meed-logo

line1 line2 line3
SIGN IN / REGISTER

GCC banks navigate Credit Suisse fallout

31 March 2023

 

Saudi National Bank chairman Ammar al-Khudairy’s abrupt resignation on 27 March capped a turbulent few weeks for the world’s financial system. This period saw the kingdom’s champion bank dragged into the harsh glare of the global spotlight and serious questions asked about Gulf financial institutions’ readiness to serve as props in an increasingly jumpy financial order.

A short sentence uttered in an interview by a senior Saudi banker precipitated the collapse of a 160-year-old institution. Ruling out extending beyond its 10 per cent stake as it would entail a higher capital cost led to the fellow Swiss bank UBS buying the troubled lender at a steep discount.

Al-Khudairy took the rap for what was deemed an avoidable crisis, in which SNB took a hosing: it bought the Credit Suisse stock at CHF3.82 ($4.2) a share; UBS has paid just CHF0.76 ($0.83) a share.

The pain goes wider than SNB and the Qatar Investment Authority (QIA), the other Gulf institution directly impacted by Credit Suisse’s troubles, given its 6.9 per cent stake in the lender.

The crisis poses serious questions about the role of wealthy Gulf institutions in a global system that is increasingly reliant on them, but has yet to stress test the relationship.

On the one hand, Gulf investors have been spooked about their exposure to venerable banking institutions that were once seen as copper-bottomed plays. Conversely, Western banks may now legitimately ask whether their Gulf counterparts are reliable partners in a crisis.

Volatile landscape

The backdrop is one of wider concern about the health of global financial markets. The Credit Suisse crisis was prefaced by US regulators shutting Silicon Valley Bank (SVB) on 10 March, following mass withdrawals of customer deposits.

For now, analysts caution against panic. First, SNB’s exposure – and that of other prominent Gulf lenders – appears limited.

“The impact of SNB’s investment in Credit Suisse and the subsequent takeover by UBS on SNB are limited because the initial investment represents less than 2 per cent of SNB’s investment portfolio and 70-80 bps of the bank’s risk-adjusted capital ratio,” says Mohamed Damak, senior director, Financial Institutions Ratings, at ratings agency S&P.

As to problems in the Western markets, again, exposures are manageable. “On average, banks we rate in GCC had exposure to the US of 4.6 per cent of assets and 2.3 per cent of liabilities at year-end 2022,” says Damak.

“Generally, GCC banks would have limited lending activity in the US and most of their assets there would be in high-credit quality instruments or with the Federal Reserve. The exposure to Europe tends to be limited as well, except for banks that have a presence in some European countries like France or the UK. Most of the activity in these jurisdictions tends to be linked to home countries or generally made of high-quality exposures.”

This will not end SNB shareholder anxiety that the bank’s raison d’etre – supporting domestic projects related to Vision 2030 – had been sidelined in the pursuit of equity positions in global blue chips.

Qatari contagion

Similar questions will be asked in Qatar, where the QIA provided ballast for the Swiss bank’s balance sheet in 2021, when it issued $2bn in convertible notes. The Qatari wealth fund will be reviewing its bank holdings and stress-testing its wider portfolio.

Others will do the same. “Gulf sovereign wealth funds will probably review their asset allocations, regardless of this current crisis,” one Gulf-based economist tells MEED. “The reality is that their role is changing. They were, in the past, more opportunistic investors. Today they are becoming strategic vehicles.”

If Gulf funds like QIA will no longer serve as the global financial system’s white knights – as they proved in the 2008 financial crisis – this may prompt a reconfiguration of investment strategies.

There will be a steep learning curve, says one Gulf-based economist – on both sides.

Governance implications

In light of the growing financial strength of the Gulf institutions come new responsibilities and governance requirements, reflecting the dawning reality that Gulf institutions are growing into increasingly globally systemically significant investors or sources of capital.

“They need to act accordingly,” says the economist. “Not just from the global governance perspective, but also from the perspective of protecting their assets.”

Gulf institutions’ transformation into opportunistic investors was well-timed when liquidity was required at short notice.

