The sell-off in European bank shares sparked by Silicon Valley Bank's collapse continued March 13, even after HSBC Holdings PLC acquired the failed lender's U.K. operations.
Credit Suisse Group AG led the declines among major European lenders as its stock reached new lows, falling 13.9% in early afternoon trading. Germany-based Commerzbank AG's stock was down 12.1%, while Spain's Banco de Sabadell SA was trading 9.9% lower.
Shares of Italian lenders UniCredit SpA, Banco BPM SpA, Banca Popolare di Sondrio S.p.A and Banca Monte dei Paschi di Siena SpA were all down more than 7%.
The declines pared some of the gains European banks have enjoyed so far in 2023 on the back of higher interest rates and strong earnings expectations. The S&P Pan Europe BMI Banks index was up more than 20% year-to-date on March 6, but that gain had fallen to 13.8% by the end of the week. Still, it has performed significantly better than the equivalent U.S. and Asian indexes, both of which are down year-to-date.
HSBC announced March 13 that its ring-fenced HSBC UK Bank PLC subsidiary would acquire Silicon Valley Bank's London-headquartered unit for a nominal sum of £1.
SVB U.K. made a pretax profit of £88 million in 2022 and is expected to have about £1.4 billion of tangible equity, HSBC said. HSBC will take on around £5.5 billion of loans and £6.7 billion of deposits through the deal.
"This acquisition makes excellent strategic sense for our business in the U.K.," HSBC Group CEO Noel Quinn said in a press release. "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 U.K. and internationally."
The deal ensures no loss to depositors or costs to taxpayers for a rescue of the unit. The transaction was "the best possible outcome," said Harriett Baldwin, chair of the U.K.'s Treasury Select Committee.
HSBC's London-listed shares were trading 4.7% lower following news of the deal.
Silicon Valley Bank's Germany branch, meanwhile, was placed under moratorium by the local regulator BaFin on March 13. The unit had assets totaling €789.2 million as of the end of 2022 and poses no threat to financial stability, BaFin said.
California's financial regulator on March 10 took possession of Silicon Valley Bank, citing inadequate liquidity and insolvency after attempts to raise capital sparked a bank run. The Federal Deposit Insurance Corp. has said all depositors of Silicon Valley Bank will be made whole, and no costs will be incurred by taxpayers related to its resolution.
JPMorgan Chase & Co., PNC Financial Services Group Inc., Apollo Global Management Inc. and Morgan Stanley are interested in acquiring the bank's holding company SVB Financial Group, which has smaller operations in private wealth, asset management and securities, Axios reported.