bombers coming along, so effectively it’s the same thing, you nationalize the bond markets, bond markets can’t respond to initial increases in inflation, and by the time central banks spot it, it’s too late, which is exactly what I think has happened over the last two or three years.”

The U.S. Federal Reserve was slow off the mark in hiking interest rates, initially contending that spiking inflation was “transitory” and the result of a post-pandemic surge in demand and lingering supply chain bottlenecks.

“So effectively you’ve got a situation whereby they should have been raising interest rates much much sooner than they did, and when they finally got round to raising interest rates they didn’t really want to admit that they themselves had made an error,” King said.

He suggested that the “wobbles” in the financial system over the past month, which also included the emergency rescue of Credit Suisse by Swiss rival UBS, were arguably the consequence of a prolonged period of low rates and quantitative easing.

“What it encourages you to do is effectively raise funds very cheaply and invest in all kinds of assets that might be doing very well for a short period of time,” King said.

“But when you begin to recognize that you’ve got an inflation problem and start to raise rates very very rapidly as we’ve seen over the course of the last couple of years, then a lot of those financial bets begin to go rather badly wrong.”

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March 31, 2023
HSBC bought Silicon Valley Bank UK in record time — here’s how events unfolded

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HSBC came to the rescue of Silicon Valley Bank UK in a crucial deal for the whole banking sector. But if you had told its CEO — just a few days beforehand — that this would be happening, he would not have believed you.

“I was going about my normal business on Friday. If somebody had said to me [that] we would be acquiring another bank within two or three days, I wouldn’t have believed it,” Ian Stuart, CEO of HSBC UK Bank, told CNBC’s “Squawk Box Europe” Thursday.

It was all very quick. Silicon Valley Bank — a U.S. lender with clients mostly in the tech and health-care startup world — was deemed insolvent by American regulators on Friday. That raised alarm bells across the pond, where SVB had a subsidiary.

Consequently, the Bank of England announced Friday that, “absent any meaningful further information,” it would be placing Silicon Valley Bank UK into an insolvency procedure.

“Woke up on Saturday morning, saw the announcement and by just after 10:30 a.m. we were in touch with the regulator offering our help, myself and our global CEO Noel Quinn both in contact. And it went a little bit quiet, I think at that point we were just trying to offer any assistance we could,” Stuart said.

More than 200 companies — depositors with SVB UK — wrote Saturday to the U.K.’s Treasury asking for help. They said that some would not be able to comply with payroll deadlines without accessing their deposits with SVB UK.

“We got access to the data bank early on Sunday. We had about five hours to do due diligence and by about 6pm on Sunday — and we had lots of meetings throughout the day — as far as we were concerned it was a competitive situation, and I can honestly tell that even up to about 10, 11 p.m. at night, I still thought it was a competitive situation and around about that time, we were in really close dialogue with the regulator.”

Other financial institutions were also in the mix and assessing the possibility of buying SVB UK, including OakNorth Bank, The Bank of London and Abu Dhabi investment firm Royal Group.

It’s a wonderful opportunity.

“It wasn’t until … early hours of Monday morning that we thought, ‘right, I think we have got a bank,’ and we started preparing comms at that point,” Stuart said.

HSBC UK announced at 7 a.m. London time Monday that it was buying Silicon Valley Bank UK for £1 ($1.21). The deal protected £6.7 billion in deposits.

“We have a U.K. bank that’s well run, very good people, good quality products and, yes, five hours isn’t a lot of time to do due diligence, but what we decided was, ‘Are there any black holes? No, not that we could see,’” Stuart said.

“Was it worth — your words, not mine — a gamble. We thought it was a sensible approach, we didn’t ask for government support, we didn’t ask for anything out of the ordinary,” he said, adding that the deal will help HSBC accelerate its strategic plan by two or three years.

“It’s a wonderful opportunity,” he said.

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March 16, 2023
Why Silicon Valley Bank collapsed and what it could mean | CNN Business

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CNN
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Silicon Valley Bank collapsed with astounding speed on Friday. Investors are now on edge about whether its demise could spark a broader banking meltdown.

The US federal government has stepped in to guarantee customer deposits, but SVB’s downfall continues to reverberate across global financial markets. The government has also shut down Signature Bank, a regional bank that was teetering on the brink of collapse, and guaranteed its deposits.

