A specialist business lender warned that the decision to sell Silicon Valley Bank’s British operations to HSBC could hurt ambitions for the UK as a technological superpower.
OakNorth Bank attempted to acquire Silicon Valley Bank UK, but was unable to match HSBC’s ability for market stability in the struggling tech sector lender.
Rishi Kosla, OakNorth’s founder and chief executive said he understood the reasons HSBC was chosen to bring stability into the market and business. However, he cautioned that this move could limit lending to technology companies over the medium-term. The government wants Britain to be a “technology superpower” by 2030.
Khosla, 47, stated that the UK missed an opportunity to bring together the champion for biotech and tech companies with OakNorth, and create a real powerhouse capable of supporting the innovation economy. The unintended consequence of the business moving to a large institution such as HSBC is that you will likely be left with more voids in the tech and biotech sector.
Khosla stated that the digital bank offered PS100 to SVB UK for its £1.4 billion equity capital. This compares with HSBC’s winning bid of £1. It also requested that the Bank of England provide short-term liquidity support. This was something that HSBC could do from its own financial statements.
“From all that we’ve been told, we were runners-up. Khosla stated that we made it all the way.
OakNorth was founded in 2015 and has 214,000 UK business and consumer customers. Yesterday, it announced pre-tax profits of £152.3 million for 2022. This is an increase from £134.5 millions in 2021. While gross lending declined from £1.8 billion a £1.5 billion, its total loan portfolio increased from £4.2 million to PS4.6 billion. The expected losses from loans increased annually by 0.08 to 0.12 percent.
Khosla stated that “we feel like we’re in a good place” and added that there was “positive momentum on new retail deposits as a result Silicon Valley Bank UK’s collapse.” More than 90% of its deposits were covered by the £85,000 financial compensation scheme guarantee limit.
Khosla stated that the banking regulations in Britain could be more difficult for small lenders after Brexit. He stated that while we recognize the importance of a stable regulatory environment and stability, there are technical issues that could affect how much lending can be done. This is where the UK is becoming more conservative than Europe and other markets. “We could end up in a worse position than we would have been under the European system.”
OakNorth’s net margin, which is the difference between what OakNorth pays depositors as well as what it lends small and medium-sized business owners, was 7.3% in 2019, up from 6.6% in 2021. Its operating cost remained at 26%. Comparatively, NatWest’s ratio is 58% and HSBC’s is 64%.
Khosla stated that it was unlikely OakNorth would issue shares on a stock exchange within the next 12 month, but said such a move was possible in the future. Khosla declined to comment on whether New York was more popular than London. SoftBank, Clermont Group, and Toscafund are the bank’s main investors. He said that the bank is extremely capitalised and makes a lot of money so it doesn’t require capital.
After Credit Suisse’s turmoil, Saudi National Bank’s chairman has resigned (Callum Jones writes). According to the bank, Ammar Al Khudairy had decided to resign “due personal reasons”. Saudi National Bank, the largest shareholder of Credit Suisse, had just four months ago purchased a stake in the bank worth almost 9.9 percent for $1.46 million. After two American banks failed, the entire system was under scrutiny. Al Khudairy, the lender, announced that it would no longer provide financial assistance to Credit Suisse. This slashed its shares by up to 30% in one day. Saudi National Bank suffered a loss of $1 billion due to the forced sale to UBS.