Riyadh — The Saudi National Bank (SNB) announced on October 26, 2022 that it has completed a financial investment in Credit Suisse Group AG (CSGN.SW) (Credit Suisse) for up to $1.50 billion representing up to 9 .9% pile.
This investment in Credit Suisse is a financial investment that will form part of SNB’s $68.7 billion overall investment portfolio, hence the stake will include c. 2.2% of the SNB’s pro forma investment portfolio, c. 3.5% of total equity and c. 0.6% of total consolidated assets.
From a capital perspective, the transaction is expected to have a limited total impact of 20 to 40 basis points over the next 5 years, with the SNB maintaining a significant buffer above regulatory capital requirements given its strong capital position.
The SNB views this investment as very attractive from a shareholder value creation perspective given the current Credit Suisse P/TBV multiple of c. 0.24x based on its last reported tangible book value, which is a significant discount to SNB’s P/TBV multiple.
SNB remains highly disciplined in its investment portfolio and continues to focus on continuing its successful track record of strong investment returns.
The SNB does not currently plan to go beyond a 9.9% stake in Credit Suisse and any future investment would be individually assessed at that time by carefully considering the merits of such an investment based on financial impact, treatment of capital and creation of long-term shareholder value.
The transaction also opens up the possibility of exploring a strategic and technical partnership for SNB to expand its product capabilities in private banking/wealth management, asset management and investment banking in Saudi Arabia. and in the Gulf region and to provide its customers with best-in-class services. services, products and capabilities to meet their financial needs by leveraging the transfer of know-how between Credit Suisse and the SNB.
Such a potential strategic partnership reinforces the logic of the SNB’s investment in Credit Suisse, especially given the very attractive financial returns.
SNB has previously stated that our focus throughout this year has been to realize the synergies of our strategic merger with Samba Financial Group and to focus on the future growth potential in Saudi Arabia, in line with Vision 2030 objectives.
As reflected in our first three quarter financial results, we are well ahead of our synergies targets and aim to achieve higher than expected synergies.
We have also previously stated that we will not be focusing on international expansion and this investment does indeed represent a financial opportunity with potential benefits to solidify our wealth management, asset management and investment banking capabilities in Saudi Arabia. Saudi Arabia and the Gulf region based on our very strong market positions.
SNB is the leading banking franchise in Saudi Arabia with over 11 million customers and a large private banking offering. The country is one of the fastest growing G20 economies with a burgeoning middle class accumulating wealth.
The growing need for sophisticated products is evident, with the Credit Suisse partnership offering potential opportunities to broaden and develop the product and service offering for SNB clients in Private Banking.
In asset management, SNB Capital is the largest manager by AUM in the Kingdom with $67 billion AUM. We believe that cooperating with a leading global asset manager in the production and distribution of different products will strengthen our presence in the institutional asset management space. In particular, our Sharia-based skill set will complement those of Credit Suisse and we believe we can mutually benefit from each other.
With regard to wholesale and investment banking activities, there is a significant need for capital to help finance the growth of Saudi Arabia and the wider Gulf region, with a significant investment program government and the private sector.
All capital requirements may not be met by local liquidity. This may need to be supplemented with international debt and equity capital and in addition may need to provide advice on mergers, acquisitions, restructurings, optimal capital structure and other financial initiatives strategies that require an investment bank with a full set of capabilities. —SG