- FTSE 100 closes 200 points lower
- US stocks advance in volatile trading
- HSBC buys SVB's UK arm for £1
4.40pm: FTSE 100 down 200 points
At the close, the FTSE 100 was down 2.6% to finish below the 7,600 level at 7,549 points.
Stock markets have been rocked by the weekend’s events in US banking, but there seems more to come, said Chris Beauchamp, chief market analyst at online trading platform IG.
“US stocks have had a busy start to the week, but have overall succeeded in making gains as the actions of US regulators provide some comfort to worried investors," Beauchamp noted.
"The same cannot be said of Europe, which is deep in the red as traders this side of the Atlantic wait to see whether the pressure on European banks will turn into something that requires authorities to step in. It promises to be a roller-coaster week thanks to tomorrow’s CPI and Thursday’s ECB decision, leaving markets at risk of further falls.”
4.15pm: The first, the last, the only thing
The FTSE 100 index is set to end another session sharply lower as worries over the collapse of Silicon Valley Bank and Signature Bank knocked the heavyweight banking sector, even as Wall Street indexes rallied amid hopes the crisis could stay the Federal Reserve's hands on interest rate hikes.
Kallum Pickering, senior economist at Bernberg commented: "Ongoing troubles in the US banking system are complex and not yet fully understood. The decision by US authorities to guarantee all deposits at two failed banks as well as the broad-based selling of banks stocks reflects reflect a sharp lurch to risk aversion. But as long as global central banks and regulators take the appropriate steps – which we expect – a systemic crisis seems unlikely.
"Beyond the extreme and unlikely scenario of a serious financial crisis, the broader global banking sector’s reaction has the potential for significant real economic effects. Even if the episode turns out to be a storm in a teacup, it may still impact the behaviour of lenders for a while – especially as they continue to process the significant tightening of monetary policy by global central banks that started in late 2021. For the medium-sized and highly open UK economy, with a massive financial system relative to the size of its GDP, expect the Bank of England (BoE) to turn extra cautious for a while."
Pickering added: "Short of the US Fed promising to back all deposits in the US banking sector – to enable exposed firms to spread out their losses – the global banking sector is going to have to absorb some losses in the coming weeks and months. While it is impossible to say by just how much at this early stage, it is reasonable to presume that parts of the UK financial sector and banking system will be hit.
"But we are confident that, if and when that happens, the system is adequately protected and policymakers will take the necessary steps to prevent a genuine breakdown of normal banking activities for the real economy."
"Judging by the market reaction, the scale of the selling of UK banks exhibits a degree of panic and reflects more than just a marking down of revenue and profit expectations due to a flatter yield curve and a likely moderation of loan growth for a while. This sell-off will add to bank’s cautious behaviour. Whether the failure of SVB is the just the first, or the last and only, thing that is broken by the global monetary squeeze remains to be seen. But until central banks pause their rate hike cycle and until the lagged effects of past hikes have been processed, and until banks are confident that they have fully adjusted to higher rates, risk-taking may be remain impaired," Pickering concluded.
3.50pm: Self-remediation hurts
Ahead of tonight's deadline, a flurry of building companies revealed that they have signed the UK government's Self-Remediation contract.
Vistry Group PLC, Crest Nicholson Holdings PLC and Persimmon PLC this afternoon joined fellow housebuilders Redrow and Bellway in signing the contract which requires developers to fix unsafe buildings from the past 30 years.
The new requirement follows the Grenfell Tower fire in 2017, which was made deadly by flammable building cladding.
The self-remediation contract widens builders' responsibilities regarding potential remediation work which may need to be undertaken.
Vistry said it "strongly believes that the cost of remediation of fire safety issues should not be borne by leaseholders" and said it has supported the government's aim to "deliver a lasting industry solution".
Crest Nicholson, which had signed the Building Safety Pledge in April last year, said it had "worked proactively with all stakeholders to identify and remediate those buildings which may be at risk within what has been a rapidly changing regulatory environment".
