Bank crisis trades have ranged from the terrific to terrible. At the positive end is Warren Buffett’s 2008 deal with Goldman Sachs . At the other is Abu Dhabi Investment Authority’s 2007 investment in Citigroup , which ended up in . Saudi National Bank is continuing the tradition, ponying up about $1.4 billion for a 9.9% stake in troubled Credit Suisse . Its returns may be closer to Buffett’s than its Gulf peer’s.
SNB Chairman Ammar Al Khudairy hasn’t driven as hard a bargain as the Sage of Omaha did at the peak of the financial crisis. Buffett limited his potential losses by buying low-risk preference shares with a 10% coupon, while extracting warrants to snap up Goldman stock on the cheap. By contrast, Saudi Arabia’s biggest bank is acquiring $1.2 billion of new Credit Suisse shares in a private placement and then participating in the bank’s imminent rights issue.
Credit Suisse is targeting a 6% return on tangible equity in 2025, once Chief Executive Ulrich Körner hasand shrank the investment bank. If it succeeds, a fair valuation might be 0.6 times tangible book value. That would imply a market capitalisation in 2025 of $26 billion. SNB’s stake would be worth $2.6 billion, meaning Chair Al Khudairy could almost double his money in three years, for a 24% annualised return.
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