The Qatar Investment Authority is once again stepping in to support a struggling European universal bank. This time the recipient would be Credit Suisse. Last time, back in 2008, it was Barclays.
We all remember how well that went. Qatari money saved Barclays from a UK state bailout, but embroiled the lender in lengthy misconduct investigations and associated legal ructions.
Unabashed, the gas-rich Gulf state now plans to increase its stake in the permacrisis that is Credit Suisse.
The Swiss bank needs to raise SFr4bn to fund its latest restructuring, which includes splitting off part of its investment banking business. The QIA would invest alongside Saudi National Bank and family-run conglomerate Olayan Group. The bloc is expected to own between a fifth and a quarter of Credit Suisse after the deal completes.
The QIA has shifted away from a strategy of owning big, well-known companies. It sold stakes in Barclays and Glencore earlier this year. Instead it has favoured investments that can aid the country in its future development, particularly tech start-ups.
Credit Suisse very loosely fits that description via its promise to set up a “tech hub” employing 100 people in Qatar.
The QIA is already the third-largest shareholder in the Swiss bank with 5 per cent of outstanding stock. It could buy a portion of the new shares on offer as well as taking up a rights issue. At under 0.4 times book value, Credit Suisse is one of the cheapest European banks.
At a minimum, any deal will maintain the QIA’s existing stake. “The QIA is getting two birds with one stone,” says David Aserkoff at JPMorgan.
The investment should be manna from heaven for Credit Suisse. Gulf investors have typically held large stakes in UK businesses for long periods without rocking the boat. The Swiss bank has a large wealth management business. Getting closer to Gulf institutions could help its salespeople get closer to the wealthy families that control them.
Credit Suisse compliance staff will doubtless swarm all over the capital injection from the Gulf. The lender will have no wish to fall into the same elephant trap as Barclays.
The Lex team is interested in hearing more from readers. Please tell us what you think of the QIA’s proposed investment in the comments section below