The largest shareholder of Credit Suisse Group AG, Saudi National Bank, whose holdings have lost more than one-third of their value in the past three months, decided against adding to the total stake since a heavier investment would result in greater regulatory restrictions.
On Wednesday, Saudi National Bank Chairman Ammar Al Khudairy was asked by Bloomberg TV whether the bank would inject more money if there was another call for additional liquidity. Responding to this, he said, “The answer is absolutely not, for many reasons outside the simplest reason, which is regulatory and statutory.” The Saudi bank’s stake in Credit Suisse is just under 10%, and if it crosses 10%, it will be subject to more regulations, which the bank does not want.
On March 14, Credit Suisse said that it had found “material weaknesses” in internal controls over financial reporting and had not yet stopped client exodus. “As of December 31, 2022, the Group’s internal control over financial reporting was not effective, and for the same reasons, management has reassessed and has reached the same conclusion regarding December 31, 2021,” it said.
The reporting flaws come as Credit Suisse works to rebuild its reputation after a spate of scandals that have damaged its standing with clients and investors. According to the reports, client withdrawals increased to well over 110 billion Swiss francs ($120 billion) in the fourth quarter.
In Zurich, Credit Suisse also dropped as much as 24% to a new record low, and the cost to insure the bonds against default in the short future appeared getting close to a level that is generally an indication of very significant investor concerns.
The situation of Credit Suisse so much vulnerable that a Wall Street expert has said that it will be the next bank to collapse after the Silicon Valley Bank and Signature Bank in the US. Robert Kiyosaki, who accurately predicted the 2008 Lehman Brothers’ collapse, has warned that Credit Suisse could be at risk as the volatile bond market crashes, with rising interest causing bonds to fall in price. Kiyosaki said, “The problem is the bond market, and my prediction, I called Lehman Brothers years ago, and I think the next bank to go is Credit Suisse, because the bond market is crashing.”
He further said, “The US dollar is losing its hegemony in the world right now. So they’re going to print more and more and more of this … trying to keep this thing from sinking.”
Interestingly, Robert Kiyosaki made this prediction even before Credit Suisse admitted that it has “material weaknesses”.
It is notable that a private banking arm of Credit Suisse AG in February stopped accepting bonds of some of the group entities of Adani Group, Adani Ports & SEZ, Adani Green Energy, and Adani Electricity Mumbai as collateral for margin loans amid Hindenburg row.
After allegations of stock manipulation and inappropriate use of tax havens made by a US short seller, Hindenburg Research, and concerns raised about debt levels, seven listed Adani Group firms together lost more than $100 billion in market value. Adani however rubbished the claims of fraud stating that they were based on stale, baseless, and discredited allegations.
Indian Twitter users meanwhile reviewed the financial situation of Credit Suisse and targeted the bank for facing trouble. “CreditSuisse gave long sermons on #Adani & #IndiaEconomy Risks. Today, Credit Suisse Default Swaps Hit Record. Lesson – Never bet against India,” said a Twitter user.
👉🏼#SVB had a sell report for #SBI
— Arun Pudur (@arunpudur) March 13, 2023
Today SVB bankrupt & woke billionaires wrapped themselves in Nationalism begging bail out
👉🏼 #CreditSuisse gave long sermons on #Adani & #IndiaEconomy Risks
Today, Credit Suisse Default Swaps Hit Record
🫵🏼 Lesson – Never bet against India
“A bank which downgraded the bonds of #adani is in the verge of collapse. Irony is that they identified material weakness in their reporting for the past two years..#CreditSuisse Suisse should learn to clean their house before poking nose at us…#nifty50 #banknifty,” said another Twitter user.
A bank which downgraded the bonds of #adani is in the verge of collapse . Irony is that they identified material weakness in their reporting for the past two years..#CreditSuisse Suisse should learn to clean their house before poking nose at us…#nifty50 #banknifty
— rakesh chandran (@chandrrakesh) March 14, 2023
“Did #CreditSuisse just detonate. They should have concentrated more on themselves than finding fault with Adani bonds,” noted another Twitter user.
Did #CreditSuisse just detonate.
— Mohi Kulkarni (@Mohibjp) March 14, 2023
They should have concentrated more on themselves than finding fault with Adani bonds. pic.twitter.com/KqnQznu8Cw
The Saudi National Bank, which is 37% controlled by the kingdom’s sovereign wealth fund, became Credit Suisse’s biggest shareholder late last year after acquiring a 9.9% holding in the Swiss institution for 1.4 billion francs. In a couple of months, the investment has lost more than 500 million francs.
Al Khudairy frequently states that his bank does not wish to increase its stake over the present level. He stated in October that while he “likes” the new leadership of Credit Suisse and their commitment to carrying out its turnaround plan, further stock is now “out of the question.” He stated on Wednesday that increasing the shareholding would result in further regulatory obstacles.
“If we go above 10%, all new rules kick in whether it be by our regulator or the Swiss regulator or the European regulator. We’re not inclined to get into a new regulatory regime. I can cite five or six other reasons, but one reason is there is a glass ceiling and we’re not going to entertain going beyond it,” he said.
Meanwhile, Chief Executive Officer Ulrich Koerner stated on Tuesday that the financial position of the bank was sound. In spite of the market upheaval, he said that the company got inflows on Monday and is progressing ahead of schedule with its recovery strategy. “Nobody is pleased by the share price development, but we manage what we can manage, and this is the execution of our plan,” he was quoted as saying.
