London open: Stocks edge lower; HSBC buys SVB's UK arm

London stocks edged lower in early trade on Monday as investors mulled news that HSBC has bought the UK arm of stricken Silicon Valley Bank for a nominal £1, and looked ahead to this week’s Budget.

At 0830 GMT, the FTSE 100 was down 0.4% at 7,716.57.

The acquisition took place after a night of frantic negotiations involving government ministers and Bank of England officials.

Talks were held over the weekend on a private sale of SVB UK and a plan to help depositors in the lender in an effort to avoid a state bailout. US regulators on Sunday evening said that SVB’s American depositors would have access to all of their money on Monday.

"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," said HSBC chief executive Noel Quinn.

Chancellor Jeremy Hunt said customer deposits at SVB UK will be protected, with no taxpayer support through the rescue deal with HSBC.

Victoria Scholar, head of investment at 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."

Several companies issued statements on Monday to say they had no material exposure to SBV UK, including online card and gifts retailer Moonpig, media group Future and Auction Tech.

Away from the SVB drama, insurer Direct Line was under the cosh after saying it swung to a full-year loss as it took a hit from inflation, and warning that 2023 earnings will be impacted by higher-than-expected claims inflation in the motor business.

In the year to the end of December 2022, the company swung to a pre-tax loss of £45.1m from a profit of £446m the year before, while operating profits slumped 94.6% to £32.1m. Analysts had been expecting operating profit of £70m.

Direct Line pointed to elevated motor claims inflation, higher-than-expected weather event claims, new regulatory changes and "“challenging" investment markets.

Elsewhere, British American Tobacco was knocked lower by a downgrade to ‘neutral’ at JPMorgan.

Market Movers

FTSE 100 (UKX) 7,716.57 -0.41%
FTSE 250 (MCX) 19,345.94 -0.06%
techMARK (TASX) 4,581.79 -0.32%

FTSE 100 - Risers

Endeavour Mining (EDV) 1,725.00p 4.55%
Fresnillo (FRES) 740.80p 2.58%
Ocado Group (OCDO) 457.00p 1.31%
London Stock Exchange Group (LSEG) 7,456.00p 1.28%
Rolls-Royce Holdings (RR.) 151.74p 1.09%
Frasers Group (FRAS) 775.50p 1.04%
Anglo American (AAL) 2,839.50p 0.98%
Hargreaves Lansdown (HL.) 794.80p 0.84%
Bunzl (BNZL) 2,954.00p 0.82%
SEGRO (SGRO) 776.00p 0.70%

FTSE 100 - Fallers

Beazley (BEZ) 570.00p -1.98%
British American Tobacco (BATS) 3,057.50p -1.80%
Airtel Africa (AAF) 118.60p -1.58%
BP (BP.) 541.80p -1.35%
Abrdn (ABDN) 217.00p -1.27%
Pershing Square Holdings Ltd NPV (PSH) 2,805.00p -1.06%
Aviva (AV.) 445.00p -1.05%
Imperial Brands (IMB) 1,958.50p -1.04%
Vodafone Group (VOD) 97.57p -1.00%
Spirax-Sarco Engineering (SPX) 11,015.00p -0.94%

FTSE 250 - Risers

Senior (SNR) 174.00p 5.20%
Trainline (TRN) 260.60p 4.45%
Aston Martin Lagonda Global Holdings (AML) 256.00p 4.19%
IP Group (IPO) 57.50p 3.42%
CLS Holdings (CLI) 141.00p 2.62%
Volution Group (FAN) 415.50p 2.47%
Centamin (DI) (CEY) 104.40p 2.45%
Keller Group (KLR) 745.00p 2.34%
Schroder Oriental Income Fund Ltd. (SOI) 263.50p 2.33%
Baltic Classifieds Group (BCG) 150.00p 2.32%

FTSE 250 - Fallers

Bank of Georgia Group (BGEO) 2,560.00p -5.54%
TBC Bank Group (TBCG) 2,260.00p -4.64%
Direct Line Insurance Group (DLG) 160.35p -4.35%
Virgin Money UK (VMUK) 159.30p -3.16%
Close Brothers Group (CBG) 1,049.00p -2.60%
Petershill Partners (PHLL) 162.00p -2.53%
Jupiter Fund Management (JUP) 139.00p -2.25%
Baillie Gifford Japan Trust (BGFD) 754.00p -1.69%
Premier Foods (PFD) 120.40p -1.63%
Worldwide Healthcare Trust (WWH) 3,035.00p -1.62%