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SBI hikes lending and deposit rates
State Bank of India (SBI) has hiked its base rate and Benchmark Prime Lending Rate (BPLR)
by 25bp each to 9.50% and 14.25%, respectively. The hike will be effective from July 11,
2011. With the latest increase, the base rate of the bank has increased by 125bp in the
last three months, which we believe will help the bank in mitigating, to an extent, the
pressures from rise in cost of funds. The bank has also hiked deposit rates, especially in the
longer term maturities (over three years), by up to 100bp. However, the peak retail FD rate
in the 1–3 year maturity bucket remains at 9.25%.
At the CMP, the stock is trading at 1.6x FY2013E ABV (after adjusting for value of
subsidiaries). Post the recent run-up in the stock, we recommend Accumulate with a target
price of `2,832.
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