In a sign of how seriously officials are taking the SVB failure, US President Joe Biden told Americans Monday that they “can rest assured that our banking system is safe,” adding: “We will do whatever is needed on top of all this.”

Here’s what you need to know about the biggest US bank failure since the global financial crisis.

Established in 1983, Silicon Valley Bank was, just before collapsing, America’s 16th largest commercial bank. It provided banking services to nearly half of all US venture-backed technology and life science companies.

It also has operations in Canada, China, Denmark, Germany, Ireland, Israel, Sweden and the United Kingdom.

SVB benefited hugely from the tech sector’s explosive growth in recent years, fueled by ultra-low borrowing costs and a pandemic-induced boom in demand for digital services.

The bank’s assets, which include loans, more than tripled from $71 billion at the end of 2019 to a peak of $220 billion at the end of March 2022, according to financial statements. Deposits ballooned from $62 billion to $198 billion over that period, as thousands of tech startups parked their cash at the lender. Its global headcount more than doubled.

SVB’s collapse came suddenly, following a frenetic 48 hours during which customers yanked deposits from the lender in a classic run on the bank.

But the root of its demise goes back several years. Like many other banks, SVB ploughed billions into US government bonds during the era of near-zero interest rates.

What seemed like a safe bet quickly came unstuck, as the Federal Reserve hiked interest rates aggressively to tame inflation.

When interest rates rise, bond prices fall, so the jump in rates eroded the value of SVB’s bond portfolio. The portfolio was yielding an average 1.79% return last week, far below the 10-year Treasury yield of around 3.9%, Reuters reported.

At the same time, the Fed’s hiking spree sent borrowing costs higher, meaning tech startups had to channel more cash towards repaying debt. At the same time, they were struggling to raise new venture capital funding.

That forced companies to draw down on deposits held by SVB to fund their operations and growth.

While SVB’s problems can be traced back to its earlier investment decisions, the run on the bank was triggered Wednesday when the lender announced that it had sold a bunch of securities at a loss and would sell $2.25 billion in new shares to plug the hole in its finances.

That set off panic among customers, who withdrew their money in large numbers.

The bank’s stock plummeted 60% Thursday and dragged other bank shares down with it as investors began to fear a repeat of the global financial crisis a decade and a half ago.

By Friday morning, trading in SVB shares was halted and it had abandoned efforts to raise capital or find a buyer. California regulators intervened, shutting the bank down and placing it in receivership under the Federal Deposit Insurance Corporation, which typically means liquidating the bank’s assets to pay back depositors and creditors.

US regulators said Sunday that they would guarantee all SVB customers’ deposits. The move is aimed at preventing more bank runs and helping tech companies to continue paying staff and funding their operations.

The intervention does not amount to a 2008-style bailout, however, which means investors in the company’s stock and bonds will not be protected.

“Let me be clear that during the financial crisis, there were investors and owners of systemic large banks that were bailed out … and the reforms that have been put in place mean that we’re not going to do that again,” Treasury Secretary Janet Yellen told CBS in an interview Sunday.

“But we are concerned about depositors and are focused on trying to meet their needs.”

There are already some signs of stress at other banks. Trading in First Republic Bank

(FRC) and PacWest Bancorp

(PACW) was temporarily halted Monday after the shares plunged 65% and 52% respectively. Charles Schwab

(SCHW) stock was down 7% at 11.30 a.m. ET Monday.

In Europe, the benchmark Stoxx Europe 600 Banks index, which tracks 42 big EU and UK banks, fell 5.6% in morning trade — notching its biggest fall since last March. Shares in embattled Swiss banking giant Credit Suisse were down 9%.

SVB isn’t the only financial institution whose investments into government bonds and other assets have fallen dramatically in value.

At the end of 2022, US banks were sitting on $620 billion in unrealized losses — assets that have decreased in price but haven’t been sold yet, according to the FDIC.

In a sign that regulators have concerns about wider financial chaos, the Fed said Sunday that it would make additional funding available for eligible financial institutions to prevent the next SVB from collapsing.

Most analysts point out that US and European banks have much stronger financial buffers now than during the global financial crisis. They also highlight that SVB had very heavy exposure to the tech sector, which has been particularly hard hit by rising interest rates.

