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Wednesday, March 22, 2023

ALEX BRUMMER: HSBC boss Quinn backs UK’s tech future

Quinn backs UK’s tech future: HSBC’s purchase of SVB will lift its reputation in Whitehall and among the public, says ALEX BRUMMER

The emergence of HSBC as a white knight in the rescue of Silicon Valley Bank’s UK arm should be a great confidence builder.

HSBC chief executive Noel Quinn has been fighting a rearguard action to hold the vast Asian bank together in the face of sustained criticism from its biggest investor, China-based insurer Ping An.

Quinn is keeping critics at bay by shedding under-performing operations in Canada and Europe, savaging costs and focusing on Asia.

White knight: HSBC’s purchase of Silicon Valley Bank’s UK arm demonstrates its commitment to the UK’s tech future and also gives it access to a bank with a book value of £1.4bn

Banking turbulence often provides an opportunity. On a different scale, Barclays, led by Bob Diamond, bought Lehman Brothers’ US operation out of Chapter 11 for $250million (£208million) in 2008, making it the only European financial concern with a competitive investment bank.

Lloyds (less successfully) swooped on HBOS in 2008 with government encouragement. It gained what it wanted with access to the market-leading Halifax mortgage book.

By the standards of these other deals, HSBC’s purchase of SVB is a fleabite. Nevertheless, its willingness to step in and make depositors and borrowers whole will lift its reputation in Whitehall and among the public. 

It is a demonstration of HSBC’s commitment to the UK’s tech future and also gives it access to a bank with a book value of £1.4billion, several thousand high-tech firms and the important venture capital industry.

The risk is that HSBC’s bureaucracy and compliance brigade will fail to understand the different financing models of the tech sector, where future income is amortised years before it is taken, crushing entrepreneurial spirits.

There is inevitably booing from the sidelines from new-wave UK lenders such as Bank of London, who felt the SVB failure was a chance for them to boost their footprint and provide more challenging opposition to the Big Four. 

Maybe. But in one of the periodic bouts of volatility in global banking, safety first is always the priority. 

Britain’s fintech and challenger banks will have a tough enough task in the days and weeks ahead fire-fighting to reassure depositors and borrowers that they gave sufficient resources to weather the squalls.

Doubling down on the risk doesn’t seem very wise.

Thinking small

Tradition dictates that on the Sunday before the spring budget, the most we would see of the Chancellor are orchestrated camera shots of him putting the final touches to his speech.

It has been a different build-up for Jeremy Hunt, with the Treasury huddled down with the Bank of England for much of weekend seeking a way to rescue SVB’s UK arm without putting taxpayers money on the line.

That hasn’t happened yet. But given the intervention by the US Treasury and Federal Reserve, and governor Andrew Bailey’s record of bolstering stability at the start of the lockdown in March 2020 and during last year’s Trussonomics-induced pensions crisis, it could be around the corner.

The last thing that the Chancellor and the Bank would want is a cascade of failures in the challenger bank sector, which could stymie fintech and innovation.

Since outlining his vision for making the UK the next Silicon Valley, Hunt has been focused on unleashing funding sitting in Britain’s £10billion pensions sector and supporting innovation. 

Indications are that tomorrow’s Budget will pivot towards small- and medium-sized enterprises which are the backbone of the UK economy.

Headline tax rates will be kept low at 19 per cent, new more generous investment allowances will be endorsed and there will be restoration of some of the tax breaks for R&D.

The Treasury revealed last night that the Chancellor also intends to put a pot of £80million towards beefing up 12 investment zones. Every little (and it isn’t very much) helps.

Ethnic lift

Here is a potentially uplifting tweet from the nation’s self-appointed human rights advocate Gary Lineker.

The Parker Review, headed by former Sainsbury’s boss David Tyler, reports that 96 FTSE companies now have at least one ethnic minority director and 49 have two.

Among FTSE 250 firms the count is up to 67 per cent from 55 per cent in 2021. Tyler is now asking the FTSE 350 to plug minorities into succession planning and to set five-year targets for advancement. 

It is also looking to the 50 biggest private firms to begin work on appointing at least one ethnic minority director.

The face of British enterprise is changing for the better.

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