Public sector Bank, Union Bank of India (UBI) has cut its base rate by 0.10% to 10.65% with effect from December 26, 2011.
The move follows RBI's (Reserve Bank of India’s) pause in its previous monetary policy review on December 16,
2011.
The RBI had given clear indications that the interest rate cycle had peaked
and was likely to reverse from now on. However, we do not expect other banks to
follow suit as the deposit rates continue to remain high and systemic liquidity
continues to be extremely tight.
The overnight LAF borrowings by the banks from
the RBI have been well in excess of Rs. 1,00,000 Cr for about a fortnight now. The
move is likely to be bit of negative for UBI.
Having said that valuations at 0.7x 2012-13 E ABV are at a substantial discount to its historic trading range of 0.95-
1.50x with a median of 1.30x one year forward ABV.
Hence, Angel Broking maintain Buy
recommendation on the stock with a revised target price of Rs. 198, implying an
upside of Rs. 20% from current market price.
Review by Angel Broking
6th Floor, Ackruti Star
Central Road,MIDC
Andheri (E) , Mumbai-93
www.angelbroking.com
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