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
  • Dubai seeks consultants to develop drainage strategy

    18 March 2026

    Dubai Municipality has issued a request for qualifications (RFQ) for a study to develop a sustainable urban drainage systems (Suds) strategy across the emirate.

    The bid submission deadline is 9 April.

    The tender, issued through the Sewerage and Recycled Water Projects Department, covers the development of a strategy and conceptual implementation plan for Suds in Dubai.

    It follows a separate RFQ issued by the municipality in March for consultancy services to study the emirate’s sewage treatment strategy.

    The Suds project, designated TF-23-D1, aims to support the emirate’s flood protection and drainage infrastructure by promoting a more sustainable approach to stormwater management.

    The scope of work includes a review of international best practices in Suds and their applicability to Dubai. It also involves undertaking a Suds opportunity study and carrying out catchment-scale modelling and financial evaluation for a pilot study area.

    Consultants will be required to develop Suds design guidelines, specifications and standard drawings. The project also includes establishing a strategy, policy, legal and regulatory framework to support a Suds implementation roadmap.

    Dubai Municipality said the initiative represents “a significant step towards a more resilient, sustainable and forward-looking stormwater management approach for Dubai.”

    The study forms part of a broader review of Dubai’s water and wastewater infrastructure. Earlier this month, the municipality issued a separate consultancy tender (P115-D1) to assess the emirate’s sewage treatment and recycled water distribution strategy. 

    The study will focus on infrastructure requirements to support future population growth. 

    This includes identifying locations for potential future facilities such as treatment plants and pumping stations.

    The bid submission deadline is 23 March.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16027434/main.jpg
    Mark Dowdall
  • Oman awards power purchase agreements

    18 March 2026

    Oman’s Nama Power & Water Procurement Company (PWP) has issued letters of award (LoA) for new power purchase agreements (PPAs) to three independent power producers (IPPs), according to regulatory filings.

    The new PPAs will extend the operating life of existing gas-fired power plants beyond the expiry of their current contracts.

    The projects have a combined capacity of about 3,500MW.

    The agreements have been awarded to Phoenix Power Company, Al-Batinah Power Company and Al-Suwadi Power Company.

    Phoenix Power Company operates the 2,000MW Sur IPP.  It is owned by a consortium of international and regional investors, including Japan’s Marubeni Corporation and Chubu Electric Power, Qatar’s Nebras Power, Qatar Electricity & Water Company and Multitech of Oman’s Bahwan Engineering Company.

    Al-Batinah Power Company and Al-Suwadi Power Company operate the 750MW Sohar 2 IPP and the 750MW Barka 3 IPP, respectively.

    According to regional projects tracker MEED Projects, Nama PWP signed the original PPA for the Barka 3 project in 2010 with a consortium led by Gaz de France (GDF) Suez under a special purpose vehicle (SPC) called Al-Suwadi Power Company.

    The shareholders comprised GDF Suez (46%), Bahwan Engineering Company (22%), Shikoku Electric Power Corporation (11%), Sojitz Corporation (11%)  and the Public Authority for Social Insurance (10%).

    In 2015, GDF Suez was rebranded as Engie following a strategic shift towards low-carbon energy and utilities.

    All three companies said the new PPAs will run for 15 years under agreed commercial terms. Acceptance of the LOAs has been requested by 18 March 2026.

    The new agreements for Sohar 2 and Barka 3 will take effect on 1 April 2028 and run until 31 March 2043. The agreement for the Sur IPP will commence on 1 April 2029 and run until 31 March 2044.

    The awards form part of Nama PWP’s 2028-29 procurement programme. The programme aims to secure firm generation capacity from existing assets whose current PPAs are due to expire during that period.

    In Oman, IPP projects are developed under a build-own-operate model. This allows plant operators to continue running assets beyond the initial PPA term, either through contract extensions or by selling power into a future electricity market.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16027001/main.jpg
    Mark Dowdall
  • DP World awards Jafza warehouse construction deal

    18 March 2026

    Dubai-based ports operator DP World has awarded a contract to build a multi-tenant warehouse development at Jebel Ali Freezone in Dubai, UAE.

    The contract was awarded to local firm Group Amana.

    The development spans 141,916 square metres (sq m) and comprises 187 units across seven blocks.