“While SVB is a major failure, [it] and other niche players like Signature are quite unique in the broader banking world,” research analysts David Covey, Adrian Cighi and Jaimin Shah at M&G Investments commented in a blog post on Monday. “So unique, in our view, that it is unlikely to create material problems for any of the large diversified banks in the US or Europe from a credit point of view.”

HSBC stepped in Monday to buy SVB UK for £1 ($1.2), securing the deposits of thousands of British tech companies that hold money at the lender.

Had a buyer not been found, SVB UK would have been placed into insolvency by the Bank of England, leaving customers with only deposits worth up to £85,000 ($100,000) — or £170,000 ($200,000) for joint accounts — guaranteed.

The HSBC rescue is “fantastic news” for the UK startup ecosystem, said Piotr Pisarz, the CEO of Uncapped, a financial tech startup that lends to other startups. “I think we can all relax a bit today,” he told CNN.

In a statement, HSBC CEO Noel Quinn said the acquisition “strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life science sectors, in the UK and internationally.”

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March 13, 2023
HSBC pays £1 to rescue UK arm of Silicon Valley Bank after all-night talks

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The Silicon Valley Bank (SVB) logo is seen through a rain-covered window.

Justin Sullivan | Getty Images News | Getty Images

LONDON — HSBC on Monday announced a deal to buy the U.K. subsidiary of collapsed U.S. tech startup lender Silicon Valley Bank, following all-night talks.

HSBC confirmed that its U.K. ring-fenced subsidiary, HSBC UK Bank, had agreed to acquire SVB U.K. for £1 ($1.21). The assets and liabilities of SVB U.K.’s parent company are excluded from the transaction.

The acquisition “strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life-science sectors, in the U.K. and internationally,” said HSBC Group CEO Noel Quinn.

“SVB U.K. customers can continue to bank as usual, safe in the knowledge that their deposits are backed by the strength, safety and security of HSBC.”

As of Friday, SVB U.K. had loans of around £5.5 billion and deposits of around £6.7 billion, with £88 million of full-year profit before tax in 2022, HSBC highlighted in the Monday statement. The bank expects SVB U.K.’s tangible equity to be around £1.4 billion, but added that “final calculation of the gain arising from the acquisition will be provided in due course.”

The sale, facilitated by the Bank of England in consultation with the U.K. Treasury, will protect the deposits of SVB U.K. clients, the Treasury said in a statement.

Shares of HSBC were down 3.4% around 9:30 a.m. London time, following the announcement of the transaction.

British Finance Minister Jeremy Hunt stressed that the deal “ensures customer deposits are protected and can bank as normal, with no taxpayer support.”

“The U.K.’s tech sector is genuinely world-leading and of huge importance to the British economy, supporting hundreds of thousands of jobs,” he added.

Hunt had on Sunday said that the U.K. administration and the Bank of England were working to “avoid or minimize” potential damage resulting from the U.K. branch of SVB.

In parallel, U.S. regulators on Sunday approved plans to backstop depositors and financial institutions linked with U.S. parent company SVB.

The U.S. Treasury Department designated both SVB and New York-based Signature Bank, which was shuttered Sunday over similar contagion fears, as systemic risks, enabling it to unwind both institutions in a way that protects depositors.

Not a ‘systemic issue’

Andrew Griffith, economic secretary with the U.K. Treasury, signaled that the fallout of SVB’s U.K. branch did not represent a “systemic issue,” amid market concerns of a broader spread of withdrawals among lenders.

“The Bank of England governor has been very clear about the fact that this wasn’t a systemic issue,” he told CNBC’s Silvia Amaro Monday. “We’ve now resolved this bank, we’ve resolved that decisively, and it’s now well capitalized with HSBC standing behind that, and customers will continue to have access to their deposits and their banking facilities, while still protecting the taxpayers’ interests.”

He stressed the need to support the businesses served by SVB, which had focused on tech startups:

“It’s an important sector to us, and in particular they rely on their access to cash to do what they’re exceptionally good at,” he said. “So it was a clear priority for us to be able to give them the certainty this morning, if we could, that they could continue to operate their business.”

‘Big sigh of relief’ for UK tech startups

Toby Mather, CEO and co-founder of startup children’s education platform Lingumi, has been a customer of SVB for the last seven years, depositing 85% of the company’s cash with the stricken lender.

