"...Credit Suisse’s demise was a long time coming, with a culmination of years of scandals, multi-billion dollar losses, leadership changes and a strategy that failed to inspire investor confidence. In February, the bank — Switzerland’s second-largest — reported its biggest annual loss since the 2008 financial crisis after clients withdrew more than 110 billion Swiss francs ($120 billion).
In December 2022, Credit Suisse raised some $4 billion in funding from investors, including major Gulf banks and sovereign wealth funds like Saudi National Bank, the Qatari Investment Authority and the Saudi Olayan Group. Norway’s sovereign wealth fund, Norges Bank Investment Management, is also a major shareholder.
SNB’s feeling right now is probably like all shareholders in CS — utter anger that management have let the situation get to this point.Simon Fentham-FletcherCHIEF INVESTMENT OFFICER, FREEDOM ASSET MANAGEMENT
The sharp and sudden downturn that began last week and led to the bank’s emergency sale is partially the fault of Saudi National Bank itself, some argue.
Saudi National Bank chairman Ammar Al Khudiary on Wednesday was asked by Bloomberg if it would increase its stake in the troubled Swiss lender. His reply was “absolutely not, for many reasons outside the simplest reason, which is regulatory and statutory.”
The comment triggered investor panic and sent Credit Suisse shares down 24% during that session, even though the statement wasn’t in fact new; the Saudi bank said in October that it had no plans to expand its holdings beyond the current 9.9%.
“Even though the situation at Credit Suisse was not perfect and investors had a lot of question marks about the future of the bank, SNB didn’t help calm down investors and shot themselves in the foot” with the chairman’s comments, one UAE-based investment banker, who requested not to be named due to professional restrictions, told CNBC.
MARKETS
First Republic shares slide 18% Monday after a credit rating downgrade
PUBLISHED MON, MAR 20 20236:36 AM EDTUPDATED 31 MIN AGO
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John Melloy
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S&P cut its credit rating to B+ from BB+ on Sunday after first lowering it to junk status just last week.
The rating remains on CreditWatch Negative, said S&P.
First Republic shares are down sharply this month as the collapse of Silicon Valley Bank caused investors to rethink other banks with large uninsured deposit bases. the banker said.
The Saudi National Bank chairman did attempt to calm the situation the following day, telling CNBC’s Hadley Gamble in Riyadh that “if you look at how the entire banking sector has dropped, unfortunately, a lot of people were just looking for excuses.”
“It’s panic, a little bit of panic. I believe completely unwarranted, whether it be for Credit Suisse or for the entire market,” Al Khudairy said. His comments ultimately failed to stem the bank’s continued rout.
The messy fallout, which spilled over across the entire banking sector, has ruptured market confidence and stoked fears of another global banking crisis. Swiss Finance Minister Karin Keller-Sutter set out to reassure angry taxpayers during a press conference Sunday, stressing that “this is a commercial solution and not a bailout.”
“SNB’s feeling right now is probably like all shareholders in CS — utter anger that management have let the situation get to this point,” Simon Fentham-Fletcher, chief investment officer at Abu Dhabi-based Freedom Asset Management, told CNBC.
“For years CS lurched from crisis to regulatory fine and changed management as it emerged in a new path. Finally the bank ran out of time,” he said.
He said that shareholders, specifically large ones like Saudi National Bank, will likely now want to reappraise the way they make investments and “where the stake is as large as it was here, will probably want to start embedding people so they properly understand what is happening inside their investments.”
“This might see a rise in activist shareholders not just wanting a board seat but real eyes and ears,” he added, noting that the last few weeks of market turmoil will undoubtedly put a significant dent in investor desire for risk.
From a risk perspective, Fentham-Fletcher said, “generally I think that we will see a pull back in all risk appetite as confidence has just taken a severe beating, and this combined with the apparent upending of the capital structure rules will undoubtedly make people pause.”
- S&P cut its credit rating to B+ from BB+ on Sunday after first lowering it to junk status just last week.
- The rating remains on CreditWatch Negative, said S&P.
- First Republic shares are down sharply this month as the collapse of Silicon Valley Bank caused investors to rethink other banks with large uninsured deposit bases.
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