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On Wednesday, Goldman Sachs analysts initiated coverage on Al Rajhi Bank (RJHI:AB) with a Buy rating, setting a price target of SAR105.00. The analysts highlighted the bank’s defensive qualities amid an uncertain macroeconomic and oil price environment.
In a detailed analysis, Goldman Sachs noted that while investors have shown caution towards Saudi banks due to their oil dependence, Al Rajhi Bank stands out for its unique position among MENA banks. The bank’s significant fixed-rate exposure, particularly in retail loans and mortgages, contributes to a negative net asset repricing gap over a 12-month period.
The analysts emphasized four fundamental parameters where Al Rajhi Bank performs well compared to its peers. They believe the bank is well-positioned as a "late-cycle NII play," expecting it to experience net interest margin (NIM) expansion through 2027.
Goldman Sachs projects that Al Rajhi Bank will achieve best-in-class compound annual growth rates (CAGRs) for net interest income (NII) and net income (NI) of 14% and 16%, respectively, from 2024 to 2027.
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