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Friday, March 17, 2023
Arabian Gulf Business Insight - Saudi National Bank has liquidity to withstand Credit Suisse shock
Saudi National Bank has enough liquidity to withstand any losses arising from the troubled Credit Suisse, according to a leading economist.
SNB, the kingdom’s biggest lender, took a stake of almost 10 percent in Credit Suisse last year after it participated in the bank’s $4.3 billion capital raise.
It become its largest shareholder, with a commitment to invest up to 1.5 billion Swiss francs ($1.5 billion).
At the time SNB chairman Ammar Alkhudairy described it as a “financial opportunistic investment”.
“The bank has been battered – excessively so, pricing wise. It’s trading at less than a quarter of tangible book value, which is a steal,” he added.
The stake, initially worth 1.4 billion Swiss francs ($1.53 billion), has since lost more than 500 million francs, according to a Bloomberg report.
The bank’s shares fell 24 percent on Wednesday and SNB said it could not offer any more financial assistance due to regulatory reasons if it increased its stake above 10 percent.
In a statement early on Thursday, Credit Suisse said it would exercise an option to borrow from the central bank up to 50 billion Swiss francs.
Shares in SNB on the Saudi Tadawul exchange closed down 2.9 percent on Thursday.
Credit Suisse, the second biggest bank in Switzerland, is looking to recover from a string of scandals that have undermined the confidence of investors and clients.
Customer outflows in the fourth quarter of last year rose to more than 110 billion Swiss francs.
Earlier this week Credit Suisse published its annual report for 2022 where it revealed “material weaknesses” had been identified in controls over financial reporting and it had not yet stopped customer outflows.
It comes following the collapse of US-based Silicon Valley Bank last Friday, the largest bank to fail since the 2008 financial crisis, which roiled markets and left billions of dollars belonging to companies and individuals stranded.
SNB’s Alkhudairy told CNBC on Thursday the whole situation had caused “a little bit of panic” which was “totally unwarranted, whether it be for Credit Suisse or for the entire market”.
Saudi Arabia’s banks have no dealings with non-performing US banks, the Saudi central bank governor, Ayman Alsayari, said in an interview with Al Arabiya on Thursday.
The kingdom had recently implemented tools to provide liquidity to the banking system, Alsayari added, without providing further detail, according to a report from Reuters.
The banking sector in Saudi Arabia was already down 12.8 percent year-on-year even before the latest turbulence, as per the daily report from Kamco Invest.
The Qatar Investment Authority (QIA), the Gulf state’s sovereign wealth fund, increased its stake in Credit Suisse to just under 7 percent in January, becoming the Swiss bank’s second largest shareholder behind SNB.
QIA bought 139.03 million shares in the Swiss lender, bringing its ownership to 6.87 percent.
Saudi Arabian conglomerate Olayan Group owns a stake of about 3 percent, Eikon data shows.Source:
Arabian Gulf Business Insight