Persimmon said the document's commitments were "consistent" with its principles, having stated two years ago its determination to protect leaseholders from the costs of cladding
In afternoon trading, Persimmon shares were down 1.3% at 1,221.50p, Redrow were off 1.9% at 461.80p, Bellway shed 2.4% at 2,048.00p, Vistry fell 2.1% at 761.50p, and Crest Nicholson lost 1.8% at 223.00p.
3.35pm: More Barclays branches going
As if the SVB collapse and crisis engulfing the global banking sector weren't enough, Barclays is hammering its customers by shutting a further 14 more branches in a fresh blow for the UK high streets, according to the Daily Mail's This Is Money website.
The lender said this morning that it will close 11 sites across England, two in Wales and one in Scotland, including branches in London, Colchester, Beckenham and Ebbw Vale.
The announcement by Barclays follows a flurry of closures by other banks this year, including NatWest, which is axing 23 sites, and Lloyds Banking Group, which is closing 40 Halifax and Lloyds branches, the website noted.
In the past seven years, more than 7,000 branches from the five biggest lenders have closed in a sign of the growing strain facing the industry, it added.
3.05pm: President Biden tries reassurance
The FTSE 100 index stayed not far from session lows as banking stocks remained sharply lower, reflecting the pandamonium of their US counterparts after the collapse of Silicon Valley Bank last Friday, although Wall Street indexes moved higher in very volatile trading as President Biden offered some reassuring words.
Commenting on Biden's speech, Susannah Streeter, head of money and markets, Hargreaves Lansdown said: ‘’His admission that fresh regulations may be needed to stop further failures exposes weaknesses in the current system and now lawmakers will be asked to toughen the rules. So, even though the collapse has centred on a small tech-focused corner of the financial system, the fall-out risks spreading. The era of cheap money has hurtled to an end and investors are waking up to some dramatic highly unintended consequences."
She added: "The wider banking system will bear the brunt of the bail out of banking customers, as the money will come from fees institutions pay into the deposit insurance fund. The realisation that regulatory action isn’t stopping the rot has led to sharp falls in some of Wall Street’s biggest banking names in early trade such as Wells Fargo down 7.5%, Citigroup down 6%, and Bank of America down 7%. Despite the pretty bold regulatory action investors have still been shaken by the events of the past few days and are highly nervous about spilling over and creating pools of fresh problems. The freefall of shares in a raft of smaller lenders including First Republic bank, Western Alliance Bancorp and PacWest Bancorp shows the extent of the contagion concerns with shareholder confidence evaporating.
"Biden’s warning that the bailout buck would not extend to investors has seen a fresh exodus for perceived safe havens. Gold prices have shot up by 2.2% while yields on government bonds have fallen back. There is growing expectation that the Federal Reserve will now be forced to press pause on rate hikes, or at least slow their path, to shore up financial stability. This has helped bolster sentiment across the S&P 500 more widely despite the banking rout."
Streeter noted that in London: "Banking stocks extended losses with Standard Chartered the biggest faller, dropping by almost 7% followed by Barclays, down by 5.5%. HSBC also slid by around 4.5% with shareholders still highly uncertain about the implications of its takeover of SVB’s UK arm, given the concern surrounding the tech sector right now and the losses which had mounted up for its bond portfolio. The banking rout has extended even deeper in Europe.
"The deposit insurance scheme in the US is significantly more generous than across the Atlantic, and there is a growing expectation that the US Treasury will move swiftly to fully guarantee further deposits if more banks turn insolvent, with the extra loan facilities available offering a bit more reassurance for the wider financial sector."
After around 90 minutes of trading in New York, the Dow Jones Industrial Average was up 197 points, or 0.6% at 32,106, while the broader S&P 500 index also added 0.6%, and the tech-laden Nasdaq Composite rose 0.8%.
