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On Tuesday, Jefferies analysts initiated coverage on Al Rajhi Bank (RJHI:AB) stock with a Hold rating, citing limited potential upside compared to its peers. The analysts set a price target of SAR96.00, reflecting less than a 10% potential increase from current levels.
The analysts noted that Al Rajhi Bank shares offer a lower dividend yield, averaging around 4% for 2025-2027, compared to the 6.5% yield projected for its peer, Saudi National Bank (SNB). Despite Al Rajhi’s strong shareholder returns, with a return on tangible equity expected to rise from 20.0% in 2024 to 23.1% in 2027, the bank’s price-to-earnings ratio is significantly higher than the sector average.
The report highlighted that Islamic banking franchises, such as Al Rajhi, typically trade at a premium due to their appeal to Sharia-compliant investment pools. However, even considering this factor, the analysts expressed caution about purchasing Al Rajhi shares at current valuations.
Jefferies’ analysis suggests that while Al Rajhi Bank has a positive fundamental outlook, the current stock price already reflects its strengths, leaving limited room for further appreciation. The analysts emphasized the need for investors to weigh these factors when considering Al Rajhi Bank stock.
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