HSBC to Buy Silicon Valley Bank's U.K. Arm
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HSBC (-4.1% in London) announced the acquisition of Silicon Valley Bank UK (SVB UK), the UK subsidiary of the bankrupt US Silicon Valey Bank, for £1. HSBC and the UK Treasury stated that all funds deposited with SVB UK were safe and that all operations would continue as normal. The UK banking giant indicated that the acquisition would enable it to strengthen its presence in the UK. As of 10 March, SVB UK had loans of around £5.5 billion (€6.22 billion) and deposits of around £6.7 billion, while equity capital is expected to be around £1.4 billion. The acquisition was completed with immediate effect. The Bank of England (BOE) commented that it had taken the decision to sell SVB UK in order to stabilise the business, ensure continuity of banking services, minimise disruption to the UK technology sector and support confidence in the financial system. On Friday, SVB UK's parent company, Silicon Valley Bank, was shut down following a run on its deposits, becoming the second largest bank failure in US history. The BOE had signalled on Friday evening that it planned to place SVB UK in insolvency proceedings on Sunday, unless the situation changed.
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The Swiss stock market held up slightly better on Monday on a pitch-black trading day in Europe. Nevertheless, the Swiss stock market also posted marked declines, but the flight to perceived safety slowed the slide marginally, as defensive heavyweights Nestle (+1.2%), Roche (+0.2%) and Novartis (+0.1%) were sought after. The Swiss franc also gained due to investors' need for safety. Concerns about contagion risks in the banking sector as a result of the developments surrounding Silicon Valley Bank (SVB) in the US deterred equity investors. This was particularly felt by the European banking sector, which sank by 5.7 per cent. The SMI lost 1.2 per cent to 10,632 points. Among the 20 SMI stocks, there were 15 price losers and five price winners. 151.96 (previously: 89.44) million shares were traded. With the weakness of the European banking sector, Credit Suisse shares (-9.6%) slumped and marked an all-time low. UBS plunged 7.7 per cent. Similarly, insurance stocks such as Swiss Re, Swiss Life and Zurich were under pressure, losing up to 4.3 per cent. Holcim (-3.6 per cent) bought in Mexico. Among small caps, Metall Zug fell 1.5 per cent after reporting financial results. HIAG (+0.8%) reported successful real estate project developments for 2022.
European stocks traded significantly lower again on Monday as investors continued to digest the Silicon Valley Bank fallout. The Stoxx Europe 600 index dropped 2.4% to 442.8 points. In Paris, the CAC 40 and the SBF 120 were each down 2.9%. The DAX 40 index in Frankfurt gave up 3%, and the FTSE 100 in London shed 2.6%. The banks continue to be penalised by the setbacks of Silicon Valley Bank. In Paris, Société Générale and BNP Paribas slipped 6.2% and 6.8% respectively. Crédit Agricole SA slumped 3.1%. In Frankfurt, Deutsche Bank was down 4.9%. In Milan, UniCredit slid by 9% and Intesa Sanpaolo by 6.1%. In Madrid, Banco Santander plunged 7.4%. The pharmaceutical company Sanofi (-1.7%) has reached an agreement to acquire the US biopharmaceutical company Provention Bio for approximately 2.9 billion dollars. Sanofi will acquire the outstanding shares of Provention Bio listed on the Nasdaq for $25 per share. Faurecia was the biggest decliner on the SBF 120 (-8.3%) after Morgan Stanley downgraded its recommendation on the stock from "overweight" to "neutral weight", while maintaining its price target of €20. Michelin (-3.6%) confirmed at an investor day its intention to increase the share of its "non-tire" activities to between 20% and 30% of turnover by 2030, compared with less than 5% currently. US private equity firm Silver Lake and Canadian pension fund Canada Pension Plan Investment Board have reached an agreement to acquire Qualtrics for $12.5bn, including the purchase of SAP's stake (-3% in Francort) for $7.7bn.
Major U.S. stock indexes held relatively steady Monday while investors attempted to assess what newfound stress in the banking system would mean for Federal Reserve policy. Regional bank stocks plunged, and investors piled into government bonds to seek safety after regulators took extraordinary measures over the weekend to limit the impact of the collapse of Silicon Valley Bank. The Treasury Department, the Fed and the Federal Deposit Insurance Corp. guaranteed the deposits of SVB, which collapsed after an attempt to raise capital led to a bank run. Regulators also said they had taken control of Signature Bank, which serves many cryptocurrency companies. Yet stock investors found a possible silver lining in the tumult: The rescue plan appeared to shift—at least temporarily—the calculus on the path of the Fed’s interest-rate increases. The S&P 500 closed down 5.83 points, or 0.2%, at 3855.76, for its third straight day of losses. The Dow Jones Industrial Average slipped 90.50 points, or 0.3%, to 31819.14. The tech-heavy Nasdaq Composite added 49.96 points, or 0.4%, to 11188.84. Regional bank shares plummeted, with investors’ confidence shaken. Larger banks fared better, but the S&P 500’s financial sector was still off about 3.8%. First Republic shares were halted for volatility after plunging 65% in morning trading, despite an agreement for additional financing from JPMorgan Chase on Sunday. The regional lender’s shares fell $50.55, or 62%, to close at $31.21. First Republic, Western Alliance Bancorp, and Metropolitan Bank were among the worst performers in the U.S. stock market, all dropping by more than 40%. The KBW Bank Index, which tracks 24 leading banks, tumbled 12%. Pfizer (+1.2%) announced that it has reached an agreement to acquire biotech company Seagen (+15%) for an enterprise value of $43bn, a deal designed to bolster its cancer treatment programme. Illumina shares rose 17%. Software company Qualtrics International (+6.8%), which specialises in experience management solutions, is to be acquired by private equity firm Silver Lake and Canadian pension fund Canada Pension Plan Investment Board for $12.5bn. The price includes the purchase of the majority stake from Germany's SAP for $7.7 billion. Rivian shares hit a new all-time low, losing 3.1% to $13.73. The carmaker and Amazon are negotiating the end of their exclusive partnership in electric vans following orders placed by the e-commerce giant for 2023, according to people close to the matter.
Stocks in Asia mostly fell, with Japan’s Nikkei 225 down 2.3% and the Hang Seng in Hong Kong down 1.8%. China’s Shanghai Composite slipped 0.8%. In South Kora, the Kospi declined by 2.4%. Japan’s Nikkei 225 was weighed down by financial stocks. The shares of Sumitomo Mitsui Financial Group fell by 7.6%. HSBC shares in Hong Kong lost 4.8% and AIA Group edged 3.9% lower.
U.S. government debt yields fell sharply on Monday as the failures of Silicon Valley Bank and Signature Bank had investors factoring in the chances of the Federal Reserve either pausing its rate-hike campaign or raising borrowing costs more slowly next week. The 2-year Treasury note declined by more than 60 basis points, or 0.6 percentage points, to 3.962%. The 10-year Treasury note slipped by 16 basis points to 3.53%.
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