In London, around 3.05pm, the FTSE 100 was down 157 points, or 2.0% at 7,590, moving further above the day's low of 7,548.30.
2.45pm: SVB collapse "is an idiosyncratic risk, not a systemic risk"
As financial markets continue to roiled by the collapse of Silicon Valley Bank (SVB), Daniel Casali, chief investment strategist at wealth management firm Evelyn Partners noted that while the risk posed by the collapse of SVB to the start-up sector in the UK will be mitigated by the acquisition of the UK subsidiary by HSBC.
“Nonetheless," he added, "we still expect that investor sentiment towards these sectors will be hit in the near term. The crisis indicates that there continues to be sizeable risks in financial markets.
“Interest rates have moved a long way in a short space of time, exposing weaknesses across the global financial system that manifested first in pension schemes’ LDI crisis last autumn and now in the SVB collapse. It’s hard to know where the next crisis will emerge from, so investors will need to remain vigilant as the impact of higher interest rates feeds its way through the global economy.”
Casali continued: “SVB collapsed as a result of a liquidity crisis with too many ‘large’ depositors wanting to take money out at the same time, in contrast to the 2007/08 financial crisis, which was a solvency crisis caused by bad loans and poor investments.
“The collapse of SVB is an idiosyncratic risk, not a systemic risk. It was driven by mismanagement of liquidity by the bank itself. The wider banking system has better diversification across their asset portfolios, and larger banks have regulatory obligation to hedge against changes in interest rates. “Generally, banks have also built-up their capital reserves since the GFC to ensure they are better insulated against future crises.
“The crisis has, however, shone a light on a new risk. The prevalence of online banking allows faster deposit withdrawals, which could be accelerated by speculation about bank solvency on social media. Going forward, regulators will need to consider what this means for financial stability.
Casali concluded: “The quick response from the Fed, FDIC and the Treasury Secretary should, in our view, be enough to reduce stress across the financial system, support financial stability and minimise the impact on businesses and the wider economy. The acquisition of SVB UK by HSBC should also help to draw line under this crisis in the UK.
“We also think it’s likely the Federal Reserve will proceed more carefully with changes to monetary policy in the coming months. The FOMC will want to avoid moving too quickly as it assesses the fallout from the collapse of SVB.”
2.20pm: Volatility rules
The FTSE 100 index stayed sharply lower as US stocks proved exceptionally volatile, rallying after big opening falls to recover some of Friday's sell-off after the collapse of Silicon Valley Bank (SVB) sent shockwaves across financial markets, before retreating again.
Around 50 minutes after the opening bell, the Dow Jones Industrial Average was down 42 points, or 0.1% at 31,867 having shed over 200 points at the start, while the broader S&P 500 shed 0.2%, having opened down 1%, and the tech-laden Nasdaq Composite was flat, off 0.02%, having lost 0.8% first thing.
“While the Fed has stepped in to effectively backstop SVB clients, meaning taxpayers won’t suffer any losses, broader fears for the US banking sector are weighing heavily on investor sentiment,” TickMill Group market analyst James Harte said.
Harte noted that, additionally, the State Chartering Authority announced that it was closing Signature Bank to avoid the bank suffering a similar collapse to that of SVB due to liquidity strains there.
“Fears of broader contagion linked to the collapse of SVB and the closure of Signature Bank have seen stock markets coming under heavy selling pressure,” he said.
“With financial sector liquidity concerns likely to remain a key issue going forward, equities look vulnerable to further losses near-term.”
Shares of First Republic Bank had fallen more than 65% at the open with investors betting on it being the next bank to fall.
The bank announced over the weekend that it had secured additional funding from JP Morgan to shore up its liquidity levels.
“However, the news has failed to convince traders and shares are currently down,” Harte noted, with jitters regarding a potential run building.
Regional banks Western Alliance Bancorporation and PacWest Bancorp had also shed 75% and 46% respectively at the open.
In London, around 2.20pm, the FTSE 100 was down 174 points, or 2.2% at 7,574, not far from the session low of 7,548.30.
