Riyadh-based Saudi National Bank (SNB), the largest shareholder in Credit Suisse, has lost about 80 per cent of its investment after the troubled Swiss lender was bought out by UBS Group.

SNB, the kingdom’s largest lender by assets, acquired almost 9.9 per cent of Credit Suisse for SF1.4bn ($1.46bn) last November, at SF3.82 a share. Its loss now equates to nearly $1.2bn on its investment.

Under the terms of a wider state-backed rescue plan, Switzerland’s largest banking group UBS has agreed to buy its 167-year-old rival for $3.2bn, paying Credit Suisse shareholders SF0.76 a share – a 60 per cent discount.

Swiss authorities pushed for UBS to take over its rival after a plan for Credit Suisse to borrow up to $54bn from the country’s central bank failed to reassure investors and the bank’s customers.

Despite the loss, SNB has said its strategy remains unaffected.

"Changes in the valuation of SNB's investment in Credit Suisse have no impact on SNB's growth plans and forward-looking 2023 guidance," SNB said in a bourse filing.

SNB’s investment in Credit Suisse represented 0.5 per cent of the Saudi firm’s total assets and approximately 1.7 per cent of its investment portfolio.

The impact on SNB’s capital adequacy ratio from the mark-to-market decline in Credit Suisse is about 35 basis points after the UBS takeover.

SNB’s assets surpass SR945bn, however, which means that the bank has healthy capitalisation and liquidity, remaining above the prudential thresholds.

Middle Eastern investors

In total, Middle Eastern shareholders own about a fifth of the Swiss bank.

Fuelled by higher oil prices and an economic boom in the Gulf last year, while the rest of the world is slowing down, facing the rise of interest rates and trying to rein in inflation, the region's banks and sovereign wealth funds have been looking for opportunistic deals, and Credit Suisse emerged on the list.

The low price of shares seemed an attractive deal as Credit Suisse was classified as one of the world’s 30 systematically important banks. Unlike many of its peers, the bank survived the 2008 financial crisis without a bailout.

The lender has been facing problems for years, however, including multimillion-dollar losses and scandals arising from an alleged toxic work environment and changes in senior management. It has also struggled to control risk and make profits.

As a result, its stock value plummeted by more than 95 per cent from its pre-financial crisis peak. The fall continued and the stock lost 89.2 per cent during the last fiscal year.

Following a restructuring plan, the new Credit Suisse management raised $4bn in funding at the end of 2022 from investors including major Gulf banks and sovereign wealth funds, such as Saudi National Bank (almost 40 per cent owned by the Public Investment Fund), Qatar Investment Authority and Saudi Olayan Group. Norway’s sovereign wealth fund, Norges Bank Investment Management, is also a major shareholder in the bank.

In January, QIA increased its stake in Credit Suisse to 6.8 per cent, which makes it Credit Suisse's second-biggest shareholder. 

In February, the bank reported its biggest annual loss since the 2008 financial crisis.

MEED's April 2023 special report on Saudi Arabia includes:

> CONSTRUCTION: Saudi construction project ramp-up accelerates

> UPSTREAM: Aramco slated to escalate upstream spending

> DOWNSTREAM: Petchems ambitions define Saudi downstream

> POWER: Saudi Arabia reinvigorates power sector

> WATER: Saudi water begins next growth phase

> BANKING: Saudi banks bid to keep ahead of the pack