(Bloomberg) -- A Saudi bank stock viewed by investors as a proxy for the kingdom’s ambitious growth plans has outperformed JPMorgan Chase & Co. and is now poised for a boost in the event of Federal Reserve interest rate cuts.  

Shares of Al Rajhi Bank are up nearly 270% since crown Prince Mohammed Bin Salman established his Vision 2030 program to diversify the economy away from oil eight years ago, beating peers across the kingdom and abroad in that time. It has outpaced even government-backed lenders like Saudi National Bank and Riyad Bank, making it the biggest bank by market capitalization in the Middle East and Africa at roughly $95 billion.

“We see it as a long-term winner in the Saudi bank sector,” Morgan Stanley analysts led by Nida Iqbal wrote in a note last week. “Whilst Rajhi is the best placed for a rate cutting cycle, we believe current valuation levels reflect this.”

Central banks in the Gulf, like Saudi Arabia’s, largely follow Fed decisions in order to protect their currency pegs to the dollar. A gradual rate reduction by the Fed would be beneficial to Al Rajhi’s profitability and growth trajectory as it will encourage gathering cheap deposits while enabling it to issue debt at more attractive levels, according to Bloomberg Intelligence senior analyst Edmond Christou.

The lender has grown significantly over the past decade. Its assets have almost tripled, benefiting from a push to increase home ownership via strong mortgage lending, a focus on corporate financing helped by government mega-projects, and a growing expatriate population.

Investors are willing to spend more on the stock in expectations of improving future profits. Trading at 19.5 times forward earnings, Al Rajhi’s valuation is closer to US big tech stocks like Alphabet Inc. and Meta Platforms Inc. than JPMorgan or Europe’s biggest bank, HSBC Holdings Plc, which respectively trade at a price-to-earnings ratio of 11.6 and 6 times.

The lender has the 14th heaviest weight on the widely-tracked MSCI Emerging Markets Index, a benchmark of over 1,400 members, according to data compiled by Bloomberg. It’s also the biggest member of the Saudi Tadawul All Share Index benchmark. Its size has helped lure in passive investors, with 13% of the bank owned by foreign investors.

Its relatively high free float and private sector ownership “makes it a much more attractive play for foreign institutional investors,” said Dubai-based Hasnain Malik, emerging market equity strategist at Tellimer. He added that it also appealed to investors looking to replace their Russian exposure, compared to other large index weights, like the world’s largest oil producer Saudi Aramco and others “where the government is the dominant shareholder.”

To be sure, Al Rajhi’s revenues are nowhere near global peers like Citigroup Inc., though both companies have similar market capitalization near $100 billion. The Saudi bank made about 33 billion riyals ($9 billion) in revenues last year, compared to Citi’s $76 billion. 

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