Saudi National Bank, or SNB, majority-owned by the kingdom’s Public Investment Fund and its largest lender, has committed to $1.5 billion to become a new strategic investor and take a 9.9% stake in Credit Suisse, subject to approval by existing shareholders, Bloomberg revealed in a recent report.
The deal came as Saudi Crown Prince Mohamed bin Salman (MBS) cleans house, tightens purse strings and tries to make his grand Vision 2030 economic blueprint a reality.
The troubled lender, beset by scandals and losses, is striking deals to raise capital from outside investors and going back to its wealth-management roots, the paper reads.
SNB itself was created earlier this year through the merger of National Commercial Bank and Samba Financial Group. The combined entity, overseeing almost one-third of the country’s banking assets, is a mash-up of a large retail bank and commercial lender.
Flexing their financial muscle, SNB Chairman Ammar al-Khudairy has said that the investment in Credit Suisse is a “manifestation of the new Saudi Arabia.”
But where they ought to focus first is on using local money better and offering it more of a reason to stay. That’s where a stake in Credit Suisse comes in.
Another Losing Deal
Credit Suisse’s wealth-management returns have reached only 15% in the past couple of years, according to Morgan Stanley, as its long-brewing scandals and problems managing the bank hurt its operations broadly.
But in the years before the Covid pandemic, its International Wealth division was hitting average returns of nearly 30%
Credit Suisse’s wealth-management know-how and technology could prove extremely valuable to the Saudi bank – and for MBS’s plans. Technology that saves costs has become much more important in recent years because lower investment returns and growing transparency have put pressure on fees.
The wealth business also promises growth. The Middle East and Africa has a relatively small market with only about one-tenth of the assets of North America. But the Middle East could grow by nearly 5% annually over the next five years, which is better than all regions apart from Asia Pacific and Latin America, according to estimates by the consultancy Oliver Wyman.
Saudi also faces growing local competition in finance. The financially savvier United Arab Emirates has gone big on drawing in banks, global asset managers and talent to build a center of expertise.
MBS Lost $6 billion in Japan’s SoftBank Deal
SoftBank, in which MBS invested $45 billion, declared an operating loss of 704 billion yen ($6.5 billion) in the July-September 2022.
The Japanese bank reported its first quarterly loss in 14 years, whiplashed by an $6.5 billion hit at its giant Vision Fund and marking a rare, humbling moment for CEO Masayoshi Son over his backing of troubled startup WeWork.
“My investment judgment was poor in many ways and I am reflecting deeply on that,” Son, 62, told a news conference following the results. It was a remarkable admission for an executive well known for his ebullience.
He said he had turned a blind eye to problems with Neumann in areas such as corporate governance. Nevertheless, Son was defiant that WeWork was still a solid business, saying there would be a “hockey stick” recovery in its profits eventually.
Although Masayoshi Son is certainly renowned globally for the wide range of investments and deals that he has cracked, not many are aware of a unique feat that he achieved a few years back in 2017.
In 2016, Masayoshi Son, who is a 3rd generation ‘Zainichi Korean’, met the then Saudi Deputy Crown Prince Mohammed bin Salman.
And by the end of that meeting, Son managed to convince Mohammed bin Salman, MBS, as he is known, to commit $45bn from Saudi Arabia’s Public Investment Fund (PIF) to Son’s Vision Fund.
And a year later, Son opened up about that meeting in an interview with Bloomberg’s David Rubenstein.
When asked if he got the money from MBS in one hour, Son replied “No, that’s not true. I got $45bn in 45 minutes, that’s $1bn per minute.”
On being asked how he had pulled off this remarkable feat, Son said that he had told MBS “I am going to give you a gift, a Masa gift, a $1 trillion gift. OK, now it’s interesting. You invest $100bn, I give you $1 trillion.”
Mohammed bin Salman went ahead to settle on the amount of $45bn as an initial investment in Masayoshi Son’s fund.
The Saudi crown prince had previously grabbed the headlines after he reportedly spent $500m on a yacht, $300m on a chateau in France and a mammoth $450m on a painting.
