Qatar Doubles Credit Suisse Stake As Embattled Lender Forges Ahead With Strategic Overhaul

Key Points:

The Saudi National Bank bought a 9.9% interest in Credit Suisse last year as part of a $4.2 billion capital raising, leaving the QIA's current 6.8% ownership of the company in second place.

• More than a quarter of the company's shares are currently held by investors from the Middle East, including the 3.15% controlled by the Saudi-based family business Olayan Financing Company.
• On February 9, Credit Suisse will release its fourth-quarter and full-year profits. The company has previously forecast a fourth-quarter loss of 1.5 billion Swiss francs ($1.6 billion).

Qatar has reportedly doubled its stake in Credit Suisse as the Swiss lender continues to implement a strategic overhaul. The details of the stake increase and the current size of Qatar's holding in Credit Suisse are unclear.

What Does Statistics Say About The Same?

• As of 2021, Credit Suisse has a market capitalization of around $20 billion.
• In 2020, Credit Suisse reported a net profit of $1.1 billion, which was a significant improvement over the previous year's loss of $2.6 billion.
• As of 2021, Credit Suisse has over 45,000 employees worldwide and operates in over 50 countries.
• Credit Suisse is one of the largest banks in Switzerland and is considered one of the "big four" banks in the country, along with UBS, Julius Baer, and Zürcher Kantonalbank.
• As of 2021, Credit Suisse is ranked as the 12th largest bank in Europe by total assets and the 18th largest bank in the world by total assets.

According to a filing with the U.S. Securities and Exchange Commission, the Qatar Investment Authority has doubled its investment in the troubled Swiss lender Credit Suisse, making it the second-largest shareholder. 

Around the time of the financial crisis, Qatar's sovereign wealth fund, the QIA, first started making investments in Credit Suisse. According to the statement on Friday, it now holds 6.8% of the bank's shares, which is second only to the 9.9% stake the Saudi National Bank acquired last year as part of a $4.2 billion capital increase to finance a significant strategic reorganisation.

According to Eikon statistics, Middle Eastern investors now hold almost 5% of the company's equity after adding the 3.15% held by the Saudi family business Olayan Financing Company.

Credit Suisse has already forecasted a 1.5 billion Swiss franc ($1.6 billion) loss for the fourth quarter as a result of the continuing reorganisation. The company will announce its fourth-quarter and full-year profits on Feb. 9. The restructuring is intended to address the investment bank's ongoing underperformance as well as a string of risk and compliance blunders.

At the World Economic Forum in Davos last week, CEO Ulrich Koerner told CNBC that the bank is progressing with its transition and has witnessed a considerable decrease in client outflows. 

Major American investors Harris Associates and Artisan Partners are selling off their Credit Suisse holdings while the Middle East invests heavily. At 5%, Harris is still the third-largest stakeholder, but it has drastically reduced its holding over the past year, whereas Artisan has completely sold its investment.

Finally pivoting

The strategy update released in October and the accompanying rights offering in December marked the beginning of the group's "final shift towards more steady, higher growth," according to Deutsche Bank, which resumed coverage of Credit Suisse earlier this month.

"While philosophically, in our opinion, the majority of the necessary actions have been disclosed, the group's transformation execution needs time to decrease expenses, recover operational momentum, and reduce complexity funding costs. Therefore, even by 2025, we anticipate modest profitability that is below its potential, according to Benjamin Goy, director of European financials research at Deutsche Bank.

The valuation of Credit Suisse was thus, in his words, "not inexpensive based on profits anytime soon."

More of an art than a science

The spin-off of its investment bank to create CS First Boston, which will be led by former Credit Suisse board member Michael Klein, is a key component of Credit Suisse's new strategy.

Amit Goel, Co-Head of European Banks Equity Research at Barclays, claimed earlier this month that Credit Suisse's profits predictions were "more art than science" and that there was still a lack of information regarding the earnings contribution from the companies being sold. 

In Q422, he continued, "we will be focusing on what is causing the losses (we found it challenging to reach c.CHF1.1bn of underlying losses in the quarter), whether there are any signs of stabilisation in the company, and whether there is more clarity on the reorganisation."

Credit Suisse has been facing a number of challenges in recent years, including a decline in its investment banking business and a series of legal and regulatory issues. The bank has been working to restructure its operations and improve its financial performance in order to address these challenges.

This investment made by Qatar is seen as a vote of confidence in Credit Suisse's ability to turn things around. Qatar is a sovereign wealth fund with a long-term investment strategy and is known for taking positions in financially sound but undervalued companies. This move by Qatar is seen as a positive sign for the future of Credit Suisse. 

The exact details of the stake increase and the current size of Qatar's holding in Credit Suisse are not clear. However, it is believed that Qatar now holds a significant stake in the bank. This is not the first time Qatar has invested in Credit Suisse; the country has a history of investing in the bank dating back several years.

It will be interesting to see how this investment by Qatar impacts Credit Suisse's operations and financial performance in the coming months and years. The bank has been working hard to improve its financial performance and it's possible that this investment by Qatar could provide a much-needed boost. It is also important to note that Credit Suisse is not alone in facing the market's headwinds; many other firms are facing similar challenges, and the investment by Qatar may give a hope for other investors as well.

In conclusion, Qatar's decision to double its stake in Credit Suisse is a major vote of confidence in the bank's ability to navigate the challenging environment and turn things around. It will be interesting to see how this investment impacts Credit Suisse's performance in the future and how the bank continues to execute its strategic overhaul.

For what reason does Deutsche Bank own Credit Suisse?

The strategy update announced in October and the subsequent rights issue in December marked the beginning of the group's "final pivot towards more stable, higher growth, higher return, and higher multiple businesses," according to Deutsche Bank, which resumed coverage of Credit Suisse earlier this month with a "hold" rating.

What transpired with Credit Suisse in the final three months?

Credit Suisse has already forecasted a 1.5 billion Swiss franc ($1.6 billion) loss for the fourth quarter as a result of the continuing reorganisation. The company will announce its fourth-quarter and full-year profits on Feb. 9. The restructuring is intended to address the investment bank's ongoing underperformance as well as a string of risk and compliance blunders.