Saudi National Bank has lost over $1 billion in its investment in Credit Suisse. The loss resulted from UBS’s forced takeover of Credit Suisse for $3.2 billion. Saudi National Bank, Credit Suisse’s largest shareholder, holds a 9.9% stake in Credit Suisse and invested 1.4 billion Swiss francs in the bank in November 2022. Following the conditions of the rescue deal, UBS paid Credit Suisse shareholders 0.76 francs per share, which resulted in a significant discount as regulators tried to shore up the global banking system. The loss follows a turbulent few weeks that saw the demise of the United States-based Silicon Valley Bank, the shares of First Republic Bank, and major stock price declines across the global banking sector.

The circumstances that led to the Saudi National Bank’s investment in Credit Suisse were due to its desire to diversify its investment portfolio and expand its holdings in global financial institutions. Saudi National Bank believed that Credit Suisse was a reputable and stable bank that would provide strong returns. Unfortunately, the value of Credit Suisse dropped as a result of years of scandals, enormous losses, changes in leadership, and a strategy that didn’t win over investors.

The Saudi National Bank’s investment loss in Credit Suisse has significant implications for the bank, its customers, and the broader financial industry. Saudi National Bank confirmed that it had been hit with a loss of around 80% on its investment, constituting less than 0.5% of its total assets and 1.7% of its investment portfolio. The loss will impact the bank’s growth plans and forward-looking 2023 guidance.

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The bank’s second-largest stakeholder, the Qatar Investment Authority, also saw a significant loss of 6.8% of its stock. The Saudi National Bank is largely to blame for the abrupt fall that started last week and resulted in the bank’s emergency sale. When asked on Wednesday if the Saudi National Bank would expand its share in the struggling Swiss institution, Chairman Ammar Al Khudairy responded, “Absolutely not, for many reasons outside the simplest reason, which is regulatory and statutory.” Although the Saudi bank had already said in October that it had no plans to increase its stakes beyond the existing 9.9%, this news still caused market fear and sent Credit Suisse shares down 24% that session. This further led to investor panic and resulted in a significant loss for Saudi National Bank.

In conclusion, Saudi National Bank’s investment loss in Credit Suisse resulted from UBS’s forced takeover of Credit Suisse, the decline in value due to a culmination of years of scandals, leadership changes, multibillion-dollar losses, and a strategy that failed to inspire investor confidence. The loss has significant implications for the bank, its customers, and the broader financial industry. It highlights the importance of conducting thorough due diligence before investing in any financial institution and the need for banks to diversify their investment portfolio to mitigate losses.