Saudi National Bank, the largest bank in Saudi Arabia, has announced that its growth strategy will not be affected by the reduced valuation on its investment in Credit Suisse. This comes after the Swiss bank's takeover deal with domestic rival UBS was announced on Sunday.
Last November, Saudi National Bank acquired almost 9.9% of Credit Suisse for 5.5 billion riyals ($1.46 billion) and became the largest shareholder in the troubled Swiss bank. However, the UBS offer of 3 billion Swiss francs ($3.23 billion) values Credit Suisse shares at 0.76 francs each, more than 80% lower than the price paid by the Saudi bank. This means that Saudi National Bank is sitting on a loss of roughly $1.17 billion on its investment.
Despite this loss, Saudi National Bank has stated that changes in the valuation of its investment in Credit Suisse will have no impact on its growth plans and forward-looking guidance for 2023. The bank also confirmed that the potential impact to its capital adequacy ratio is about 35 basis points, with no impact on profitability. Additionally, investment in Credit Suisse formed less than 0.5% of the Saudi lender's total assets of more than 945 billion riyals as of December 2021.
Last week, Saudi National Bank's chairman confirmed that the bank was not considering any international acquisitions and was instead focused on growth in the Saudi market. This statement indicates that the bank's growth strategy is unlikely to be impacted by the reduced valuation of its investment in Credit Suisse.
The acquisition of Credit Suisse by UBS is part of a wider state-backed rescue plan in Switzerland. It remains to be seen how the deal will impact the global banking industry and whether other banks will follow a similar path. However, for Saudi National Bank, it appears that the impact of this deal on its growth strategy will be limited.
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