He told CNBC on Monday that the HSBC acquisition caused a “big sigh of relief” for British startups.

“I think I speak on behalf of UK startups when we say this is a huge relief and we can look our teams in the eye at 9 o’clock in our all-hands calls, which were going to be pretty nerve-racking this morning and say, not only will we be able to make the next payroll, but we can continue business as usual, continue innovating, doing our research and development and building the future of U.K. technology growth,” he said.

“HSBC is a great outcome … for the bank to go to a really large household name that has hundreds of years of history, I think is one of the best outcomes we could have had to feel like we can now stay with the new SVB, which has been such an important partner to the startup ecosystem, here and in the U.S. for decades now, so we feel confident.”

Bids in

A host of potential buyers had submitted proposals to purchase SVB U.K. since the Friday failure of its U.S. parent company, amid widespread concern over the immediate futures of many British tech and life sciences startups.

The Bank of London said that a consortium of private equity firms that it led had also submitted a formal proposal to the U.K. Treasury and the Prudential Regulation Authority at the Bank of England.

Bank of London CEO Anthony Watson said SVB “cannot be allowed to fail given the vital community it serves.”

“This is a unique opportunity to ensure the U.K. has a more diversified banking sector, whilst allowing continuity of service to SVB’s U.K. client base. It would be deeply disappointing for this moment to lead to further consolidation of power among big banks.”

The Bank of England confirmed that no other U.K. banks are “directly materially affected by these actions, or by the resolution of SVBUK’s U.S. parent bank,” adding that the wider British banking system remains “safe, sound and well capitalised.”

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March 13, 2023
HSBC is buying SVB’s UK business for just over $1 | CNN Business

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Hong Kong/London
CNN
—

HSBC has scooped up the UK arm of Silicon Valley Bank for £1 ($1.2), just days after its business in the United States collapsed in stunning fashion.

SVB UK would have been placed into insolvency by the Bank of England following the failure of its parent, had a buyer not been found.

In a statement, the Bank of England said it “can confirm that all depositors’ money with SVB UK is safe and secure as a result of this transaction.”

Europe’s biggest bank announced the acquisition early Monday morning, saying the deal would be effective “immediately.”

In a statement, HSBC CEO Noel Quinn said the deal means that “SVB UK customers can continue to bank as usual, safe in the knowledge that their deposits are backed by the strength, safety and security of HSBC.”

“This acquisition makes excellent strategic sense for our business in the UK,” he said. “It strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life-science sectors, in the UK and internationally.”

As of last Friday, SVB UK had loans of approximately £5.5 billion ($6.7 billion) and deposits of around £6.7 billion ($8.1 billion), according to the statement. It also logged a pretax profit of £88 million ($106.5 million) in its last fiscal year ended December.

SVB, a lender best known for providing financing to startups, had faced liquidity concerns in the United States, triggering a huge bank run last week. That ultimately led to its collapse, the second-biggest of a financial institution in US history, on Friday.

US financial regulators reacted swiftly to concerns of contagion over the weekend, announcing that customers of the failed bank would get access to all their money starting Monday.

Authorities have also guaranteed deposits for customers of Signature Bank, a regional US lender shut down by regulators because it had faced financial trouble in recent days.

— This is a developing story and will be updated.

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March 13, 2023
European banking stocks sink as Silicon Valley Bank jitters spread

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European banking stocks sold off sharply in early trade Friday as jitters surrounding U.S. bank SVB Financial — which plunged 60% Thursday — spread around the world.

It followed an announcement by the tech-focused lender of a capital raise to help offset bond sale losses.

The Euro Stoxx Banks index was on pace for its worst day since June, led by a decline of more-than 8% for Deutsche Bank.

Societe Generale, HSBC, ING Groep and Commerzbank all fell more than 5%.

This is a breaking news story and will be updated shortly.

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March 10, 2023
China denies Mark Mobius’ claims that its government is restricting capital flow

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Chinese authorities have denied claims by billionaire investor Mark Mobius, who said he is unable to wire funds out of China due to government restrictions on capital flow.

Asked in an interview with Fox Business last week about whether he’s reduced his exposure to China, Mobius said, “the government is restricting the flow of money out of the country.”

He warned investors of “all kinds of barriers” imposed by the government.

“I’m personally affected because I have an account with HSBC in Shanghai,” he told Fox Business. “I can’t get my money out.”

