The chairman of one of Credit Suisse’s newest and largest shareholders has called for the stricken bank to undergo a swift overhaul and return to a “very stable, conservative Swiss banking position”.
National Bank of Saudi Arabia, the kingdom’s largest lender and majority-owned by the Saudi government, announced on Wednesday that it is investing up to $1.5 billion in Credit Suisse, a stake of up to 9.9%.
“We got it at a minimum price. I think the bank is hurt,” Omar Alhudairi told CNBC’s Hadley Gamble on Sunday. “It’s trading for less than a quarter of book value, tangible book value, which is a steal. And it’s a 160-year-old brand, the brand has a lot of value.” The bank will reportedly become Credit Suisse’s second largest shareholder after Harris Associates.
Last week, the Swiss lender posted a third-quarter net loss of 4.034 billion Swiss francs ($4.09 billion), significantly worse than analysts’ estimates, and announced a major strategic review. The stock has fallen about 55% this year after several scandals, management changes and weak earnings reports.
In an expected strategic shift, the bank pledged to “radically restructure” its investment arm to significantly reduce the risk-weighted assets used to determine the bank’s capital requirements. It also aims to cut costs by 15%, or 2.5 billion Swiss francs, by 2025.
The chairman of the SNB called Credit Suisse’s investment banking division the company’s Achilles heel, which is highlighted by the current climate of heightened market volatility.
“The biggest overhang for Credit Suisse over the last couple of years … has been the volatility of their investment bank performance,” he told CNBC.
A bank branch of Credit Suisse Group AG in Basel, Switzerland, Tuesday, Oct. 25, 2022. Thousands of job cuts, efforts to raise fresh capital and a restructuring of the investment banking division are all part of a radical overhaul of the entire Credit Suisse company.
Stefan Wermuth | Bloomberg | Getty Images
Alhudairi added that the bank’s other three core businesses, which are retail in Switzerland, private wealth management and asset management, are “very stable” lines of business that generate “predictable and sustainable returns”.
“So it’s just a return to a very stable, conservative Swiss banking position, which we like,” he said.
In the short to medium term, Alhudairi said he believes the most important step for Credit Suisse is to “take the volatile business out of quarterly earnings” and focus on private wealth management and growing the retail business.
“I would just encourage them not to blink, not to be shy and just comply [the overhaul]. The sooner, the better,” he said.
There is no intention to interfere with management
The investment came after Crown Prince Mohammed bin Salman encouraged Saudi Arabia’s largest firms to invest actively abroad and strengthen its status as a global investor. Saudi Arabia’s sovereign wealth fund manages about $620 billion in assets and is an integral part of the crown prince’s ambitions.
However, when asked about the SNB’s move to invest in the embattled Swiss bank, Alhudairi denied that it was necessarily related to the PIF, but rather an investment that was “a manifestation of the new Saudi Arabia”.
He added that Saudi National Bank currently has no seats on Credit Suisse’s board of directors, and he doesn’t see that changing in the future.
“We will support the bank as a major shareholder,” Alkhudairi said. “There is no intention to interfere in management, to participate in management.”
“Let me be clear: this is a financial investment, the 9.9% was very precisely measured, because once you get to 10%, you have all kinds of regulatory and accounting issues that we felt we didn’t want to get involved with. We have no seats on the board of directors at this time, and we don’t see ourselves taking a seat on the board directly,” he said.