Credit Suisse sale hurts Saudi and Qatari partners
Middle Eastern shareholders, who own about a fifth of Swiss bank Credit Suisse, suffered a heavy loss from the UBS takeover. When UBS bought the troubled bank for much less than its value, the Saudi partners lost around $1 billion.
According to Bloomberg calculations, the 9.9 stake in Saudi Arabia’s largest financial institution has now fallen to about 304 million francs ($329 million) following the UBS offer.
SAUDIS LOSE $1 BILLION
The Saudi National Bank, of which the Crown is a major partner, invested 1.4 billion francs in Credit Suisse late last year. This resulted in a loss of over $1 billion. With this investment, the Saudi bank’s shares fell by around a third during this period. The bank’s market capitalization shrank by $25 billion.
Wealthy investors from the Middle East have been investing in European banks like Credit Suisse in different ways for many years. Citigroup and Barclays used Abu Dhabi-based funds during the 2008 financial crisis. In addition, another Saudi company, Olayan Group, is one of its largest shareholders with a 3.27 percent stake.
THE QATARS HAVE ALSO LOST
On the other hand, Qatar Wealth Fund participated in Credit Suisse’s nearly $2 billion convertible bond issuance in April 2021. The fund helped strengthen its balance sheet during another crisis the bank was going through at the time. In January, the Qataris increased their stake from around 5.6% to 6.87%, making them the second largest shareholder in Credit Suisse.
Qataris were also known to have once owned the bank’s bonds. The Qataris are also estimated to have suffered losses when Swiss regulatory agencies zeroed out the value of Credit Suisse’s $17 billion equity bonds traded on the markets as part of the sale deal.
US corporation Harris Associates, once the bank’s largest shareholder for a long time and once owning about 10 percent, reported its stake as less than 3 percent.
WHAT HAPPENED?
The banking crisis, which started in the US last week, spread to Europe with Credit Suisse. In addition, deposits worth more than 10 billion francs were withdrawn from the bank daily. Subsequently, as part of a package prepared by the Swiss government, the UBS Group bought Credit Suisse, which has been in business for 167 years, for 3 billion Swiss francs and assumed the bank’s debt for 5.4 billion dollars.
While the Credit Suisse acquisition and actions taken by central banks had eased investor concerns in the early hours, the massive losses suffered by investors holding Credit Suisse debt securities have reignited investor concerns.
Swiss regulators set the value of Credit Suisse’s $17 billion equity bonds traded on the markets at zero as part of the sale agreement. This decision, which will strengthen UBS’s capital, angered investors who deal with bonds, which are a safer investment vehicle compared to shares.
Investors are concerned about the damage to investors holding Credit Suisse bonds, as well as the potential for problems in one country’s banking sector to spread to other countries and the condition of fragile midsize banks in the United States.