Credit Suisse Leans On Saudi Money To Backstop Revamp Plans

(Bloomberg) -- One of Credit Suisse Group AG’s biggest rescue packages is coming from an unexpected corner of Saudi Arabia. 

Saudi National Bank, the kingdom’s largest lender -- but one without much of a presence until now -- is set to become one of the Swiss bank’s biggest shareholders alongside Harris Associates with a 9.9% stake as part of a sweeping $4 billion overhaul. 

The potentially $1.5 billion deal marks the first major international acquisition for Saudi National Bank, which is 37% owned by the kingdom’s sovereign wealth fund. The lender, created through a $15 billion merger less than a year ago, will use the investment to expand its wealth management and investment banking businesses inside the kingdom and globally.

The investment also sets in motion Crown Prince Mohammed Bin Salman’s plan to encourage Saudi Arabia’s largest firms to expand globally to raise the kingdom’s profile as a serious investor and diversify its economy. 

The $620 billion Public Investment Fund is key to those ambitions and has been increasingly active overseas to diversify the economy. A strong banking sector able to finance new industries is seen as key to efforts to boost the dynamism of the private sector and accelerate growth. 

With MBS -- as the de facto ruler is known -- sitting on his first budget surplus and oil money gushing in to make Saudi Arabia the fastest growing economy in the Group of 20, those plans are being supercharged. Meanwhile, a slowing global economy makes influential state funds -- like the PIF -- more important than ever.

Wall Street Pitch

Since it was formally created through a combination of National Commercial Bank and rival Samba Financial Group in January, Wall Street bankers have been pitching opportunities to Saudi National Bank to boost its presence outside the kingdom through major overseas acquisitions, ranging from a full takeover of Credit Suisse to an acquisition of Standard Chartered Plc. 

And with good reason. Despite its lack of experience on the global stage and brief history compared with Credit Suisse’s 166 years, Saudi National Bank has a market value of over $70 billion -- compared with the Swiss bank’s about $11 billion -- and roughly $255 billion in assets. 

For their part, European banks are long used to wealthy Middle Eastern investors coming to the rescue in their hour of need. Credit Suisse, itself, already counts Saudi conglomerate Olayan Group and Qatar Investment Authority among some of its top shareholders. 

Although these investors have pared back their stakes in difficult times, they’ve also stuck by the bank. The Qatar fund’s participation in Credit Suisse’s approximately $2 billion convertible notes issuance in April 2021 helped shore up its balance sheet after the Archegos Capital Management LP blow up.

Deep-pocketed Gulf investors could be called upon again. Saudi National Bank has already indicated that it may invest in any future capital raisings by the Swiss firm, while Credit Suisse Chief Executive Officer Ulrich Koerner already has a commitment for a $500 million injection for its new investment bank spinout from a “highly respected investor,” without naming the backer.

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