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Great play by HSBC. It's very interesting because some banks will make out very nicely in the comming weeks and some will be dragged down a lot by the general p

by kriro 4y ago

Great play by HSBC. It's very interesting because some banks will make out very nicely in the comming weeks and some will be dragged down a lot by the general pull of the market. HSBC already found some "free money" right away. I think at least one of the big US banks will also print some money (I'd bet on JPM).

bognition 4y ago
What is “free money” and how does a big bank print money?
- short_sells_poo 4y ago
  They acquired a bunch of client assets for 1 GBP. Those client assets will generate money for them in the long term. For HSBC this is a great deal. For the clients too, come to think of it. On Friday the future of their money was uncertain, whereas today they can relax a bit because a big bank is backing them.
  - deleted 4y ago
    [deleted]
  - Teandw 4y ago
    They didn't acquire client assets for £1. That's not quite how it works.
  - noobermin 4y ago
    Assuming of course clients don't fucking pull out the moment they can when svb uk reopens.
    - naijaboiler 4y ago
      Um "client assets" are liabilities to a bank
      - deleted 4y ago
        [deleted]
    - actionablefiber 4y ago
      If you had deposits with SVB's UK arm before, congrats, you're now an HSBC customer. There is a much lower chance HSBC experiences a bank run. Not to jinx it but the most likely outcome is that most customers are satisfied that HSBC is a well-capitalized bank and keep their money there, while HSBC gets to use their deposits and the bank's assets to sit comfy earning yield.
  - deleted 4y ago
    [deleted]
- dan-robertson 4y ago
  One point is that hsbc might not be acquiring all of the liabilities – they might mostly get customer deposits but not eg some unsecured loan or bond issue. Regulators could be ok with such an outcome because a bunch of businesses losing bank deposits may be seen as worse than a single company defaulting on its debt. Another is that SVB UK could be solvent so long as they don’t have to sell assets at a loss. Being part of hsbc stops the assets needing to be sold at a loss. And a separate thing is that even if the assets net liabilities are negative, the customer relationships could be valuable enough to hsbc to counteract that. Hsbc get a load of growing companies whom they can try sell banking services to. That assumes customers don’t all flee, but I don’t think they would because there isn’t a particular reason to fear hsbc in the way there was for SVB. I don’t know what the commenter meant about JPM printing money.
  - shapefrog 4y ago
    > Being part of hsbc stops the assets needing to be sold at a loss Borrowing in the maket at 5% so you can keep the bonds paying 1% for the next 10 years might not seem like a "loss" but it is a loss.
    - dan-robertson 4y ago
      For sure that’s a reasonable possibility. But even if this in particular is -ve, I think it could still be a good deal for hsbc for the reasons given above and below.
kasey_junk 4y ago
The US regulators really frown on the big banks snatching up failed bank assets. They allow it when they have to but the median regulator driven take over is done by banks in the same tier as the one acquired. I actually wonder if that’s why the uk arm of svb was able to be purchased but the US one wasn’t. It’s probably just the relative size differences but I’m curious if the fdic got no bids for svb or didn’t get any it liked.
- tankerkiller 4y ago
  The FDIC generally doesn't do "bids" based on this article https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-takeover https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-t... it seems that the FDIC basically just shows up at a competing bank, tells them their buying the failed bank, and that's the end of it.
  - kasey_junk 4y ago
    That’s not what they did with svb. https://www.bloomberg.com/news/articles/2023-03-12/fdic-auction-for-svb-said-to-be-underway-final-bids-due-sunday https://www.bloomberg.com/news/articles/2023-03-12/fdic-auct...
  - russnewcomer 4y ago
    My father, controller at a mid-sized regional bank, was involved in a couple of these when I was growing up, and worked at the FDIC as an examiner in the 80s. My memory from the last takeover he did shortly after this NPR article was that the FDIC had given him the vaguest of hints that his bank was on a list that could be selected to takeover a bank in the next month or so, then called him on a Wednesday afternoon, told him he needed to be half a state over by Friday morning (which I also gathered was a little out of norm but the FDIC person was someone my Dad had dealt with for a while and there was mutual trust) for a meeting, and then they took over the bank on Friday. There was the impression from my dad that they could have tried to refuse, but his bank wanted to expand in that area anyway, the FDIC knew that, and decided it would be best to have a larger, not-in-the-market-but-near-it bank take over this smaller community bank. My dad also was the lead in his bank purchasing other banks in the 90s, and that was a months long, tiring and stressful process that they knew how to manage, and he said that receiving a bank from the FDIC was a different level of acute stress. Edit Just unlocked a memory, I think one of the reasons that my dad's bank got selected was also that they ran the same backend banking software, since it was going to be a crash acquisition.

