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(Alliance News) - The FTSE 100 was called down on Monday morning, as the fall out from the collapse of Silicon Valley Bank continues, with HSBC Holdings stepping in to buy SVB's UK arm.
HSBC has brought failed lender Silicon Valley Bank UK Ltd for a nominal GBP1, in what HSBC calls "a strategic acquisition" to strengthen its banking franchise in the UK.
Before the announcement, Chancellor Jeremy Hunt said the UK government was "working at pace" on a plan to prevent affected businesses from going bust, which could involve an emergency private takeover deal.
A survey of 31 venture capital funds, which hold thousands of investments in UK tech and science firms, found that 34% of their portfolio companies – amounting to 336 – have accounts with bank. More than 200 of those now face short or long-term cashflow risk, according to the data from BVCA – the industry body representing venture capital investors.
Around GBP2.5 billion of capital from these firms is locked in the lender.
The Bank of England announced on Friday that Silicon Valley Bank UK is set to enter insolvency, following action taken by its parent company in the US.
Elsewhere, motor and home insurer Direct Line posted some disappointing results, as it swung to a full-year loss.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called down 0.1% at 7,740.90
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Hang Seng: up 2.0% at 19,700.44
Nikkei 225: closed down 1.1% at 27,832.96
S&P/ASX 200: closed down 0.5% at 7,108.80
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DJIA: closed down 345.22 points, or 1.1%, at 31,909.64
S&P 500: closed down 56.73 points, or 1.5%, at 3.861.59
Nasdaq Composite: closed down 199.47 points, or 1.8%, at 11,138.89
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EUR: up at USD1.0727 (USD1.0637)
GBP: up at USD1.2108 (USD1.2025)
USD: down at JPY134.39 (JPY134.82)
Gold: up at USD1,877.72 per ounce (USD1,859.42)
(Brent): up at USD83.20 a barrel (USD83.02)
(changes since previous London equities close)
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ECONOMICS
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Monday's key economic events still to come:
08:00 CET Germany labour cost index
11:00 GMT Ireland industrial production and turnover
18:05 GMT UK BOE MPC Member Swati Dhingra speaks
10:00 EDT US employment trends index
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The UK's ability to compete internationally in electric vehicle production is at risk, an automotive industry body has claimed. Urgent action is needed by the UK government to respond to "fierce competition" from other countries, the Society of Motor Manufacturers & Traders said. Cutting energy costs, speeding up funding for green technology projects and expanding free trade agreements are among the measures included in an SMMT blueprint setting out how to encourage EV production. The Green Automotive Transformation Strategy also calls for more generous subsidies and reducing red tape for proposed battery-production schemes.
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The UK's 363,000 international traders will see a streamlined customs process under reforms to be announced in the government budget this week. Chancellor Jeremy Hunt is set to details plans to cut red tape and simplify paperwork involved in moving goods in and out of the country, the Treasury said. The changes would give traders six additional days to submit forms after border crossings, reducing admin burdens for business. They would need fewer authorisations and financial guarantees. Hunt said: "A simpler tax and customs system lets businesses focus on what they do best, creating wealth and generating economic growth, instead of getting tied up in red tape.
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BROKER RATING CHANGES
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JPMorgan raises Bunzl to 'overweight' (neutral) - price target 3,375 (3,250) pence
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JPMorgan cuts British American Tobacco to 'neutral' (overweight)
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Peel Hunt raises National Express to 'buy' (hold) - price target 215 (175) pence
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COMPANIES - FTSE 100
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HSBC Holdings has agreed to buy Silicon Valley Bank UK for a nominal GBP1, calling the deal for the failed lender a strategic acquisition to strengthen HSBC's banking franchise in the UK. As at March 10, SVB UK had loans of around GBP5.5 billion and deposits of around GBP6.7 billion. In 2022, SVB UK recorded a pretax profit of GBP8 million. HSBC Chief Executive Noel Quinn 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."
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Phoenix Group lifted its annual dividend to 50.8 pence from 48.9p in 2021, despite a wider loss on net investment losses. Its pretax loss widened to GBP2.84 billion in 2022 from GBP430 million in 2021. Net premiums were flat at GBP5.37 billion from GBP5.38 billion. The wider loss was due to GBP38.1 billion in negative net investment income, compared to positive GBP18.0 billion. Looking ahead, Phoenix noted that 2023 has "a challenging economic environment", but it remains confident that its model and risk management approach will ensure that it remains "highly resilient to any economic volatility".
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COMPANIES - FTSE 250
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Direct Line Insurance posted net earned premium of GBP2.97 billion in 2022, flat compared to GBP2.96 billion in 2021. Net insurance claims rose to GBP2.32 billion from GBP1.72 billion. Direct Line swung to a pretax loss of GBP45.1 million from GBP446.0 million profit. The company's solvency capital ratio fell to 147%, from 176% year-on-year. It confirmed that it would not propose a dividend for 2022, as previously announced. Acting CEO Jon Greenwood said: "2022 was a tough year for Direct Line Group. Motor and Home market conditions were challenging, with high claims inflation and regulatory reforms creating substantial headwinds for the business, and we did not navigate these challenges as effectively as we would have wished. Exceptional weather and difficult investment markets also significantly impacted our results."
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OTHER COMPANIES
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Gresham House Energy Storage Fund said in a trading update that earnings before interest, tax, depreciation and amortisation exceeded GBP48 million in 2022, up 20% on 2021. Declares a 7 pence dividend for 2022. Looking ahead, Gresham expects further Ebitda growth in 2023. It intends to pay a dividend of 7.35p per share for 2023, a 5% increase over 2022. Chair John Leggate said: "In 2022, the manager grew the team's capabilities commensurate with the projected growth of the pipeline, optimised current operations, added balance sheet flexibility through its debt facility, improved construction oversight and built out the pipeline. The board believes that we are exceptionally well-positioned to capitalise on the exciting battery energy storage opportunities ahead of us in the UK and our targeted international markets."
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Atalaya Mining said it expects to delist from the Toronto Stock Exchange on March 20, having previously expected the delisting to occur on March 7. The company shares will continue to trade on the AIM market in London.
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By Sophie Rose, Alliance News reporter
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