    These comprise warehouses, light industrial units, a retail shop, a mosque and other associated infrastructure.

    The new contract builds on their existing partnership to deliver the logistics park at Jeddah Islamic Port in Saudi Arabia.

    In February last year, MEED exclusively reported that Dubai’s DP World and the Saudi Ports Authority (Mawani) had awarded a SR347m ($92m) design-and-build contract to Group Amana for the project.

    The scope of the contract covers construction work on the buildings under package two of the project’s first phase.

    Earlier this week, MEED reported that DP World has kept its 2026 capital expenditure budget at nearly $3bn, focusing on two domestic assets and four overseas projects.

    The company said in a statement that the priority developments include Jebel Ali and Drydocks World in Dubai.

    Earlier this month, the group announced record financial results for 2025, with revenue up 22% to $24.4bn and adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) up 18% to $6.4bn, delivering a 26.3% margin.

    DP World said this performance was driven by strong momentum across its ports and terminals and logistics business.

    The group’s gross throughput rose 5.8% to 93.4 million 20-foot equivalent units.

    Profit for the year increased 32.2% to $1.96bn, and operating cash flow grew 14% to $6.3bn.

    Return on capital employed increased to 9.9% in 2025, up from 8.9% in 2024, reflecting stronger earnings despite ongoing geopolitical and trade uncertainty.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16026660/main.png
    Yasir Iqbal
  • Egyptian firm starts building Sal’s Riyadh logistics centre

    18 March 2026

    Egyptian contractor Rowad Modern Engineering, a subsidiary of the Elsewedy Electric Group, has begun construction on the expansion of Saudi Logistics Services Company (Sal) facilities at King Khalid International airport in Riyadh.

    The scope of work includes the rehabilitation and upgrade of existing infrastructure, as well as the construction of new supporting facilities and services.

    Sal started the tendering process for its SR4.2bn ($1bn) logistics zone in the north of Riyadh in September last year, as MEED reported.

    UAE-based Global Engineering Consultants is the project consultant.

    The logistics hub aims to meet the demand for customised warehouses located near King Khalid International airport and the Riyadh Metro.

    The project is in line with Vision 2030 and the National Transport & Logistics Strategy, which aims to support the kingdom’s logistics sector and enhance Saudi Arabia’s position as a global logistics hub.

    Sal and Sela signed an agreement to develop the project in March last year.

    This was followed by another lease agreement for the project, which will span about 1.57 million square metres. 

    According to an official statement: “The lease will extend for 30 years, which is further extendable to an additional 15 years upon agreement of both parties.”

    GlobalData expects the kingdom’s construction industry to record an annual average growth rate of 5.2% in 2025-28, supported by investments in transport, electricity, housing and tourism infrastructure projects, as well as the $850bn-plus gigaprojects programme.

    Growth will also be supported by government investments in rail, dams, industrial and road infrastructure projects. 

    The industrial sector is estimated to grow by 3.3% in 2025-28, supported by investments in the development of manufacturing, logistics, chemicals and pharmaceuticals plants.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16026154/main.gif
    Yasir Iqbal
  • Jabal Omar plans next phase of its Mecca development

    18 March 2026

    Saudi Arabian developer Jabal Omar Development Company is carrying out planning for phase seven of its Jabal Omar master development in Mecca, according to a fourth-quarter 2025 financial presentation.

    The company said phase seven will be a mixed-use scheme comprising hotels, retail and residential components, but did not disclose a breakdown of the project elements.

    Jabal Omar plans to use a development partnership model for the phase to minimise capital expenditure.

    Separately, the developer said it is targeting the delivery of 1,346 hotel keys and more than 20,000 square metres of gross leasing area in phase four by 2027.

    Rotana Jabal Omar Makkah, comprising 655 keys, is due to be fully operational in the first quarter of 2026, after 450 keys began operating in the final week of December 2025.

    The 1,141-key Sofitel is scheduled to become operational in the fourth quarter of 2026, while the 20,000 square metres of gross leasable area is expected to be ready in 2027.

    Jabal Omar estimates its 2026 capital expenditure at SR1.1bn ($293m), with spending expected to fall once the phase four hotels are completed.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16026145/main.png
    Yasir Iqbal