The role of the Saudis in the CS drama

In October 2022, the Saudi National Bank became Credit Suisse’s largest shareholder with a stake of 9.9 percent. Credit Suisse has been in the past since last week and the Saudi National Bank is probably one of the biggest victims in the Credit Suisse drama. An overview:

The beginning

CS posted a loss of CHF 7.3 billion in fiscal year 2022. In the fourth quarter alone, clients raised CHF 110 billion or about 8 percent of assets under management with the bank. A large part of the deductions took place in the first two weeks of October 2022, after rumors spread on social media about possible difficulties at the bank.

CS subsequently announced a capital increase totaling CHF 4 billion to ensure the long-term survival of the bank. Shortly afterwards, it was announced that the Saudi National Bank had committed to contribute part of the capital increase – it subscribed to new CS shares worth CHF 1.5 billion in November, acquiring 9.9 percent of CS’s shares. shares.

The Saudi National Bank was not the only Arab investor in CS. The Olayan Group has held shares in the Swiss bank for many years, which is backed by a wealthy oil dynasty. And the second largest shareholder with 6.9 percent is the Qatar Investment Authority (QIA), the government fund from Qatar.

According to the “Tagesanzeiger”, the connection with the crown prince and his bank was made by Michael Klein. He is on the board of directors of Credit Suisse. He is also known as the “Starbanker”. According to the Wall Street Journal, Klein is a respected advisor in the kingdom, for example when state oil giant Saudi Aramco went public in 2019. The Crown Prince himself was not involved in negotiations for a stake in Credit Suisse. But without his permission, such an investment would be fine didn’t even get it.

The alleged rescue operation

The Saudi National Bank reportedly reported for the takeover of UBS on the Sunday. They wanted to save CS from financial collapse. She would have made the proposal to inject about five billion dollars. This would have protected Credit Suisse shareholders, the Wall Street Journal reports. The paper relies on an insider. He claimed that the Federal Council rejected the offer. Because the Saudi group wanted the same state guarantee that UBS has now received.

This news came as a surprise. Because the Saudis were complicit in the rapid decline of CS last week. The Saudi National Bank refused to inject capital, accelerating the outflow of deposits, the bank told CNBC.

But the excitement of the Saudis and other major shareholders had an effect. Because UBS’s initial proposal to pay only one billion francs was increased to three billion francs.

The Saudi National Bank confirmed to US news channel CNBC on Monday that it had lost about 80 percent on its investment. She is therefore probably the biggest victim in the CS drama – at least in financial terms. Nevertheless, the bank announced on Monday that valuation changes have “no impact” on its growth plans and its 2023 forecast.

The interview

But back to the capital injection just mentioned, which the Saudis rejected:

A statement from the Saudi major shareholder rocked CS last Wednesday: The Saudi National Bank, which only got involved last year as part of the capital raise, announced in an interview with Bloomberg TV that further capital injections for CS would be categorically ruled out.

The reason: the regulatory issues that would arise if the stock were just below 10 percent. Saudi National Bank president Ammar Al Khudairy, when asked if he would be willing to support Credit Suisse if there was a need for additional liquidity, said:

According to this statement, CS stock crashed by minus 24 percent. Then there was panic. The stock has been suspended from trading several times. The premium for default insurance was unprecedentedly high. Even significantly higher than that of UBS before the 2008 bailout.