Jefferies has adjusted its stance on Al Rajhi Bank (TADAWUL: 1120), shifting the rating from Underperform to Hold, and increased the price target to SAR 77.30 from SAR 70.00.
The revision follows the bank's second-quarter earnings call, which the analyst described as positive due to an upgrade in loan growth to high-single-digit (HSD), contributing to a lower cost-income ratio (CIR) and a higher return on equity (ROE).
The analyst at Jefferies highlighted that the earnings per share (EPS) estimates for Al Rajhi Bank have been raised by 2-7% for the years 2024 through 2026. The new projections are now slightly above the Visible Alpha consensus.
Jefferies' revised outlook suggests that Al Rajhi Bank's stronger financial performance could be the primary argument for bullish investors. However, the analyst noted that a significant premium in the stock's price would position it well above the historical average when compared to expected returns.
The report concluded with a reference to Al Rajhi Bank's valuation metrics, stating that the bank is trading at 16.2 times the projected earnings for 2025 and 3.2 times the projected book value per share. The Hold rating is maintained based on the newly revised price target of SAR 77.3.
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