“The money centres of the world turned to one of the biggest honey pots they could identify. And, of course, some of the old reservations were conveniently parked aside, at least for the time being,” says the economist.

The challenge for the Gulf institutions was the lack of deep experience or institutional frameworks needed to underpin those initial investments.

“Opportunities arose, these countries chose to take them and they got lucky because they helped stabilise the global financial system, and they helped protect the reputation of these institutions. And no major mistakes were made. But that initial opportunistic approach will no longer fly,” says the economist.

Gulf sector outlook

The Credit Suisse saga has also prompted much ruminating in Western media to the extent that Western institutions may cast a more wary eye in future over their Gulf counterparts.

But absent new funding sources, the GCC's appeal may prove irresistible to them. After all, says the economist, beggars can’t be choosers.

“What is the alternative to resorting to institutions such as the Gulf sovereign funds? They’re not going to go to China, that’s for sure. The only real alternative is to get some sort of a backstop from national central banks. And that is pretty much as close as you can get to a moral hazard,” he says.

The broader global picture is evolving. How Gulf institutions related to primarily Western institutions will also be influenced by the change in the GCC states’ foreign policy.

Gulf governments are increasingly cognisant of the need for a balanced, multi-directional foreign policy. And that is something they will also want to reflect in their wealth funds and banks’ investment behaviour.

The next year should provide an insight into how the post-Credit Suisse modus vivendi will play out.

https://image.digitalinsightresearch.in/uploads/NewsArticle/10724320/main2803.jpg
James Gavin

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Joint venture wins $230m Ras El-Hekma buildings

    30 September 2026

    A joint venture of UK-based Innovo Build and Egypt’s Redcon Construction has won a contract worth about E£12bn ($230m) to carry out infrastructure and construction works for the DP03 East package of the Wadi Yemm development at Ras El-Hekma on Egypt’s North Coast.

    Wadi Yemm is being developed by the UAE’s Modon Development as the first phase of its Ras El-Hekma masterplan, which will comprise 17 planned districts.

    DP03 East has a built-up area of 323,000 square metres and is scheduled for completion within 21 months.

    The scope of work includes more than 660 residential units – comprising standalone villas and townhouses – as well as public service areas, lakes, a commercial mall, landscaping and roadworks.

    The delivery of units at Wadi Yemm is expected to begin in the third quarter of 2029.

    Ras El-Hekma is located on a spur of land on Egypt’s northern Mediterranean coast, about 240 kilometres west of Alexandria.

    Abu Dhabi-based holding company ADQ appointed Modon Holding as master developer for the Ras El-Hekma project in 2024. Modon will oversee the overall development, which covers more than 170 million square metres (sq m).

    Modon will develop the first phase, covering 50 million sq m. The remaining 120 million sq m will be developed in partnership with private developers, under the supervision of the recently established ADQ subsidiary Ras El-Hekma Urban Development Project Company and Modon.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/20123189/main.jpg
    Yasir Iqbal
  • Hassan Allam wins $1bn Cairo mixed-use project deal

    30 September 2026

    Grova Developments, the real estate development arm of Egypt’s Hassan Allam Holding, has awarded Hassan Allam Construction a $1bn contract to deliver the Grova Westfields project in West Cairo.

    Hassan Allam Construction’s scope of work includes a 150-key five-star hotel, branded residences, luxury villas and apartments, as well as infrastructure and landscaping works.

    The project spans about 1.2 million square metres and is being developed in partnership with the Egyptian Kuwaiti Company for Real Estate Development.

    Broadway Malyan has been appointed to lead the master planning and architectural design.

    In October last year, Hassan Allam Construction announced that it had won a $550m contract to build another mixed-use development spanning more than 128 hectares in New Cairo.

    That development comprises villas, townhouses, commercial and office space, mixed-use buildings, infrastructure and other associated facilities.

    Hassan Allam Properties is co-developing the project with Grova Developments.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/20123048/main.jpeg
    Yasir Iqbal
  • King Salman Park prepares for soft opening

    30 September 2026

     

    King Salman Park Foundation is preparing a phased soft opening of the Riyadh park as it moves from construction to operations.