1.30pm: London's movers
A quick look at some of today’s fallers and risers in London.
Fallers
Empire Metals- down 11.6% to 2.2p
Announced it had raised £1.25mln via the sale of 55mln shares at 2.25p per share, with proceeds used to accelerate its Pitfield copper project in Western Australia.
Direct Line- down 7% to 154p
Reported on Monday a collapse in annual operating profits after what it called “a tough year”.
For the 12 months to 31 December 2022, operating profit tumbled 95% to £32.1mln from £590.3mln, reflecting a volatile operating environment with elevated motor claims inflation, higher-than-expected weather event claims, new regulatory changes and challenging investment markets.
Risers
Nightcap- up 6% to 11.6p
The London cocktails company drank in an increase in revenue which inched the shares higher.
Revenue in the 26 weeks to 1 January 2023 grew by 48% to £23.5mln compared to the same period a year earlier.
1.00pm: Nasdaq set to lead US markets higher
Wall Street is expected to open higher after US regulators stepped in to protect depositors at collapsed Silicon Valley Bank (SVB) and Signature Bank, with the demise of the two tech-focused banks making it less likely that the Federal Reserve will pursue a hawkish agenda when it decides on its next interest rate hike later this month.
Futures for the Dow Jones Industrial Average rose 0.1% in Monday pre-market trading, while those for the broader S&P 500 gained 0.4% and contracts for the Nasdaq-100 jumped 1%.
US stocks fell sharply on Friday following the collapse of SVB, which was rescued by the Federal Deposit Insurance Corporation (FDIC), with a new bank set up to hold and guarantee deposits up to US$250,000 held at the bank.
The DJIA closed 1.1% down at 31, 910, the Nasdaq Composite lost 1.8% to 11,139 and the S&P 500 fell 1.5% to 3,862. The small-cap Russell 200 index declined 3.2% to 1,769.
On Sunday, crypto bank Signature was also closed down due to what was said by the regulator to be a risk of systemic bank failure. All Signature's depositors will be "made whole", said the FDIC, adding that as with the resolution of Silicon Valley Bank, no losses will be borne by the US taxpayer.
“The move by US regulators is seen as an urgent and significant defence of the banking system alleviating some of the concerns last seen during the GFC (global financial crisis),” commented TickMill Group market analyst Patrick Munnelly.
“With a distinct lack of tier one data on the docket for both the European and US sessions, investor focus will shift to tomorrow's US CPI data,” he added. “However, this release may have lost some of its significance given the banking system stress witnessed over the weekend, as the Fed’s focus on fighting inflation has shifted to firefighting systemic stress.”
“Goldman Sachs (NYSE:GS) now believes that the Fed’s hands are tied by the banking system stress as such they do not see the FOMC (Federal Open Market Committee) raising rates at the March 22nd meeting this has led to an uptick in bonds overnight weighing on yields with the 2-year US yields dropping back below 4.5%,” he said.
Munnelly noted that US core inflation is expected to show a ‘modest retreat’ to 5.5% in February, down from January’s year-over-year gain of 5.6%.
Ahead of the restart in the US and London's lead index is at 7,557.65, down 190.70 points, or 2.46%, just above session lows.
11.58am: UK bioitech and VC leaders welcome HSBC deal
UK biotech and venture capital sector leaders have welcomed HSBC’s move to buy Silicon Valley Bank’s UK business.
“This is a win for UK life sciences — and a win for UK banking,” said Steve Bates, chief executive of the BioIndustry Association. “Now we have a major UK bank backing the UK life science industry.”
Michael Moore, who heads the British Private Equity & Venture Capital Association, said: “Confidence should return to markets and the affected businesses with an orderly transition and access to the cash frozen over the weekend.”
Dom Hallas, executive director at Coadec, which represents UK start-ups, said the government deserved “huge credit” for facilitating the deal.
