MENA investors see losses after Credit Suisse collapse
- SNB has lost more than $1bn: Other MENA shareholders have also seen their shareholdings take a considerable hit.
- The losses are not expected to affect SNB’s outlook for 2023
- SNB shares fell sharply, but have rebounded since
“Absolutely not” drives the collapse of Credit Suisse
The global banking industry had already been under considerable strain as a series of medium-sized US banks had started to fail in early March.
However, this US banking crisis was brought to Europe on 15th March.
The chairman of the Saudi National Bank, Ammar Al Kudairy, was asked in an interview on Bloomberg TV whether the bank would increase its holding in Credit Suisse.
“Absolutely not”
His answer would have a profound impact.
SNB was Credit Suisse’s largest shareholder at 9.9%. It was claimed that the holding could not go into double figures due to regulatory reasons.
Markets leapt on this sharp response.
This caused panic with the answer taken to mean that Credit Suisse would struggle to raise funds. The shares of Credi Suisse fell dramatically
Having opened at 2.28CHF on 15th March, just a matter of days later, it was announced that Swiss rival UBS would buy the entire Credit Suisse share capital for 0.76CHF.
Although shareholders will receive some payout, it is a fraction of their investments.
The top shareholders of Credit Suisse are all from MENA
MENA investors will have felt the impact of the collapse of Credit Suisse especially.
Before the hastily arranged purchase by UBS, the top three shareholders of Credit Suisse all originated from MENA. Collectively they owned around 20% of Credit Suisse:
- Saudi National Bank (SNB) held 9.9%
- Qatar Investment Authority held 6.8%
- Olayan Group held 3.27%
What makes the situation even more difficult to swallow is that the MENA investors had only recently invested or have been recently adding to their positions.
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SNB invested $1.4bn in October
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QIA increased its holding from 5.6% to 6.4% in January.
The losses rack up for SNB
Since SNB invested the equivalent of c. $1.4bn at 3.82 CHF during a fundraising drive in October, the shares have been falling steadily.
However, with the takeover paying out 0.76 CHF per share, this means that SNB will receive c. 20% of its original investment.
This gives them a loss of c. $1.1bn.
SNB’s response
However, SNB has tried to shake off the losses.
A statement was released on Monday 20th March as markets re-opened after UBS had bought Credit Suisse over the weekend. Reportedly, Credit Suisse only accounted for +0.5% of SNB’s total assets and 1.7% of its investment portfolio.
Also that:
“Changes in the valuation of SNB’s investment in Credit Suisse have no impact on SNB’s growth plans and forward-looking 2023 guidance.”
However, there has been a corporate casualty, with Chairman Ammar Al Kudairy resigning his position, apparently due to “personal reasons”.
Considering it was his interview that sparked the panic and resulted in the collapse of Credit Suisse, this is entirely understandable.
SNB’s shares are trying to recover
SNB shares fell considerably in early March and accelerated lower as the collapse of Credit Suisse played out. This was a move felt in banking stocks across the world.
However, interestingly, since the announcement of the forced takeover, this has helped to settle shares in bank stocks.
Despite taking a considerable hit, this recovery includes the shares of SNB.
SNB shares ended up trading over +4% higher on 20th March and have held this recovery ground since. They now trade not far from where they were during the December to February period.
It would appear that the statement claiming that there is little material impact on the SNB business from the Credit Suisse collapse has helped to steady the nerves of investors in MENA, at least for now.
