Following Saudi National Bank’s October investment of $1.6 billion for up to 9.9 percent of Credit Suisse, the firm is reportedly considering investing an additional $500 million in the bank’s proposed reboot of its Credit Suisse First Boston investment banking unit.
The Saudi National Bank, controlled by the Saudi government, is now Credit Suisse’s largest shareholder despite not having a controlling stake. Additionally, it is likely that the firm was not one of the investors consulted on the plan for Credit Suisse to carve out its CS First Boston venture. While the bank may have shared details of the plan when discussing SNB’s 9.9 percent stake purchase, it’s likely that the bank worked out a plan without SNB’s input, needed external capital and the Saudis bought into the idea.
One question being raised as a result of the additional capital infusion into Credit Suisse, is why commit additional capital? Andreas Venditti, head of banks research for Bank Vontobel in Zurich believes its lies with the goals Crown Prince Mohammed bin Salman or MBS has set for Saudi’s own investors.
“One thing which is clear is that the Saudis are trying to undergo a very big transformation of their economy, which is now very much focused on oil and gas,” says Venditti. “They have a need to diversify,” he says. “They need to find other sources of revenue, because over the long term, global oil and gas demand is expected to slow.”
Venditti notes that the firm is seeking out banks to finance and help source prospective investors for future diversification. With the Crown Prince and Saudi National Bank getting a foothold into cross-border banking and dealmaking it will be interesting to see where the country’s sovereign fund looks for diversification.
As long-term demand for global oil and gas wanes, it will be notable to see where the Saudis choose to invest their funds.
–Keith Button