“They have saved hundreds of the UK’s most innovative companies today,” he said.
Meanwhile the FTSE 100 is at 7,595.92, down 152.43 points, or 1.97%.
11.19am: US regional banks under pressure in pre-market
Concerns over America’s regional banks do not appear to have fully abated, despite last night’s efforts by US authorities to shore up confidence.
First Republic, based in San Francisco, is not the only one under pressure (still down over 50% in pre-market trading).
PacWest Bancorp of Los Angeles has dropped 27% before Wall Street opens, while Phoenix, Arizona’s Western Alliance Bancorporation is on track to fall around 47%. State regulators closed New York-based Signature Bank on Sunday.
A new facility is being set up to give US banks access to emergency funds, with the Federal Reserve also making it easier for banks to borrow from it in emergencies.
10.37am: Bundesbank convenes crisis team - Reuters
The Bundesbank convened its crisis team on Monday to assess the possible fallout of the collapse of US lender Silicon Valley Bank on the local market, even as no emergency action was foreseen in Europe, according to Reuters.
With euro zone banking shares falling sharply early on Monday -- Commerzbank fell as much as 11% while Deutsche Bank was down 6.5% -- the German central bank called a meeting of its Financial Crisis Team to assess the ramifications for local lenders and financial markets, a spokesman told Reuters.
Created at the time of the last financial crisis in 2008, the team is tasked with informing the Bundesbank's board and making recommendations but it doesn't have the power to take decisions.
U.S. authorities launched emergency measures on Sunday to shore up confidence in the banking system after the failure of Silicon Valley Bank (SIVB.O) threatened to trigger a broader financial crisis.
10.10am: Citi sees limited UK impact from SVB
Are the falls in bank share prices a buying opportunity? Broker Citi suggests it could be. It sees very limited read-across from the issues facing Silicon Valley Bank in the US to the European Banking sector.
The bank noted European banks have less deposit concentration, are still seeing relatively healthy deposit flows, operate with large liquidity portfolios, and remain well capitalized.
“We also see less risk to capital in the event that balance sheet positions in negative carry do have to be crystallized.”
Citi remains overweight European banks with its top-picks BBVA, Lloyds, Intesa.
JP Morgan said: “Whilst we do not believe there is a banking crisis in the making and the SVB situation is somewhat unique, we do expect increased investor scrutiny on 1) bond portfolios as a percentage of deposits; 2) mark-to-market of Available For Sale (AFS) as well as Held To Maturity (HTM) books; and 3) deposit outflows and the pace of.”
JPM said it also expects increased regulatory oversight of smaller banks as well as of all the liquidity related bonds in the banks including HTM books that are not currently marked-to-market.
The investment bank is concerned in Europe is that market expectations are already optimistic on deposit flows and deposit betas.
Banking share price remain under pressure in the UK with Standard Chartered, Barclays, Lloyds and NatWest down by 5.1%, 4.8%, 4.1% and 4% respectively.
The FTSE 100 is now at 7,578.22, down 170.13 points, or 2.20%. In Europe, the Dax is down 2.5% and the Cac 40 down 2.4%.
9.59am: HSBC purchase of SVB's UK arm a good solution - Shore Capital
Shore Capital's banking analyst Gary Greenwood thinks the acquisition by HSBC of SVB's UK arm is "a good solution for all."
He noted HSBC gains access to new customers in a fast-growing part of the market on attractive financial terms while depositors will presumably be protected on the basis they are now part of a much larger and stable bank, which should provide comfort and access to much needed funds.
"Finally, this removes a headache for the UK regulator, demonstrating its ability to execute a swift resolution and so removing further risks to financial stability, while also helping out a government that is keen to show support to the UK’s growing tech services industry," he pointed out.
Shore Capital retained a 'buy' rating on HSBC with a fair value of 740p.
It may be seen as a good deal but confidence in the FTSE remains knocked. The lead index is now down 2.2% at 7,578.38.
