The largest lender in the country, Saudi National Bank, which is majority-owned by the Saudi government, disclosed on Wednesday that it was taking a 9.9% stake in Credit Suisse through an investment of up to $1.5 billion.
The Swiss lender announced a significant strategic reorganisation and reported a third-quarter net loss of 4.034 billion Swiss francs ($4.09 billion), significantly worse than analyst expectations.
After several scandals, management changes, and subpar earnings reports, shares have fallen by about 55% this year.
Credit Suisse was urged to make a swift overhaul and return to a “very stable, conservative Swiss banking posture” by the chairman of one of its newest and largest shareholders.
The largest lender in the country, Saudi National Bank, which is majority-owned by the Saudi government, disclosed on Wednesday that it was taking a 9.9% stake in Credit Suisse through an investment of up to $1.5 billion.
We paid the floor price for it. Ammar Alkhudairy said on Sunday to Hadley Gamble of CNBC, “I think the bank has been battered. It is currently trading for less than one-fourth of its tangible book value, which is an incredible deal. Additionally, the brand is 160 years old and is very valuable. According to reports, the bank will overtake Harris Associates as Credit Suisse’s second-largest shareholder.
The Swiss lender announced a significant strategic reorganisation and reported a third-quarter net loss of 4.034 billion Swiss francs ($4.09 billion), significantly worse than analyst expectations. After several scandals, management changes, and subpar earnings reports, shares have fallen by about 55% this year.
The bank pledged to “radically restructure” its investment arm as part of the anticipated strategic shift in order to significantly reduce its exposure to risk-weighted assets, which are used to calculate a bank’s capital requirements. By 2025, it also plans to reduce costs by 15%, or 2.5 billion Swiss francs.
The SNB chairman identified Credit Suisse’s investment banking division as the organization’s Achilles’ heel, which is made worse by the current environment of elevated market volatility.
The volatility of the performance of their investment bank, he said, has been “Credit Suisse’s biggest overhang over the past couple of years.
The retail business in Switzerland, private wealth management, and asset management, which are the bank’s other three core businesses, are all “very stable” business streams that have produced “predictable, sustainable returns,” according to Alkhudairy.
Thus, he continued, “it’s just returning to a very stable, conservative Swiss banking posture, which we like.”
Alkhudairy stated that, in the short to medium term, he believes that Credit Suisse should concentrate on private wealth management and grow its retail business, and “get the volatile business out of the quarterly earnings.
I would simply urge them to carry out [the overhaul] without pausing or blinking. The faster, the better, he declared.
No intention to interfere in management
Following Crown Prince Mohammed Bin Salman’s encouragement of Saudi Arabia’s biggest companies to actively invest abroad and raise its profile as a global investor, the investment was made. The Public Investment Fund of Saudi Arabia, which oversees assets worth about $620 billion, is essential to the goals of the crown prince.
When questioned about the SNB’s decision to invest in the troubled Swiss bank, Alkhudairy refuted the notion that it was somehow connected to PIF and instead described it as a “manifestation of the new Saudi Arabia.”
He continued by saying that Saudi National Bank does not currently hold any board seats at Credit Suisse, and he does not anticipate that to change in the near future.
As a significant shareholder, we will support the bank, said Alkhudairy. There is absolutely no intent to participate in or interfere with management in any way.
To be clear, this is a financial investment. The 9.9% was carefully calculated because once you reach 10%, a host of regulatory and accounting issues arise that we felt we did not want to face. As of right now, we don’t have any board seats, and we don’t anticipate taking one,” he said.
