FAB Securities has listed Al Rajhi Bank, Saudi National Bank (SNB) and The Saudi Investment Bank (SAIB) as its preferred banks among those under its coverage.

The brokerage assigned an "accumulate" rating for Al Rajhi Bank, increasing the target price by 13.3% to SAR110 per share. SNB and SAIB were given "Buy" ratings, with target prices of SAR47 (+22.5%) and SAR17.80 (+36.8 %), respectively.

Other banks under coverage include Alinma Bank, Bank Albilad, Arab National Bank, Banque Saudi Fransi and Riyad Bank.  All these banks were assigned "Buy" ratings and target price increases.

In a report, FAB Securities said that Saudi Arabia's banking system outlook remains favourable, supported by a resilient macroeconomic backdrop, ongoing structural reforms, and sustained credit demand.

The latest amendments to the White Land Tax are expected to encourage increased real estate development and housing supply, which is forecast to gradually translate into higher mortgage and construction-related lending.

The Saudi Central Bank's (SAMA) proposed introduction of a one percent countercyclical capital buffer, effective May 2026, is likely to promote more conservative capital management in the near term, including higher earnings retention, which may moderate dividend payouts, the report said.

However, stronger capital buffers are likely to enhance balance sheet resilience, reduce earnings volatility, and support more sustainable dividend distributions over the medium term.

The expected rate cuts by the US Federal Reserve and SAMA are expected to support credit demand, although margin pressure is likely to persist in the fourth quarter of 2025 amid repricing lags and elevated funding costs, necessitating banks to focus on repricing, funding efficiency, and income diversification, FAB Securities said.

The Kingdom's banking sector is predicted to benefit from strong growth in the non-oil sector, with total banking assets rising 13.2% year on year to SAR 4.9 trillion in October 2025.

(Editing by Brinda Darasha; brinda.darasha@lseg.com)