Credit Suisse to Commit $600 Million for Saudi ExpansionDinesh Nair and Jan-Henrik Foerster
Bank to use some capital for loans backed by local stocks
Lender said to be in advanced talks to secure banking license
Credit Suisse Group AG, the Swiss lender seeking a banking license in Saudi Arabia, has allocated about $600 million of its own capital to expand its business in the kingdom, according to people familiar with the matter.
The Zurich-based bank, which has a securities and equities business in the country, plans to use the capital to, among other things, offer investors Lombard loans, which are backed by liquid assets such as stocks, said the people, who asked not to be identified because the information is private. Such loans could help facilitate trading in local equities, they said.
International banks are seeking to expand their operations in the kingdom as it embarks on an unprecedented economic shakeup under Deputy Crown Prince Mohammed bin Salman, who is seeking to reduce its reliance on oil after a plunge in prices that started in 2014. Iqbal Khan, head of the Credit Suisse’s international wealth-management business, said in an interview last year that the bank was in talks with the Saudi central bank for an onshore license.
Those discussions are at an advanced stage, the people said, though no final agreements have been reached on the license, and the talks may still falter. About a dozen international lenders, including Deutsche Bank AG and JPMorgan Chase & Co., currently hold an onshore license, which allows banks to operate branches and take deposits in local currency.
"Credit Suisse is further expanding and investing in its business in Saudi Arabia, a key growth market and of great importance to international wealth management," Adam Bradbery, a spokesman for the bank, said in an e-mailed statement. "We are continuing to work toward a fully-fledged onshore private banking presence, and a natural progression to further build our local footprint would be a banking license."
He declined to comment on the amount the bank has set aside for business in the kingdom. Credit Suisse had total shareholders’ equity of 42.2 billion francs ($42 billion) at the end of 2016. Common equity Tier 1 capital, which is the basis for calculating the bank’s regulatory capital ratios, stood at 31.1 billion francs.
Credit Suisse was among lenders invited to pitch for an advisory role in the initial public offering of Saudi Arabian Oil Co., people familiar with the matter said in January. The partial IPO, which the prince said may value the state-owned oil producer at more than $2 trillion, is the key piece in his plan to diversify the economy and create the world’s largest sovereign wealth fund.
Citigroup Inc., which sold out of the country more than a decade ago, has set up a company-wide task force, involving some of its most senior bankers, to target business opportunities in Saudi Arabia, people familiar with the matter said in September. The country’s planned privatizations represent the biggest investment banking opportunity in emerging markets, the bank’s head of investment banking, Omar Iqtidar, said in an interview last year.
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