Mark Mobius, executive chairman of Templeton Asset Management’s Emerging Markets Group

Dario Pignatelli | Bloomberg | Getty Images

China has strict rules on foreign exchange and taking money out of the country.

Officials at the State Administration on Foreign Exchange (SAFE) told CNBC in a Monday statement that it’s a matter of a “basic process and internal control requirements of the bank handling specific business.” They did not name HSBC.

“We have noticed that relevant market participants have doubts about the bank’s handling of their personal fund remittance businesses,” SAFE said in its statement. “There is no change in the country’s policy on cross-border remittance of funds.”

On Tuesday, Mobius told Hong Kong newspaper Ming Pao the “problem has been resolved” but did not elaborate.

When asked about the Ming Pao report, HSBC said, “We do not comment on individual client circumstances.”

SAFE said it will continue guiding and urging commercial banks to optimize cross-border financial services and improve their service levels.

Peter Alexander, managing director of Z-Ben, a Shanghai-based investment management consulting firm, said he did not encounter problems in cross-border capital flows out of China.

“I spent this morning speaking to a dozen clients all of whom confirmed to me that there are no issues in the operations of cross-border capital flows,” he wrote in a LinkedIn post. “Business as usual.”

Read more about China from CNBC Pro

He said what Mobius is facing may be a process that “any individual looking to conduct overseas transfers” goes through. He added that his business has “never had a single issue” wiring money in and out of China.

“As for Mobius, well the issue raised is with his personal bank account,” Alexander wrote. He pointed out that Mobius is “far from alone in his frustration” as other have experienced the same issues.

— CNBC’s Iris Wang contributed to this report.

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March 6, 2023
CNBC Daily Open: The Fed wants inflation at 2%. But the economy might be fine with higher inflation
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United States Federal Reserve building, Washington D.C.

Lance Nelson | The Image Bank | Getty Images

This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

The Fed wants to bring inflation down to 2%. But the economy may be fine with higher inflation.

What you need to know today

HSBC, Europe’s largest bank by assets, reported a fourth-quarter profit of $5.2 billion before tax. That’s a 108% jump year over year, beating analysts’ estimates of an 87% increase. More good news: The bank is one of the few companies optimistic about its performance this year.

Markets in the U.S. were closed on Monday for Presidents Day, but stock futures dropped overnight. In Asia-Pacific, markets traded mixed Tuesday. Japan’s Nikkei 225 dipped 0.23% as the country’s flash purchasing managers’ index fell to 47.4 in February, indicating a contraction.

The U.S. Federal Reserve — and many other central banks in the world — have been proclaiming their determination to bring inflation down to 2%. But it’s an arbitrary target criticized by some economists.

PRO The U.S. economy could avoid a recession this year — or crash. These stocks let investors “expect the best … but insure against the worst,” according to Goldman Sachs.

The bottom line

The 2% inflation target has been repeated so often by Fed officials and central bankers worldwide that it seems absolutely crucial to a healthy economy. But “the 2% inflation target, it’s relatively arbitrary,” said Josh Bivens, director of research at the Economic Policy Institute.

In fact, it was invented in New Zealand in the 1980s. Arthur Grimes, professor of wellbeing and public policy at Victoria University, said that New Zealand was experiencing skyrocketing inflation then, and the central bank picked an inflation target — seemingly out of nowhere — so that it could work toward a goal.

Other central banks followed suit. In 1991, Canada announced its inflation target; the United Kingdom followed a year later. It was not until 2012 that the U.S. declared its 2% inflation target, but that number has remained stubbornly alive in the minds of the Fed ever since.

But if the 2% target is arbitrary, it implies that the economy could function normally at a higher level of inflation. Indeed, in 2007, some economists wrote a letter to the Fed arguing for a higher ceiling. “There’s no evidence that 3% or 4% inflation does substantial damage relative to 2% inflation,” said Laurence Ball, professor of economics at Johns Hopkins University, who was among those who signed that letter.

The Fed, however, is unlikely to change its target amid the current hiking cycle — it might look like it’s caving to investor demands for lower rates. Reconsidering what healthy inflation means will be a task left to another generation of central bankers.

—CNBC’s Andrea Miller contributed to this report.

Subscribe here to get this report sent directly to your inbox each morning before markets open.
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February 20, 2023