Stock Saudi National Bank Logo
Saudi National Bank's investment portfolio sits at a hefty $68.7 billion. Image Credit: Supplied

Dubai: The Saudi National Bank is taking a 9.9 per cent stake in Credit Suisse for $1.5 billion, with the former seeing this deal as ‘highly attractive’ for shareholder value creation.

“SNB remains highly disciplined with regards to its investment portfolio and maintains its focus on continuing its successful track record of solid investment returns,” it said in a statement about the transaction in the Swiss bank. “SNB has no current plans on going beyond a 9.9 per cent shareholding in Credit Suisse and any future investment would be appraised individually at the time by carefully considering the merits of such investment based on financial impact, capital treatment and long-term shareholder value creation.”

For SNB, this then becomes part of an investment portfolio weighing in at $68.7 billion. “From a capital perspective, the transaction is expected to have a limited total impact with 20-40 bps over the next 5 years, with SNB preserving significant buffer above regulatory capital requirements given its robust capital position,” the statement added.

Acquiring the Credit Suisse stake could in time give considerable heft to SNB’s private banking services following the merger with Samba Financial Group. (It was in January last that National Commercial Bank completed its merger with Samba to set up Saudi Arabia’s biggest bank.) “SNB has previously stated that our focus throughout this year has been on delivering the synergies of our strategic merger with Samba Financial Group,” the statement added. “As our first three quarters financial results indicate, we are well ahead of our synergies targets and we aim to deliver higher than anticipated synergies.

“We also stated previously that we will not be focused on international expansion and this investment effectively represents a financial opportunity with potential benefits to solidify our wealth management, asset management, and investment banking capabilities in the Kingdom and the Gulf region further building on our very strong market positions.”

SNB has over 11 million customers and an existing ‘significant private banking proposition’. “The growing need for sophisticated products is apparent, with Credit Suisse’s partnership providing potential opportunities to expand and develop product and service offering for SNB’s clients in private banking,” the statement said.

Plus, SNB Capital is a dominant name in asset management in the Kingdom with $67 billion. “We believe the cooperation with a leading global asset manager in both production and distribution of different products to enhance our presence in the institutional asset management space,” the Saudi bank said. In particular, our Sharia-based skill set will complement those of Credit Suisse and we feel can mutually benefit from each other.”

Inward funding opportunities

The deal can be a win-win in other ways too. Saudi Arabia and the Gulf require more inward financing as ‘all the capital requirements may not be met by local liquidity’. "This may need to be supplemented by international debt and equity capital and furthermore there may need to be advise provided on mergers, acquisitions, restructurings, optimal capital structure and other strategic financial initiatives which requires an investment bank with a full set of capabilities,” SNB said.

Ticking the SNB numbers
The investment in Credit Suisse is part of SNB’s overall investment portfolio of $68.7 billion. The 9.9 per cent stake holding will comprise around 2.2 per cent of SNB’s pro forma investment book, about 3.5 per cent of the total shareholders’ equity, and 0.6 per cent of total consolidated assets.