Bank of India slashes base rate by 25bp - Angel Broking

Public sector lender - Bank of India (BOI) has cut its base rate by 25bp to 10% with effect from July 8, 2013. The move follows the meeting of finance minister with PSU banks chief, wherein the minister had advised banks to reduce lending rates, so as to stimulate credit growth. Though systemic liquidity has eased considerably, the deposits rates remain elevated, making it difficult for banks to lower their lending rates.

Amongst our coverage banks, the base rate for BOI after the rate cut, would be second lowest amongst PSUs and fourth lowest overall. The move to reduce rates when deposit rates are elevated, is likely to a bit negative for BOI, in the near term. Having said that, after the recent underperformance, it trades at 0.5x FY2015E ABV.

We maintain our Buy recommendation on the stock, with a target price of Rs. 270.

Source : Equity Bulls

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