London share prices opened lower on Monday amid continued disquiet over the collapse of Silicon Valley Bank and despite HSBC Holdings stepping in to buy the US lender’s UK arm.
The FTSE 100 index opened down 88.25 points, 1.1%, at 7,660.10. The FTSE 250 was down 231.43 points, 1.2%, at 19,126.03, and the AIM All-Share was down 5.29 points, 0.6%, at 832.15.
The Cboe UK 100 was down 1.1% at 766.20, the Cboe UK 250 down 1.4% at 16,733.87, and the Cboe Small Companies down 0.3% at 13,758.04.
Asia-focused lender HSBC said its ring-fenced UK subsidiary, HSBC UK Bank has acquired Silicon Valley Bank UK, for the nominal price of £1. ‘The transaction completes immediately,’ HSBC said.
HSBC shed 0.2% on the back of the news.
On Friday, SVB UK’s Californian parent company collapsed, with US regulators seizing its assets. The Bank of England then ordered its UK arm into insolvency on Sunday night.
A number of buyers were said to be considering the acquisition of SVB UK, with Sky News reporting that JPMorgan Chase also was exploring the possibility.
According to HSBC, as of Friday, SVB UK had loans of around £5.5 billion, with deposits of around £6.7 billion. In 2022, it brought in pretax profit of £88 million. Its tangible equity is expected to be around £1.4 billion.
‘Final calculation of the gain arising from the acquisition will be provided in due course,’ HSBC said.
‘This acquisition makes excellent strategic sense for our business in the UK. 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,’ said Chief Executive Officer Noel Quinn.
‘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.’
On Monday, UK Chancellor Jeremy Hunt said on Twitter that the UK government and the Bank of England had ‘facilitated a private sale’ of SVB UK to HSBC.
‘Deposits will be protected, with no taxpayer support,’ Hunt confirmed.
On Sunday, Hunt warned the insolvency of SVB UK posed a ‘serious risk’ to the UK’s tech and science sectors, vowing to bring a plan forward ‘very quickly’ to resolve the situation.
According to BVCA - an industry body representing venture capital investors - a survey of 31 venture capital firms found that 34% of their portfolio companies - or 336 firms - have accounts with SVB UK. Some £2.5 billion in capital from these firms is locked in the lender, according to BVCA.
On Sunday, US authorities unveiled sweeping measures to rescue depositors’ money in full from SVB and to promise other institutions help in meeting customers’ needs, as they announced a second tech-friendly bank, Signature Bank, had been closed by regulators.
With the two bank failures rattling nerves, President Joe Biden vowed to hold ‘fully accountable’ the people responsible for ‘this mess’ and said he would deliver remarks on Monday morning on maintaining a resilient banking system.
Elsewhere in the FTSE 100, Phoenix Group lost 1.3%.
Its pretax loss widened to £2.84 billion in 2022 from £430 million in 2021. The wider loss was due to £38.1 billion in negative net investment income, compared to positive £18.0 billion.
Net premiums were flat at £5.37 billion from £5.38 billion.
Looking ahead, Phoenix noted that 2023 has ‘a challenging economic environment’, but it remains confident that its model and risk management approach will ensure that it remains ‘highly resilient to any economic volatility’.
In the FTSE 250, Direct Line Insurance lost 4.9%, pushing the stock towards the bottom of the index of London mid-caps.
The company posted net earned premium of £2.97 billion in 2022, flat compared to £2.96 billion in 2021. Net insurance claims rose to £2.32 billion from £1.72 billion.
However, Direct Line swung to a pretax loss of £45.1 million from £446.0 million profit. The company’s solvency capital ratio fell to 147%, from 176% year-on-year.
It confirmed that it would not propose a dividend for 2022, as previously announced.
Acting CEO Jon Greenwood said: ‘2022 was a tough year for Direct Line Group. Motor and Home market conditions were challenging, with high claims inflation and regulatory reforms creating substantial headwinds for the business, and we did not navigate these challenges as effectively as we would have wished. Exceptional weather and difficult investment markets also significantly impacted our results.’
On London’s AIM, Condor Gold jumped 14%.
Condor Gold said it has received three formal expressions of interest, including two non-binding offers for the La India open pit, in Nicaragua. The company also expects further offers from another nine companies.
CEO Mark Child said: ‘The board is confident that a binding agreement will be reached. Investors will be updated in due course.’
The company added that whilst it is ‘encouraged’ by the sale process to date, there is no guarantee that it will complete the sale of its assets.
In European equities on Monday, the CAC 40 index in Paris was down 1.1%, while the DAX 40 in Frankfurt was down 1.0%.
The pound was quoted at $1.2101 at early on Monday in London, higher compared to $1.2025 at the equities close on Friday. The euro stood at $1.0710, up against $1.0637. Against the yen, the dollar was trading at JP¥133.97, down compared to JP¥134.82.
In Asia on Monday, the Nikkei 225 index closed down 1.1%. In China, the Shanghai Composite rose 1.2%, and the Hang Seng index in Hong Kong was up 2.0%. The S&P/ASX 200 in Sydney closed down 1.5%
New York ended lower on Friday, with the Dow Jones Industrial Average down 1.1%, the S&P 500 down 1.5% and the Nasdaq Composite down 1.8%.
Brent oil was quoted at $82.63 a barrel at early in London on Monday, down from $83.02 late Friday. Gold was quoted at $1,885.11 an ounce, higher against $1,859.42.
Monday is a quiet day on the economic calendar. Around 1800 GMT, Bank of England Monetary Policy Committee Member Swati Dhingra is due to speak.
The US moved to summer time over the weekend, putting the East Coast four hours behind GMT, rather than five.
Copyright 2023 Alliance News Ltd. All Rights Reserved.