9.30am: Profit flows at Aramco
Away from SVB for a moment and Saudi Arabia’s state-controlled oil giant, Aramco, reported record net income of US$161.1bn in 2022 - its highest annual profits as a listed company - reflecting stronger crude oil prices, higher volumes sold and improved margins for refined products.
The jump from US$110.0bn came as the oil giant announced record cash flow from operating activities of US$186.2bn from US$139.4bn and an 18% increase in capex year-on-year, as progress continues on multiple fronts to deliver reliable, affordable and more sustainable energy.
“This is probably the highest net income ever recorded in the corporate world,” Aramco CEO Amin Nasser said on a Sunday earnings call.
The results are nearly triple the profit that oil major ExxonMobil posted for 2022.
In a statement Aramco declared a fourth quarter dividend of US$19.5bn, up 4% compared to the third quarter of 2022. It also recommended the distribution of bonus shares to eligible shareholders in the amount of one share for every 10 shares held.
Aramco said fourth quarter net income was in line with analyst consensus, excluding certain non-cash items of around US$3.3bn.
9.07am: Will First Republic Bank be next?
Will First Republic Bank be next to fall? Shares in the bank are down 60% in pre-market trading. Reports on Friday and over the weekend showed customers queuing around the block to withdraw money.
But a report in the Wall Street Journal said that the bank has shored up its finances with additional funding from the Federal Reserve & JPMorgan Chase & Co (NYSE:JPM)..
The fresh funding gives the bank, which was under pressure following the collapse of Silicon Valley Bank last week, US$70bn in unused liquidity, the report said.
Despite this shares look like coming under extreme pressure in the US when markets open today.
8.55am: FTSE slides further
The FTSE 100 has tumbled after a fairly muted open as the fall-out from the collapse of SVB and Signature Bank continues.
At 9.00am London’s lead index was at 7,648.59, down 99.76 points, or 1.29%.
In the UK authorities rushed to limit the damage from the closure of SVB by confirming the sale of its UK business to HSBC.
While in the US authorities launched emergency measures to shore up confidence in the banking system. Regulators said the failed bank’s customers will have access to all their deposits starting Monday and set up a new facility to give banks access to emergency funds. The Federal Reserve also made it easier for banks to borrow from it in emergencies.
Victoria Scholar, head of Investment, interactive investor said: “HSBC’s acquisition of SVB UK is a welcomed development for its depositors and the wider banking system.”
“It means that SVB UK will avoid insolvency proceedings and its customers will be able to access deposits and banking services as normal from today. It will be interesting to see whether the start-up friendly style of lending offered by SVB and not the larger more traditional banking behemoths, will continue to be possible under the HSBC umbrella.”
Despite the move bank shares fell further with Lloyds Banking Group PLC (LSE:LLOY) down 2%, Barclays dopped 1%, HSBC Holdings PLC (LSE:HSBA) fell 2% and NatWest declined 0.8%.
The banking turmoil has prompted speculation that central banks will put likely rate rises on hold or at least scale them back.
Victoria Scholar said: “In the UK, interest rate futures are now pricing in a roughly 25% chance that the Bank of England does not raise rates at its March meeting in what could be a significant near-term change in policy direction.”
As for US rates, Goldman Sachs (NYSE:GS) predicted the US Federal Reserve will be forced to curb its plans to raise interest rates. Analysts at Goldman expect the Fed will now postpone a rate hike expected for 22 March because of concerns about the impact of SVB's failure on other banks. Previously, the Wall Street giant had forecast US interest rates would rise by 25 basis points.
Shares in THG rose 3.2% after confirming that it does not have any exposure to SVB, either in relation to cash deposits or debt facilities. IP Group PLC (LSE:IPO) did likewise and shares rose 3.4%.
But despite stating the company does not hold any cash at SVB and it does not have a banking relationship with SVB, shares in Renalytix PLC (AIM:RENX)
Fell 4.6%.
