The Qatar Investment Authority (QIA) is undeterred by the plummeting value of its stockholding in Credit Suisse Group and is preparing to invest in a share sale alongside the Saudi National Bank (SNB), according to the Financial Times.

Ratings agencies this week delivered pessimistic assessments of Credit Suisse’s prospects, likely leading to higher borrowing costs, due to the bank’s weakened liquidity position, perceived risks of restructuring and a negative market outlook that undermines the prospect of a return to profitability.

The Swiss lender is seeking to raise CHF4.01 billion (US$4.04 billion) from investors to support its restructuring program and bolster its balance sheet following a series of setbacks, including scandals relating to money laundering and controversies involving sanctioned Russian oligarchs as well as losses associated with losses associated with Greensill and Archegos. Last week, it reported a Q3 net loss of CHF4.03 billion, significantly worse than expected by analysts.

QIA has not confirmed FT’s report, but currently has a stake of 5.6% which has declined by around US$860 million in the year-to-date as the bank’s stock value plummeted.

Last week, SNB – which is 37% owned by Saudi Arabia’s Public Investment Fund (PIF) – said it would invest up to CHF1.5 billion in Credit Suisse to raise its stake to 9.9%. Investors responded to the news with concern, wiping US$7 billion of SNB’s market value as they sold their shares in the bank.

Yet, SNB chair Ammar Alkhudairy remains optimistic and told CNBC, “We got it at the floor price. I think the bank has been battered. It’s trading at less than a quarter of book value, of tangible book value, which is, which is a steal. And it’s 160-year-old brand, the brand has a lot of value.”

He added that Credit Suisse’s main weakness was the volatility of its investment banking, but the bank’s other three core businesses – retail, private wealth management and asset management – are “very stable” business streams that have delivered “predictable, sustainable returns.” Restructuring the bank to a more stable, conservative posture would return it to profit, he claimed.

If it agrees with Alkhudairy’s assessment, the Qatari sovereign wealth fund could also raise its stake to a shade under 10%. The Swiss bank has a strong relationship with QIA, which began investing in its stock during the global financial crisis, and in 2020, both institutions teamed up in a multi-billion dollar platform to invest in direct lending.

Over the years, Qatar’s SWF has bought 202 million shares of Credit Suisse and sold 69 million. If it were to sell the remaining stake today, Global SWF estimates that the losses would amount to US$2 billion. Additionally, QIA owns a similar stake in Barclays plc, in which it has invested US$16.6 billion over the years, and 3.3% in Santander Brasil. The British bank and the Spanish subsidiary are not going through their best moment either with their combined cumulative losses to the fund totalling US$375 million y-t-d.

QIA’s weighty holdings in domestic listed banks have not offset the US$1.25 billion in combined asset value losses from Credit Suisse, Barclays and Santander Brasil so far this year, despite the uptick in the Doha Stock Exchange. Qatar Islamic Bank (QIB), in which QIA owns stakes of 17%, saw stock price growth of 31% y-t-d, while Ahlibank (QIA stake of 47.7%) witnessed a 9% rise in value and QIIB (QIA stake of 16.6%) grew 29.8%, on the back of strong revenues and profitability.

However, QIA lost more than US$500 million due to the 1.9% drop in the value of Qatar National Bank (QNB), in which it owns a majority 51.9% stake. Doha Bank’s 32.4% fall in value also hit the fund, which holds a 17.1% stake which lost nearly US$150 million.

Altogether, QIA saw a total US$168 million net gain in domestic banking stock value, which barely buffered the impact of its foreign bank holdings. Yet, the fund is unlikely to sell Credit Suisse stock so cheaply - and its long-term patient capital may be best deployed in propping up and reviving the troubled bank.

Related funds PIF QIA
Related tags Strategy Equities