Investors in Saudi Arabia have been sharply affected by the economic policies adopted by Crown Prince Mohammed bin Salman (MBS), especially after the Credit Suisse crisis.
Well-informed sources revealed that Saudi National Bank (SNB) is nursing major losses in the wake of the forced takeover of Credit Suisse by UBS to for $3.2 billion.
Saudi National Bank — Credit Suisse’s largest shareholder — confirmed that it had been hit with a loss of around 80% on its investment.
The Riyadh-based bank holds a 9.9% stake in Credit Suisse, having invested 1.4 billion Swiss francs ($1.5 billion) in the 167-year-old Swiss lender in November of last year, at 3.82 francs per share.
Under the terms of the rescue deal, UBS is paying Credit Suisse shareholders 0.76 francs per share.
The significant discount comes as regulators try to shore up the global banking system. The scramble for a rescue follows a tumultuous few weeks which saw the collapse of U.S.-based Silicon Valley Bank and shares of First Republic Bank tank, as well as major stock price downturns across the banking sector internationally.
Shares of UBS, Switzerland’s largest bank, traded down 10.5% at 9:28 a.m. London time (5:28 a.m. ET), while Europe’s banking sector was around 4% lower. Credit Suisse was down a whopping 62%.
After weekend intense talks aimed at preventing a wider international banking crisis, UBS announced it was ready to take over Swiss rival Credit Suisse for $3.25 billion. Meanwhile, Asian shares fell Monday on lingering concerns about the industry.
David Butter, a Middle East economics analyst at London-based think tank Chatham House, explains that no heavy investments have been put in foreign banks by Saudi banks until the kingdom recently started aiming for a larger global banking agenda, mainly including increasing the investment weight of the Saudi sovereign-wealth fund, the Public Investment Fund (PIF) – amounting to $600 billion.
Billions of dollars in investments have also been washed out from the Saudi-based Olayan family. This serves as a reminder of how Gulf nations were also hit hard in the financial crisis of 2008-2009, during which the foreign assets held in portfolios of Gulf Cooperation Council (GCC) states in 2008 plunged by $100 billion, down to a total of $1.2 trillion. These numbers do not include the personal holdings of the ruling families.
Despite the loss, Saudi National Bank says its broader strategy remains unchanged. Shares of the lender were up 0.58% on Monday at 9:30 a.m. London time.
“As at December 2022, SNB’s investment in Credit Suisse constituted less than 0.5% of SNB’s total Assets, and c. 1.7% of SNB’s investments portfolio,” Saudi National Bank said in a statement.
It said there was “nil impact on profitability” from a “regulatory capital perspective.”
