RIYADH: Saudi National Bank said that it has no plans now to take board seats in Credit Suisse, but is “open-minded” about it if things change, after it announced investing up to $1.5 billion in the Swiss bank to take a 9.9 percent stake.
The deal will help SNB develop a “strong strategic collaboration” to deliver global standards of products and services to serve its clients better in Saudi Arabia and the region, the Saudi bank said in a press release.
The potential partnership with Credit Suisse will be subject to applicable approvals and clearances.
SNB clarified that it is not focused on international expansion, and this investment is representing a financial opportunity to solidify its wealth management, asset management, and investment capabilities.
“We believe the cooperation with a leading global asset manager in both production and distribution of different products to enhance our presence in the institutional asset management space,” said an SNB spokesperson, adding that its Shariah-based skill set will complement those of Credit Suisse and can mutually benefit from each other,
The Saudi bank further added that it is “highly disciplined” in its investment portfolio and does not have any plans to increase its stake in Credit Suisse beyond 9.9 percent.
“We are not committed to any future capital raising by Credit Suisse. Any future investment will be based on the financial and strategic merits of such investment, considering the impact on capital returns and shareholder value.
“We will review the execution of the strategy articulated by CS with their Q3 2022 results and decide on any future steps at the appropriate time,” said the SNB spokesperson.
SNB said that the investment in Credit Suisse will be accretive in the medium to long term, and added that there could be some short-term execution risks.
The bank further added that it has invested in ordinary shares in SNB with no additional rights or obligations.
The investment of SNB in Credit Suisse is a part of the Saudi Arabian bank’s overall investment portfolio of $68.7 billion.
“The holding (investment in Credit Suisse) will comprise 2.2 percent of SNB’s proforma investment book, 3.5 percent of the total shareholders’ equity, and 0.6 percent of total consolidated assets,” said the SNB spokesperson.
From a capital perspective, the transaction is expected to have a limited total impact, with 20-40 bps over the next five years, with SNB preserving a significant buffer above regulatory capital requirements given its robust capital position, the release added.
Meanwhile, Credit Suisse Group’s newly created investment bank, CS First Boston, will advise on mergers and acquisitions, raise capital for clients through equity and debt markets, and provide leveraged finance as part of its core offerings, Reuters reported citing an internal memo.
“Over time, CS First Boston’s structure will evolve to become an independent standalone investment bank, enabling it to attract third-party capital and include employee ownership,” wrote David Miller, global head of CS First Boston in a memo to the staff.