The short version
Most Saudi investors see Al Rajhi as the best bank in the market. It earns far higher returns than its peers, it has the biggest retail franchise and it has long been funded by cheap current accounts. The first two are still true. The third is not.
For years Al Rajhi funded itself almost for free. In 2019, 93% of its deposits were current and other accounts that earn no return. Then it built the largest mortgage book in the Kingdom. Net mortgages went from about SAR 55bn in 2019 to SAR 276bn in 2025. Demand deposits did not keep up. The gap was filled with time deposits, interbank money and debt.
Today current accounts (CASA) are 61% of deposits. Wholesale funding went from 0.7% of funding in 2019 to 22.8% in 2025. In 2025 its cost line for banks and other financial institutions, which also covers debt, was SAR 15.8bn. Customers' time deposits cost SAR 10.2bn.
Since 2025 the bank has changed course. The mortgage book is shrinking. About SAR 31bn of mortgages has been securitised since 2022, about SAR 13.8bn of it traceable to the Saudi Real Estate Refinance Company (SRC). The buyer of the rest is not disclosed. Mortgage market share fell from 42.9% in 2022 to 36.3% in 9M-26. New growth is in SME lending, where the NPL ratio is 4.7%.
Rate cuts did not fix the funding. In 9M-26 average SAIBOR was about 57bp lower than a year before. Al Rajhi's cost of funds fell only 17bp. The 2026 margin gain came mostly from repricing assets, not from cheaper deposits. And management has flipped its rate view. In February it expected two cuts. By October it expected another hike.
Key numbers (5 Nov 2026 close, SAR 62.00)
Market cap SAR 372bn on 6,000m shares.
Trailing P/E 14.5x after Tier 1 sukuk costs. P/B 3.1x. Trailing dividend yield 3.9%.
9M-26 net income SAR 20.9bn, +13.3%. ROE 23.3%. NIM 3.51%.
CET1 16.78%, Tier 1 21.53%.
Model value per share: Base SAR 64.64, Upside 83.50, Downside 43.55. Probability-weighted SAR 64.1, 3.4% above the price.
My view. Fairly priced. The price already assumes Al Rajhi stays the best bank in the market. At SAR 62 the market implies a 23.3% ROE after Tier 1 sukuk costs, on opening equity. My base case gives 21.9% for 2027 on the same basis, a gap of about 1.5 points.
The edge is not in the franchise story. It sits in four questions. Can the bank win back cheap deposits when rates are no longer falling? Will SME losses stay below the through-cycle level? Can capital ratios rise on CET1, not on more Tier 1 sukuk? And who are the borrowers behind SAR 19.8bn of financing guaranteed by board members?
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