8.15am: FTSE 100 slips as SVB crisis rumbles on
The FTSE 100 fell in early exchanges as the UK moved to limit the damage caused by the closure of Silicon Valley Bank and Signature Bank in the US.
At 8.15am London’s lead index was down 31.61 points, or 0.4%, at 7,716.74 while the FTSE 250 was little changed, up just one point, at 19,358.25.
After a weekend of frantic negotiations HSBC Holdings PLC (LSE:HSBA) confirmed it has bought the UK arm of the stricken US bank for £1.
In a separate statement HM Treasury said customers of SVB UK will be able to access their deposits and banking services as normal from today.
It said this transaction has been facilitated by the Bank of England, in consultation with the Treasury, using powers granted by the Banking Act 2009.
No taxpayer money is involved, and customer deposits have been protected.
Noel Quinn, HSBC Group CEO, 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.”
Susannah Streeter, head of money and markets, Hargreaves Lansdown said: “After a number of offers from smaller banks, HSBC has agreed to scoop up the beleaguered UK arm of SVB, which should end the nightmare thousands of tech firms had been experiencing over the past few days.”
“This will be hugely welcomed by the government, given the looming crisis risked overshadowing Budget Day, as a big tech sector bailout would not have been a good look when millions have been told there is little extra money to ease the cost-of-living crisis.”
She also noted “concerted action has also been taken in the US and is helping to calm markets.”
“Deposits at SVB and Signature will be guaranteed by the Federal Deposit Insurance Corporation, but crucially generous loan facilities will be provided to other institutions.“
Numerous companies pushed out statements clarifying their exposure or otherwise to SVB.
In the FTSE 250, Moonpig Group PLC (LSE:MOON) confirmed it has no material exposure to SVB UK,.
“The group has no cash on deposit with SVB UK and does not hold a bank account with them. SVB UK is one of ten lenders that provide senior debt facilities to the group as part of a strong banking syndicate,” it said. Shares rose 0.2%
Future PLC (LSE:FUTR) said its exposure to SVB is immaterial to the group's liquidity position adding as at 10 March 2023, cash deposits with SVB accounted for less than 3% of its cash on hand, equivalent to less than £1mln. Shares were unchanged.
Direct Line Insurance Group PLC (LSE:DLG) remained friendless after reporting a collapse in annual operating profits after what it called “a tough year.”
For the 12 months to December 31, operating profit tumbled 95% to £32.1mln from £590.3mln reflecting a volatile operating environment with elevated motor claims inflation, higher than expected weather event claims, new regulatory changes and challenging investment markets..
Loss per share of 4.3p compared to 24.5p in 2021 while the insurer’s solvency capital ratio fell to 147% from 176%. The dividend for the year was cut by 67% to 7.6p from 22.7p as previously announced..
The FTSE 250 listed insurer said claims inflation was most acute in Motor, where inflation of around 14% was above the levels assumed in the group's pricing. Shares fell 3.8%.
7.50am: Direct Line profit tumbles
Direct Line Insurance Group PLC (LSE:DLG) reported on Monday a collapse in annual operating profits after what it called “a tough year.”
For the 12 months to December 31, operating profit tumbled 95% to £32.1mln from £590.3mln reflecting a volatile operating environment with elevated motor claims inflation, higher than expected weather event claims, new regulatory changes and challenging investment markets..
Loss per share of 4.3p compared to 24.5p in 2021 while the insurer’s solvency capital ratio fell to 147% from 176%. The dividend for the year was cut by 67% to 7.6p from 22.7p as previously announced..
The FTSE 250 listed insurer said claims inflation was most acute in Motor, where inflation of around 14% was above the levels assumed in the group's pricing.
Alongside disruption to supply chains causing delays in third party claims, this led to a Motor combined operating ratio of 114.7% (2021: 92.4%). In other areas, pricing kept pace with claims inflation and combined operating ratios were broadly in line with expectations, when normalised for weather.
