More Than $1 Billion Is Lost on a Credit Suisse Investment by Saudi National Bank

Saudi National Bank is suffering significant losses as a result of UBS’s forced acquisition of Credit Suisse for $3.2 billion. The biggest shareholder in Credit Suisse, Saudi National Bank, said CNBC had suffered a capital loss of over 80%.

The bank with headquarters in Riyadh currently owns 9.9% of Credit Suisse after investing $1.5 billion (1.4 billion Swiss francs) in the 167-year-old Swiss bank in November of last year at a price of 3.82 francs per share.

UBS has offered Credit Suisse stockholders 0.76 francs per share as per the provisions of the rescue agreement.

The substantial markdown is a result of regulators’ efforts to support the worldwide financial system. The search for a rescue comes after a turbulent few week that saw the demise of Silicon Valley Bank in the United States, the stock price fall of First Republic Bank, and significant stock price declines in the international banking industry.

Shares of UBS, the biggest bank in Switzerland, were down 10.5%, while the overall banking sector in Europe was down about 4%. Credit Suisse had a staggering 62% decline.

Saudi National Bank claims that its overall strategy has not changed after the setback. The lender’s stock had increased by 0.58%.

“As of December 2022, SNB’s investment in Credit Suisse constituted less than 0.5% of SNB’s total Assets, and c. 1.7% of SNB’s investments portfolio,”

Saudi National Bank stated in a statement.

According to the statement, there was “nil impact on profitability” from a “regulatory capital perspective.”

“Changes in the valuation of SNB’s investment in Credit Suisse have no impact on SNB’s growth plans and forward-looking 2023 guidance,”

the statement continued.

The second-largest shareholder in Credit Suisse, the Qatar Investment Authority, owns a 6.8% stake in the company and experienced a significant loss. A request for additional information from QIA was not answered.

With decades of allegations, multibillion-dollar damages, CEO modifications, and an approach that failed to build investor trust, Credit Suisse’s fall was long overdue. Following customer withdrawals of more than 110 billion francs in February, the bank—the second-largest in Switzerland—reported its highest yearly loss since the financial crisis of 2008.

The Saudi National Bank, the Qatar Investment Authority, and the Saudi Olayan Group were among the primary Gulf banks and sovereign wealth funds that contributed to Credit Suisse’s $4 billion capital round in December 2022. Norges Bank Investment Management, Norway’s national wealth fund, is another significant shareholder.

Some claim that Saudi National Bank is largely to blame for the fast and abrupt slump that started weeks ago and caused the bank to sell assets in an emergency situation.

Ammar Al Khudairy, the chairman of the Saudi National Bank, was questioned by Bloomberg about whether the bank will raise its holding in the struggling Swiss institution. His reply was, 

“absolutely not, for many reasons outside the simplest reason, which is regulatory and statutory.”

Despite the fact that the announcement was not new—the Saudi bank had already stated in October the company did not have intentions to increase its stakes beyond the current 9.9%—the revelation sparked market fear and sent Credit Suisse shares plummeting 24% during that session.

“Even though the situation at Credit Suisse was not perfect and investors had a lot of question marks about the future of the bank, SNB didn’t help calm down investors and shot themselves in the foot”

to the chairman’s remarks, one UAE-based investment banker, which sought not to be named because of competent constraints, told CNBC.

“As the largest shareholders in the bank, they had the most to lose if the bank goes under, and this is exactly what happened,”

the banker claimed.

The chairman of the Saudi National Bank made an effort to diffuse the circumstances, informing Hadley Gamble of CNBC in Riyadh that

“if you look at how the entire banking sector has dropped, unfortunately, a lot of people were just looking for excuses.”

“It’s panic, a little bit of panic. I believe completely unwarranted, whether it be for Credit Suisse or for the entire market,”

Al Khudairy stated. In the end, his remarks were unable to stop the bank’s ongoing collapse.

The chaotic aftermath, which affected the whole banking industry, has shaken investor trust and fueled concerns about a potential new global banking crisis. Swiss Finance Minister Karin Keller-Sutter sought to calm the fears of the nation’s furious taxpaying public by emphasizing that “this is a commercial solution and not a bailout.”

“SNB’s feeling right now is probably like all shareholders in CS — utter anger that management have let the situation get to this point,”

Simon Fentham-Fletcher, chief investment officer at Abu Dhabi-based Freedom Asset Management, advised CNBC.

“For years CS lurched from crisis to regulatory fine and changed management as it emerged in a new path. The bank finally ran out of time,”

he remarked.

He stated that the stockholders, particularly big companies like Saudi National Bank, are going to currently be inclined to reevaluate how they generate investments and

“where the stake is as large as it was here, will probably want to start embedding people so they properly understand what is happening inside their investments.”

“This might see a rise in activist shareholders not just wanting a board seat but real eyes and ears,”

he stated, noting that the past couple of weeks of market chaos are bound to make a major dent in financier desire for threat.

Fentham-Fletcher stated that from a risk viewpoint,

“generally I think that we will see a pullback in all risk appetite as confidence has just taken a severe beating, and this combined with the apparent upending of the capital structure rules will undoubtedly make people pause.”

Information from CNBC

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