Gensaid

Gensaid

A picture of multiple buildings
Business Finances and Economics

Saudi National Bank’s Failed Bid for Credit Suisse

Spread the News

Introduction

In the globe of banking and finance, unions and acquisitions are common incidences. However, not all future deals come to completion. One such instance is the current attempt by the Saudi National Bank (SNB) to upsurge its stake in the Swiss monetary institution, Credit Suisse. This editorial delves into the details of this deprived acquisition, peeling light on the reasons behind the conclusion and its inferences for both banks.

Background of Saudi National Bank

The Saudi National Bank, also recognized as SNB AlAhli is the largest profitable bank in Saudi Arabia. Founded in December 1953 as The National Commercial Bank (NCB), it has grown meaningfully over the years. In 2021, SNB appeared as a banking conqueror after the implementation of one of the largest amalgamations in the region involving NCB and Samba Financial Group. Today, SNB operates in eight countries worldwide, with its headquarters in Riyadh, Saudi Arabia’s capital city.

Ownership of Saudi National Bank

Since 1999, the ownership of SNB has been divided between two government institutions: the Public Investment Fund and the General Organization for Social Insurance, along with a number of Saudi investors. This majority holding by the Saudi Government has allowed SNB to play a vital role in supporting economic transformation in Saudi Arabia, aligning its strategy closely with the Saudi Vision programs.

SNB’s Initial Stake in Credit Suisse

As of March 15, 2023, SNB held a 9.8% stake in Credit Suisse Group. This stake was later increased to the maximum authorized amount of 9.9%. However, due to “material weaknesses” identified by auditors in Credit Suisse accounts, the Swiss bank was bought at a steep discount by its rival UBS, resulting in a significant write-down in the value of investments owned by SNB.

The Attempted Acquisition

In July 2023, SNB expressed its intention to increase its stake in Credit Suisse from 9.88% to around 40%. This move would have involved SNB, already the biggest shareholder in Credit Suisse, pumping $5 billion into the Swiss bank. However, the Swiss regulator FINMA vetoed the investment offer. Under Swiss law, major foreign shareholders must receive approval from FINA to own a larger than 10% stake in a Swiss bank.

The Aftermath of the Denied Acquisition

Following FINMA’s denial, UBS agreed to buy Credit Suisse for a knockdown price of three billion Swiss francs ($3.4 billion) in a rescue orchestrated by Swiss authorities. This emergency takeover resulted in the conversion of SNB’s stake in Credit Suisse into just 0.5% of UBS, significantly reducing SNB’s influence in the Swiss banking sector.

Conclusion

The denied acquisition of a larger stake in Credit Suisse by the Saudi National Bank underscores the complexities and regulatory constraints that can arise in international banking transactions. Despite the setback, SNB remains a significant player in the global banking landscape, continuing to support economic transformation in Saudi Arabia and beyond.

Summary:

The Saudi National Bank’s (SNB) attempted acquisition of a larger stake in Credit Suisse failed due to regulatory constraints. SNB, the largest commercial bank in Saudi Arabia, intended to increase its stake from 9.88% to around 40%, injecting $5 billion into the Swiss bank. However, the Swiss regulator FINMA vetoed the investment offer, citing that foreign shareholders must receive approval to own more than a 10% stake in a Swiss bank. Following the veto, UBS bought Credit Suisse for a significantly discounted price, reducing SNB’s stake to just 0.5% of UBS and significantly reducing SNB’s influence in the Swiss banking sector. Despite the setback, SNB continues to be a significant player in global banking.

LEAVE A RESPONSE

Your email address will not be published. Required fields are marked *