by kriro 4y ago

bognition 4y ago

What is “free money” and how does a big bank print money?

short_sells_poo 4y ago
They acquired a bunch of client assets for 1 GBP. Those client assets will generate money for them in the long term. For HSBC this is a great deal. For the clients too, come to think of it. On Friday the future of their money was uncertain, whereas today they can relax a bit because a big bank is backing them.
- deleted 4y ago
  [deleted]
- Teandw 4y ago
  They didn't acquire client assets for £1. That's not quite how it works.
- noobermin 4y ago
  Assuming of course clients don't fucking pull out the moment they can when svb uk reopens.
  - naijaboiler 4y ago
    Um "client assets" are liabilities to a bank
    - deleted 4y ago
      [deleted]
  - actionablefiber 4y ago
    If you had deposits with SVB's UK arm before, congrats, you're now an HSBC customer. There is a much lower chance HSBC experiences a bank run. Not to jinx it but the most likely outcome is that most customers are satisfied that HSBC is a well-capitalized bank and keep their money there, while HSBC gets to use their deposits and the bank's assets to sit comfy earning yield.
- deleted 4y ago
  [deleted]
dan-robertson 4y ago
One point is that hsbc might not be acquiring all of the liabilities – they might mostly get customer deposits but not eg some unsecured loan or bond issue. Regulators could be ok with such an outcome because a bunch of businesses losing bank deposits may be seen as worse than a single company defaulting on its debt. Another is that SVB UK could be solvent so long as they don’t have to sell assets at a loss. Being part of hsbc stops the assets needing to be sold at a loss. And a separate thing is that even if the assets net liabilities are negative, the customer relationships could be valuable enough to hsbc to counteract that. Hsbc get a load of growing companies whom they can try sell banking services to. That assumes customers don’t all flee, but I don’t think they would because there isn’t a particular reason to fear hsbc in the way there was for SVB. I don’t know what the commenter meant about JPM printing money.
- shapefrog 4y ago
  > Being part of hsbc stops the assets needing to be sold at a loss Borrowing in the maket at 5% so you can keep the bonds paying 1% for the next 10 years might not seem like a "loss" but it is a loss.
  - dan-robertson 4y ago
    For sure that’s a reasonable possibility. But even if this in particular is -ve, I think it could still be a good deal for hsbc for the reasons given above and below.

kasey_junk 4y ago

The US regulators really frown on the big banks snatching up failed bank assets. They allow it when they have to but the median regulator driven take over is done by banks in the same tier as the one acquired. I actually wonder if that’s why the uk arm of svb was able to be purchased but the US one wasn’t. It’s probably just the relative size differences but I’m curious if the fdic got no bids for svb or didn’t get any it liked.

tankerkiller 4y ago
The FDIC generally doesn't do "bids" based on this article https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-takeover https://www.npr.org/2009/03/26/102384657/anatomy-of-a-bank-t... it seems that the FDIC basically just shows up at a competing bank, tells them their buying the failed bank, and that's the end of it.
- kasey_junk 4y ago
  That’s not what they did with svb. https://www.bloomberg.com/news/articles/2023-03-12/fdic-auction-for-svb-said-to-be-underway-final-bids-due-sunday https://www.bloomberg.com/news/articles/2023-03-12/fdic-auct...
- russnewcomer 4y ago
  My father, controller at a mid-sized regional bank, was involved in a couple of these when I was growing up, and worked at the FDIC as an examiner in the 80s. My memory from the last takeover he did shortly after this NPR article was that the FDIC had given him the vaguest of hints that his bank was on a list that could be selected to takeover a bank in the next month or so, then called him on a Wednesday afternoon, told him he needed to be half a state over by Friday morning (which I also gathered was a little out of norm but the FDIC person was someone my Dad had dealt with for a while and there was mutual trust) for a meeting, and then they took over the bank on Friday. There was the impression from my dad that they could have tried to refuse, but his bank wanted to expand in that area anyway, the FDIC knew that, and decided it would be best to have a larger, not-in-the-market-but-near-it bank take over this smaller community bank. My dad also was the lead in his bank purchasing other banks in the 90s, and that was a months long, tiring and stressful process that they knew how to manage, and he said that receiving a bank from the FDIC was a different level of acute stress. Edit Just unlocked a memory, I think one of the reasons that my dad's bank got selected was also that they ran the same backend banking software, since it was going to be a crash acquisition.