Al Rajhi Bank
Fundamental — what it's worthbottom-up fair value
Built up from a dividend model, an FCFE cash-flow valuation, relative multiples and the value of retained capital — what is it worth?
Is it cheap or expensive right now?
Latest price vs our fair value. A comparison, not a recommendation.
What it's worth — five lenses
Five independent valuation methods, blended into one weighted central fair value.
| Valuation lens | Per share (SAR) | Weight |
|---|---|---|
| Dividend discount model — primary | 58.23 | 25% |
| Residual income (excess return) | 76.83 | 25% |
| FCFE (equity DCF) | 79.50 | 15% |
| Relative — justified P/B | 75.66 | 15% |
| Normalized earnings power | 65.26 | 20% |
| Weighted central fair value | 70.09 | +6.2% vs spot |
The five lenses span SAR 58.2 (the dividend model, cautious) to SAR 79.5 (FCFE, the ceiling), mostly above spot — the dividend looks fairly priced, the retained-capital lenses see value. The NIM path through the easing cycle and whether a ~23% ROE keeps compounding retained earnings are the swing factors. Full detail is in the study and the open model.
Technical & price structuretrend, momentum, key levels
Trend, momentum and key levels — what is the price doing now?
What the chart says
In plain terms: Al Rajhi Bank trades a few percent below our weighted central fair value — roughly fairly valued, and the whole argument is what its retained capital is worth. On the dividend it pays today (a rising ~half of earnings) the shares look fairly priced near SAR 58; on the value it builds by reinvesting at a ~23% return, the excess-return lenses land at SAR 76–80. It is the world's largest Islamic bank — a retail-led franchise with the Kingdom's deepest low-cost deposit base, earning ~23% on equity at a sector-low ~23% cost-to-income. The bull case (~SAR 80) is durable margin resilience and a step-up to a 55–60% payout; the cautious case (~SAR 58) is a faster SAMA cutting cycle that squeezes the net interest margin and incremental capital earning closer to the cost of equity. What moves it near-term is the rate path and the quarterly NIM print.
Key levels
Volatility & where the case breaks
| Typical daily moveRoughly how far the price swings in an average day (based on a measure called ATR). Bigger means choppier. | ~1.3% |
Monte Carlo — where could the price go?near-term price paths
50,000 simulated futures — near-term price paths, independent of the fundamental value.
The 5th–95th and 25th–75th percentile bands from the 50,000-path simulation. Static and pre-computed — independent of the fundamental levers above.
The exact percentiles
The 5th / 25th / middle / 75th / 95th outcomesLine up all 50,000 outcomes low to high — these are the values at the 5%, 25%, 50%, 75% and 95% marks., from 50,000 paths.
| Timeframe | Rare low (5%) | 25% | Middle | 75% | Rare high (95%) |
|---|
What drives the odds
50,000 paths, 16 forces: the SAMA/Fed rate path (the NIM driver), oil and the fiscal impulse, Vision-2030 credit demand, the mortgage & retail cycle, TASI beta and passive flows, system liquidity, and inflation — plus event forces: a quarterly earnings surprise, a dividend/payout surprise, a SAMA/Fed policy surprise, a cost-of-risk shift, an oil-price shock, a geopolitical shock, a mortgage-policy change, an index-flow rebalance, and a capital action. Details in the methodology.
Peer set & risks
Where Al Rajhi Bank sits in its markets
Al Rajhi is the world’s largest Islamic bank and Saudi Arabia’s largest bank by market value — a retail-led franchise earning a ~23% return on equity. It screens richly against Saudi and GCC peers, a premium its returns earn. This is a competitive map, not a price table.
| Arena | Al Rajhi's position | Main rivals |
|---|---|---|
| Market cap (Saudi banks) | #1 (~SAR 396bn) | SNB · Riyad Bank · Alinma |
| Return on equity | ~23% (sector-leading) | vs sector ~13–16% |
| Cost-to-income | ~23% (best-in-class) | far below peers ~35% |
| Retail & low-cost deposits | Kingdom's deepest base | SNB · Alinma |
| Islamic banking | World's largest | Kuwait Finance House · Alinma |
| Capital (CET1) | ~16.6% (strong) | sector well-capitalised |
The debate is valuation, not quality — whether a world-class franchise at ~3.5× book is worth it, which the excess-return lenses answer yes and the dividend lens more cautiously. Competitive map, not advice.
About this series & how we build these
Want the full study and the spreadsheet?
Full write-up plus the editable Excel model.
Found a flaw? Attack the model
The full study (PDF) and Excel model are available on a computer.
Edition: 1 Jul 2026. Older editions stay in the Library.