    Dale Chadwick, the foundation’s acting CEO, speaking at MEED’s Shaping Mega Projects conference in Riyadh on 28 September, said 95% of the contracts for phases one and two had been awarded, and irrigation for both phases was installed.

    “There are areas of the landscape in the park that, literally, we could open tomorrow,” he said. "It’s trying to stitch this all together into a cohesive opening.”

    The foundation will present its opening plan to its board at the end of this week. Chadwick said announcements were expected in the coming months.

    “We can’t just open 12 square kilometres of green space and public domain without going through a process,” he said.

    Landscaping works are about to restart for the season. The foundation plans to plant about 4 million plants this year at a rate of 50,000-60,000 a day. Its water treatment plant is operating on a temporary basis, producing about 50,000 cubic metres a day.

    The Royal Arts Complex, one of the park’s anchor assets, is due to be handed over to the Ministry of Culture within three to six months.

    Operational shift

    The foundation has moved out of its headquarters in King Abdullah Financial District (Kafd). About 230-240 staff are now based in the operations and maintenance building it built inside the park. The foundation will relocate fully once its permanent headquarters is complete.

    Chadwick said the move into operations was new territory for the organisation, which has not yet opened an asset. The foundation is engaging operators and has agreed how its operations will be structured.

    "It’s working with nature, so it’s a little bit tricky to really forecast how that’s going to pan out,” he said. "We’ve seen good results with the landscaping.”

    Private assets

    The public realm accounts for about SR50bn ($13.3bn) of investment. A further SR150bn of private assets is planned, and about SR20bn of this has been awarded.

    One private asset package is on site and three are in design. The foundation is close to awarding another, which Chadwick said involves foreign investment.

    He said the private assets would fund the park over the long term. “The public realm is the financial burden in terms of the ongoing operation of the park,” he said. “The financial revenue engine for us is the private assets. That is the long-term financial health.”

    Chadwick estimated the private asset programme was 20%-35% complete, depending on the measure used.

    The foundation has received 23 expressions of interest from developers. It is timing awards to follow infrastructure and landscaping works so that investors can see progress before committing.

    “What the private sector is looking for in terms of investment is surety of what we’re doing,” said Chadwick. “The closer we get to completion, the greater the appetite.”

    Phase three

    The third phase is being replanned. A golf course originally planned for the area will be replaced to allow the site to be commercialised. Chadwick said the remaster planning, which also responds to requests from the board, would start in the next couple of months.

    Chadwick said the foundation wanted the park to become a destination of choice for Riyadh residents. He said it had studied parks such as New York’s Central Park and London’s Hyde Park.

    “We’re providing a blank canvas for people to come in and experience the park,” he said. “Those parks have been there for a long time, and this is Riyadh’s journey to having a park that has some similar longevity. This is just the start of that journey.”

    https://image.digitalinsightresearch.in/uploads/NewsArticle/20118674/main.jpg
    Colin Foreman
  • Oxagon takes centre stage at Neom

    29 September 2026

     

    For all the talk of cancellations, Neom completed its biggest project yet in August, commissioning the $8.5bn Neom Green Hydrogen project.

    The project reflects Neom’s reprioritisation, which has seen the $500bn gigaproject shift from a speculative vision towards a delivery-focused industrial development.

    This shift was clearly signalled in April, when Public Investment Fund (PIF) governor Yasir Al-Rumayyan publicly backed Oxagon, Neom’s planned industrial and manufacturing hub on the Red Sea coast. Since then, there have been increasing signs that the development is taking precedence over the rest of the giga-portfolio.

    Announced strategy

    Al-Rumayyan’s remarks, delivered as PIF unveiled its 2026-30 strategy, were the clearest public articulation yet of where the fund’s priorities lie. Asked whether The Line needed to be delivered, he was blunt: it would be good to have, but it was not essential. 

    Oxagon, on the other hand, was described as “the fundamental part of Neom”.

    The comment reframed two years of speculation about scaled-back ambitions at Neom into something closer to a strategic decision, with capital following the assets capable of generating revenue, and the industrial city sitting at the top of that list.

    The shift in language also matters, since PIF has been at pains to stress that no Neom projects have been formally cancelled, even as billions of dollars of contracts have been terminated or re-scoped over the past two years.