Direct Line added 2022 saw the highest weather event costs since the group listed over a decade ago with £149mln of claims, double the the £73mln level which was budgeted for.
The group’s combined operating ratio for ongoing operations was 105.8% and 103.3% when normalised for weather.
Acting CEO, Jon Greenwood, said: “We have taken pricing actions that will support restoration of margins in Motor and mitigate the impact of further claims inflation. We have also accelerated a range of other actions including deploying additional resources in Motor.”
7.27am: HSBC confirms deal
HSBC Holdings PLC (LSE:HSBA) has also confirmed the deal It said its UK subsidiary, HSBC UK Bank, is acquiring Silicon Valley Bank UK for £1.
The FTSE 100 lender said as at 10 March 2023, SVB UK had loans of around £5.5bn and deposits of around £6.7bn. For the financial year ending 31 December 2022, SVB UK recorded a profit before tax of £88mln. SVB UK's tangible equity is expected to be around £1.4bn while a final calculation of the gain arising from the acquisition will be provided in due course.
HSBC said the assets and liabilities of the parent companies of SVB UK are excluded from the transaction which will be funded from existing resources and completed immediately.
Noel Quinn, HSBC Group CEO, 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.”
7.07am: HSBC buys Silicon Valley Bank's UK arm
Silicon Valley Bank (UK) Ltd has today been sold to HSBC Holdings PLC (LSE:HSBA), according to a statement from the Treasury.
The statement said customers of SVB UK will be able to access their deposits and banking services as normal from today.
This transaction has been facilitated by the Bank of England, in consultation with the Treasury, using powers granted by the Banking Act 2009.
No taxpayer money is involved, and customer deposits have been protected.
Silicon Valley Bank UK has today been sold to @HSBC.
This transaction has been facilitated by the @bankofengland in consultation with HM Treasury.
No taxpayer money is involved and customer deposits have been protected.
Find out more ⬇️https://t.co/Dmfjdx7duC
— HM Treasury (@hmtreasury) March 13, 2023
Making use of post-crisis banking reforms, which introduced powers to safely manage the failure of banks, this sale has protected both the customers of SVB UK and taxpayers.
Chancellor Jeremy Hunt said: "The UK’s tech sector is genuinely world-leading and of huge importance to the British economy, supporting hundreds of thousands of jobs. I said yesterday that we would look after our tech sector, and we have worked urgently to deliver on that promise and find a solution that will provide SVB UK’s customers with confidence."
“Today the government and the Bank of England have facilitated a private sale of Silicon Valley Bank UK; this ensures customer deposits are protected and can bank as normal, with no taxpayer support. I am pleased we have reached a resolution in such short order."
“HSBC is Europe’s largest bank, and SVB UK customers should feel reassured by the strength, safety and security that brings them.”
7.00am: FTSE seen flat, HSBC lind up for SVB's UK arm
The FTSE 100 is expected to open little changed on Monday as the fall out from the collapse of Silicon Valley Bank rumbles on and with the Budget to come on Wednesday.
Spread betting companies are calling London’s lead index up 1 points in early exchanges.
British ministers and the Bank of England are racing to conclude a private sale of Silicon Valley Bank’s UK arm to HSBC before markets opened, according to the Financial Times.
The report said people briefed on the negotiations said potential bidders held conference calls with the Bank of England through the night. By 6am, HSBC had emerged as the leading white-knight bidder for SVB UK, with Noel Quinn, the bank’s chief executive, involved in the overnight talks, the FT said.
The news is also being reported by Sky which reports an announcement from the company and the Treasury is imminent.
In the US The Dow closed Friday down 345 points, 1.1%, to 31, 910, the Nasdaq Composite lost 199 points, 1.8%, to 11,139 and the S&P 500 fell 57 points, 1.5%, to 3,862. The small-cap Russell 200 index declined 58 points, 3.2%, to 1,769.
In London, results from Direct Line and Phoenix Group Holdings will be the early focus.