Saturday, July 20, 2024

Saudi National bank’s 80% loss

Saudi National Bank suffers major loss following Credit Suisse takeover by UBS

Saudi National Bank, the largest shareholder in Credit Suisse, has confirmed an 80% loss on its investment after the forced takeover of the bank by UBS for $3.2bn. The Riyadh-based bank holds a 9.9% stake in Credit Suisse and had invested CHF1.4bn ($1.5bn) at CHF3.82 per share in November 2022. The UBS rescue deal pays Credit Suisse shareholders CHF0.76 per share. The Qatar Investment Authority, Credit Suisse’s second-largest investor, has also suffered a steep loss.

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Shareholders feeling angry with Credit Suisse management

Credit Suisse’s collapse was the culmination of years of scandals, multi-billion dollar losses, and a failed strategy. In December 2022, Credit Suisse raised some $4bn from investors including major Gulf banks and sovereign wealth funds like Saudi National Bank and the Qatari Investment Authority. Saudi National Bank’s chairman, Ammar Al Khudiary, responded to a question in February about increasing its stake in the troubled Swiss lender by saying that it would not, causing Credit Suisse shares to drop 24% during that session.

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The sharp and sudden downturn that began in the following weeks and led to the bank’s emergency sale is partially blamed on Saudi National Bank. One UAE-based investment banker believes that SNB shot themselves in the foot by making these comments, even though they had already stated they had no plans to expand their holdings beyond the current 9.9%. The fallout from the situation has ruptured market confidence and stoked fears of another global banking crisis. Shareholders, like Saudi National Bank, will likely want to reappraise their investment strategies and potentially embed themselves within their investments.

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SNB’s investment loss does not impact overall strategy

Despite the loss, Saudi National Bank says its overall strategy remains unchanged. The bank’s investment in Credit Suisse constituted less than 0.5% of its total assets as at December 2022 and c.1.7% of its investment portfolio. There was nil impact on profitability from a regulatory capital perspective. Changes in the valuation of SNB’s investment in Credit Suisse will have no impact on SNB’s growth plans and forward-looking 2023 guidance

Android Apps by The Saudi National Bank (SNB) on Google Play

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