    Under the new strategy, Neom has effectively been reclassified as its own reporting line within PIF’s portfolio, separated from the fund’s other domestic holdings. That separation gives Oxagon room to be judged on its own commercial merits, while distancing it from the reputational weight still carried by more conceptual elements of the wider development.

    There have been increasing signs that Oxagon is taking precedence over the rest of the giga-portfolio

    Conflict acceleration

    The reprioritisation was already under way before the region’s latest conflict began. PIF has spent the past two years pushing Neom to identify which elements of the gigaproject were fundamental and which were aspirational, a process that has as much to do with capital discipline as geopolitics.

    With the fund committing to direct roughly 80% of its $925bn portfolio towards domestic investment, while simultaneously funding Expo 2030 and the 2034 World Cup, Riyadh needed its flagship projects to start showing commercial returns rather than absorbing capital indefinitely.

    Oxagon, with a port, an export-ready hydrogen plant and land that could be leased to industrial tenants, was always the part of Neom best placed to answer that requirement, and the regional conflict that began in late February only accelerated the shift. The closure of the Strait of Hormuz to a fraction of its normal commercial throughput has hit Saudi Arabia’s oil export capacity hard and pushed the kingdom into a sizeable quarterly fiscal deficit.

    Riyadh has also had to contend with direct disruption to its own energy infrastructure, including the temporary closure of the East-West oil pipeline following drone strikes. Against that backdrop, an industrial city with its own deep-water port on the Red Sea, outside the Strait of Hormuz chokepoint, has taken on added strategic weight.

    Oxagon offers the kingdom a second maritime gateway, one that is not exposed to the same geopolitical risks as the Gulf coast terminals that have historically carried Saudi trade. For a government having to defend every riyal of committed capital spending, a project that can plausibly generate port fees, hydrogen export revenue and data-centre hosting income within the current decade is a far easier sell than a 170-kilometre linear city that is still taking shape.

    Construction ramps up

    The clearest evidence of that pivot is what has actually broken ground at Oxagon recently. At a time when Neom’s recent news flow has been about contract terminations, Oxagon’s has been about starts.

    The most visible of these is the artificial intelligence (AI) data-centre campus being developed by Humain, the PIF-owned AI company, in partnership with digital infrastructure developer DataVolt.

    Construction on the first 100MW of a planned 360MW first phase began this year, as part of a wider 1.5GW campus that builds on the companies’ original 2025 agreement, backed by roughly $5bn of investment. The facility is designed to draw on Oxagon’s pre-zoned industrial land, renewable power and subsea cable links to Europe and Africa, with the first 100MW targeted for service in 2028.

    For Neom, the project answers a question that has dogged the gigaproject for years: namely, what, beyond real estate and tourism, Oxagon actually sells.

    Connectivity is following the same pattern. Neom issued an expression of interest in September for consultancy services to plan a freight rail line of more than 400km linking the Port of Neom at Oxagon to Saudi Arabia Railways’ North-South Railway at the Al-Baseeta junction.

    The North-South network currently serves the kingdom’s phosphate and bauxite mining sector, running from Al-Jalamid and Baitha to the Gulf coast industrial cluster around Ras Al-Khair, Jubail and Dammam, with branches to Riyadh and the Jordanian border.

    A connection to Oxagon would give that network a second maritime outlet on the Red Sea and would finally give the Port of Neom a direct rail link into the kingdom’s interior, something it has lacked since operations began in 2022.

    Cargo currently depends on road transport or an additional sea leg, a constraint that has limited the port’s usefulness beyond a regional hub.

    Utilities work is quietly keeping pace with the more visible projects. Neom has tendered an industrial wastewater treatment plant at Oxagon, with proposals due in early October. The scheme has an initial capacity of 35,000 cubic metres a day, (cm/d) expandable to a maximum of 45,000 cm/d as demand grows.

    The plant is expected to cater to the wider industrial developments planned at Oxagon and points towards it developing into a full-fledged industrial cluster rather than a single-phase development.

