HSBC Holdings looks to have bagged a bargain to purchase the U.K. division of Silicon Valley Bank for £1 back in March, as the U.K.-headquartered bank on Tuesday it made a provisional gain of $1.5 billion from the deal.
The deal, hashed out by the U.K. Treasury and the Bank of England, was arranged after U.S. parent SVB Financial Group was taken over by regulators in early March following a $42 billion run on the bank. The collapse is marked as the second biggest bank failure in U.S. history.
HSBC
HSBC
said on Tuesday in its first-quarter results that it recorded initial deposit outflows following its acquisition, but outflows are now stabilizing, and client exits have been “minimal.” As of March 31, it provided $2.8 billion in funding to SVB U.K.
HSBC bosses said the SVB investment was an opportunity to “accelerate” its growth plans to take the unit global.
“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,” said Noel Quinn, group chief executive.
Other gains from buying failed banks
Otther lenders have made some sizeable gains from catching falling pieces of failed banks.
On Monday, J.P. Morgan’s
JPM
bid to buy up the majority of First Republic Bank’s assets was accepted in an auction by regulators. The Jamie Dimon-led bank will gain around $2.6 billion initially from the fire sale.
Swiss lender UBS Group
UBS
drew $28 billion in new money in its global wealth-management business following the news of its takeover of Credit Suisse
CS
in March, $7 billion of which poured in during the last 10 days of the month, according to its recent quarterly results. UBS may report earnings of up to $57 billion in the second quarter, multiple media services reported, citing the benefit from negative goodwill.
Meanwhile, First Citizens BancShares
FCNCA
bought $72 billion worth of SVB assets at a discounted price of $16.5 billion, while also handling $56 billion of the failed bank’s deposits. The bank is set to report its first-quarter earnings on May 10.
More: How First Republic ended up as the second-largest bank takeover in history
Back to HSBC’s results, the lender reported a first-quarter net profit of $10.33 billion, more than triple than the $2.76 billion declared in the same period last year.
Rising interest rates also boosted the bank’s revenue, which rose 64% to $20.2 billion. It also declared the first quarterly dividend since 2019 of 10 cents per share, as well as a share buyback of up to $2 billion.
The largest bank in Europe also benefited from a reversal of a $2.1 billion impairment that HSBC carried out against the planned sale of its retail French unit as “completion of the transaction has become less certain,” the bank said.
Earlier last month, the bank warned that there could be a potential delay of the sale of the business to Cerberus Capital Management but assured that there would be no “material impact on guidance or performance at the group level” if the sale doesn’t go through.
Opinion: First Republic’s failure exposes a flawed system where bank CEOs are not held accountable
