Saudi Banks: Model Updates

Research evidence excerpt

Saudi Banks: Model Updates

Mehmet Sevim AC CEEMEA Equity Research

(971) 4428-1784 20 July 2026 J P M O R G A N

mehmet.sevim@jpmorgan.com

Investment Thesis, Valuation and Risks

Alinma Bank (Neutral; Price Target: SRls27.10)

Investment Thesis

Alinma is a young corporate-focused bank with about a 7% market share in loans (#6). New

management since joining in 2021, has spearheaded an ambitious strategy aimed at

revitalising the franchise, with the number of customers more than doubling from c.3mn to

c.6.5mn over FY21-FY25, while loan growth at a 13% CAGR is also the highest among

banks in our coverage. This has resulted in a notable ROTE expansion to 17.2% in FY25

from 10.4% in FY21 (12.6% 10y avg.), with better NII contribution, cost efficiencies,

notably lower cost of risk, and higher leverage. We like Alinma’s quality franchise and

believe the higher return profile is largely sustainable. However, with a more limited upside

to our price target relative to peers, we rate the shares Neutral. The bank’s CET1 ratio of

13.4% (down 2pp over last 3y) offers a relatively limited headroom for growth.

Valuation

Our Dec-27 PT of SAR27.1 is based on a Gordon Growth model, incorporating 15.6%

2027E ROTE, a 10.2% cost of equity and a 4% growth rate.

Normalized ROTE 15.6%

Cost of equity 10.2%

Growth rate 4.0%

Fair P/TBV multiple 1.9

TBVPS (Dec-27) 14.5

Fair value per share 27.1

Published Fair value per share, Dec-27 27.1

Source: J.P. Morgan estimates

Risks to Rating and Price Target

Developments around the removal of FOL limitations could keep interest rates and flows

high, presenting a key upside risk. Other upside risks to our view could come from higher-

than-expected market share gains in corporate and faster penetration into the retail segment