    Road infrastructure has moved in parallel. A design-and-build tender is currently out for the permanent upgrade of Oxagon’s Highway 55, which connects the Red Sea coast with the mainland in northwestern Saudi Arabia.

    It currently serves as the only road providing north-south connectivity between Duba and the Neom region. The project is expected to support the anticipated increase in construction activity at Oxagon and facilitate the movement of cargo vehicles from Duba Port to other parts of the country and the wider region.

    These construction packages represent the unglamorous groundwork needed before an industrial city can function at scale, and that foundational build-out is already being mirrored in Neom’s external connectivity. In April, a new multimodal logistics corridor linking Europe, Egypt, Neom and the GCC was enabled, offering a faster and more flexible route for European cargo entering the region.

    The most advanced element of the build-out remains the port itself. Dutch marine contractor Boskalis has completed the deepening and widening of the main access channel, and Belgian contractor Besix has finished more than 4.6km of quay wall across seven berths, some with draughts of up to 18.5 metres.

    The Terminal 1 development, a 900-metre, fully automated container facility designed to be one of the first ports in the kingdom to use automated ship-to-shore cranes, is being phased in through 2026. This will take capacity from the port’s current 250,000 twenty-foot equivalent units (TEUs) towards a 2030 target of 1.5 million TEUs, and an eventual ambition of 12 million TEUs once fully built out. The facility has been described as an accelerator for the kind of integrated, end-to-end supply chain the wider Oxagon concept was built around.

    A development this capital-intensive will require continued private and foreign investment

    Project rationale

    Set against the rest of Neom’s portfolio, Oxagon’s advantage stands out. It has the potential to produce things that can be sold, shipped or leased within a timeframe investors and government auditors can underwrite.

    Green hydrogen converted into green ammonia for export; port capacity sold by the container; data-centre capacity sold by the megawatt; industrial land leased by the hectare. These are conventional infrastructure economics, not the largely unprecedented urban-planning bet represented by The Line or other components of the wider Neom masterplan.

    There is also a coherence to Oxagon’s individual pieces that is harder to find elsewhere in the Neom story. A port needs rail and road connections to move cargo inland. An AI data-centre campus needs power, land and subsea connectivity – things an industrial port city is well placed to provide. A green hydrogen plant needs an export terminal close by. Each project reinforces the case for the others, in a way that an industrial city announced in 2021 as one vision among several has arguably never quite managed to replicate.

    Oxagon is not without risk. Schedules have already slipped once, and a development this capital-intensive will require continued private and foreign investment if its backers are serious about reducing direct funding exposure.

    The direction of travel this year has been positive. With the green hydrogen plant entering commissioning, a hyperscale AI campus breaking ground, a new rail corridor being planned and a port moving towards its next phase, Oxagon is reinforcing its position as one of the kingdom’s flagship projects for the future. 

     

    https://image.digitalinsightresearch.in/uploads/NewsArticle/20095152/main.gif
    Yasir Iqbal
  • Contractors submit bids for Oxagon Highway 55 upgrade

    29 September 2026

     

    Contractors submitted bids on 28 September for a design-and-build contract to upgrade Highway 55 in Saudi Arabia’s Oxagon region.

    The first phase of the project includes the construction of 14 kilometres of road with two lanes in each direction, as well as one bridge and three interchanges.

    The project duration is 22 months.

    Highway 55 connects the Red Sea coast with the mainland in northwestern Saudi Arabia. It is currently the only road providing north-south connectivity between Duba and the Neom region.

    MEED reported exclusively in August last year that contractors had submitted responses to an expression of interest notice that Neom issued earlier that month.

    The project is expected to support cargo movement from Duba Port to other parts of the kingdom and the wider region.

    Last year, Neom tested a pilot initiative by handling a shipment that travelled from Cairo via the Port of Safaga, across the Red Sea to the Port of Neom, and then inland to Erbil, Iraq.

    In a statement, Neom said: “The shipment travelled through an intermodal corridor spanning over 900 kilometres, marking a significant milestone in the kingdom’s transformation into a regional and global logistics hub.”

    The Port of Neom is located on the Red Sea near the Arar border, a key entry point into Iraq.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/20093715/main.jpg
    Yasir Iqbal