Saudi National Bank (“SNB") (1180.SR [1180.sr]) announced on October 26, 2022, that it was entering into a financial investment in Credit Suisse Group AG (CSGN.SW) (“Credit Suisse") for a consideration of up to $1.50 billion representing up to a 9.9% stake.
Financial impact of the transaction:
This investment in Credit Suisse is a financial investment which will be a part of SNB's overall investment portfolio of $68.7 billion, hence the holding will comprise c. 2.2% of SNB's pro forma investment book, c. 3.5% of the total shareholders' equity and c. 0.6% of total consolidated assets.
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.
SNB views this investment as highly attractive from a shareholder value creation perspective given current Credit Suisse P/TBV multiple of c. 0.24x based on its last reported tangible book value which represents a significant discount to SNB's P/TBV multiple.
SNB remains highly disciplined with regards to its investment portfolio and maintains its focus on continuing its successful track record of solid investment returns. SNB has no current plans on going beyond a 9.9% 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.
Product focused partnership to enhance SNB's capabilities over time:
The transaction also unlocks the potential of exploring a strategic and technical partnership for SNB to develop its product capabilities in Private Banking / Wealth Management, Asset Management and Investment Banking in the Kingdom of Saudi Arabia and the Gulf region and to provide its customers with best-in-class services, products and capabilities to meet their financial needs by leveraging know-how transfer between Credit Suisse and SNB.
Such a potential strategic partnership adds to the rationale of SNB's investment into Credit Suisse particularly given the highly attractive financial returns.
SNB has previously stated that our focus throughout this year has been on delivering the synergies of our strategic merger with Samba Financial Group and ensuring significant focus on future growth potential in the Kingdom of Saudi Arabia in line with Vision 2030 objectives. 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 of Saudi Arabia and the Gulf region further building on our very strong market positions.
SNB is the leading banking franchise in the Kingdom of Saudi Arabia with over 11 million customers and a significant private banking proposition. The country is one of the fastest growing G20 economies with a burgeoning middle class that is accumulating wealth. 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.
In Asset Management, SNB Capital is the largest manager by AUM in the Kingdom with US$67 billion AuM. We believe the cooperation with a leading global asset manager in both production and distribution of different products to enhance our presence in the institutional asset management space. In particular, our Shariah based skill set will compliment those of Credit Suisse and we feel can mutually benefit from each other.
As it relates to Wholesale and Investment Banking activities, there is significant need for capital to help finance the growth of the Kingdom of Saudi Arabia and the Gulf region more broadly, with a significant government and private sector investment agenda. All the capital requirements may not be met by local liquidity. This may need to be supplemented by international debt and equity capital and furthermore there may need to be advise provided on mergers, acquisitions, restructurings, optimal capital structure and other strategic financial initiatives which requires an Investment Bank with a full set of capabilities.
About The Saudi National Bank (SNB):
SNB is the largest bank in the Kingdom of Saudi Arabia and one of the largest banks in the Middle East with total assets of c. SAR 964 Bn (US$ 257 Bn) and a market capitalization of c. SAR 283Bn (US$ 75 Bn) (3Q 2022). SNB has a well-diversified business model with scale and market leading operations in Retail, Wholesale, and Capital Markets. SNB has c.11 million customers and over 16,000 employees across 8 countries. SNB's balance sheet strength is underpinned by its solid capital position with CAR (Pillar 1) ratio of 18.4% (2Q 2022) with robust credit ratings (S&P: A- // Fitch: A- // Moody's: A1 // Capital Intelligence: A+).
SNB plays a vital role in supporting the economic transformation plan in Saudi Arabia by transforming the local banking sector and catalyzing the delivery of Saudi Arabia's Vision 2030. Its strategy is closely aligned with the Vision's programs. SNB also leverages its position as the largest institutional and specialized financier in the Kingdom to support the Kingdom's landmark deals and mega projects. SNB's vision is to be a premier financial and banking service provider locally and regionally.
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