The acquisition of Silicon Valley Bank's British operations (SVB UK) reportedly boosted HSBC's profits by $1.5 billion (£1.2 billion). The largest bank in Europe posted a pre-tax profit of $12.9bn for the three months ending in March. During the same period last year, it earned more than three times as much.
In a March transaction led by the government and the Bank of England, HSBC acquired SVB UK for a nominal £1 ($1.25). The London-based bank's profit included a "provisional gain of $1.5 billion on the acquisition of Silicon Valley Bank UK Limited," according to a statement.
Noel Quinn, the chief executive officer of the group, stated that they remain committed to enhancing their performance and maintaining rigorous cost control. However, they also saw a chance to invest in SVB UK to speed up their growth plans. The bank also benefited from the reversal of its intention to write off $2.1 billion due to the sale of its French business, which may no longer be finalized.
In 2019, HSBC announced its first quarterly dividend to shareholders since before the pandemic and that it would repurchase $2 billion in shares. It also stated that the transfer of its Canadian business is likely to be delayed.
The planned $10 billion transaction, which was initially expected to be finalized by the end of this year, is now anticipated to occur in the first quarter of 2019. The proposed transaction is essential to the company's strategy to withdraw from slow-growing Western markets.
The collapse of Silicon Valley Bank and Signature Bank in March and the forced acquisition of Credit Suisse by Swiss banking behemoth UBS have rattled the global banking sector, against which HSBC has posted a strong performance.
On Monday, US regulators seized First Republic Bank and transferred its assets to JPMorgan Chase, a Wall Street behemoth.
The action was intended to resolve the largest failure of a US bank since the 2008 global financial crisis and end weeks of industry turmoil. In recent months, HSBC has come under increasing pressure from its largest shareholder, the Chinese insurance behemoth Ping An. Ping An has demanded that HSBC separate off its Asian operation in order to increase returns for investors in the region.
HSBC is still headquartered in London, but the preponderance of its profits are generated in Asia. These profits subsidize the bank's loss-making enterprises in Europe and the United States. Ping An argues that this is unjust and proposes breaking up HSBC so that Asian investors receive a larger share of the profits.
Ping An's investment in HSBC over the past eight years has not been particularly successful. According to Kenny Wen, director of investments at KGI Asia in Hong Kong, a break-up could increase the value of the bank for shareholders in Asia.
HSBC has urged its shareholders to vote against the proposition at its upcoming annual general meeting in Birmingham on Friday. Manus Costello from Autonomous Research in London said, "HSBC has not yet earned the right to dismiss calls for change with a simple dismissal." He added that a breakup would encounter formidable obstacles, including significant economic and political barriers.
