Angel Broking bullish on SBI, recommends 'buy'

Angel Broking has given a buy rating to SBI shares with a target price of Rs 2,270 in 12 months. SBI shares ended marginally higher on Tuesday at Rs 1,910.25 on BSE.

In a research report Angel Broking said, "The asset quality of the bank has been witnessing pressure for quite some time now and with the slowdown in economic growth and persistent inflation levels pointing towards further economic stress, cyclically, the next six to nine months are likely to be challenging for the bank. However, at the current market price, the stock is trading at 1.2x FY2014E ABV (adjusting for value of subsidiaries 1.0x FY2014E ABV) vis-a-vis its historic range of 1.3-2.3x and median of 1.6x."

"Considering the bank's dominant position and reach, high fee income and superior earnings quality, we feel the stock is a value buy from a 18-24 month perspective," it added.

State Bank of India (SBI) on Friday reported a 137 per cent jump in net profit at Rs 3,752 crore for the first quarter ended June 30, 2012, though rising non-performing loans continue to be a cause of concern.

The bank had a net profit of Rs 1,583 crore in the April-June quarter of 2011-12 fiscal.

The bank's net non-performing assets (NPAs) rose to 2.22 per cent of total loan book at the end of June, against 1.61 per cent a year ago, reflecting the impact of slowing economy.

The bank's total income increased 16.89 per cent in the quarter to Rs 32,415 crore, from Rs 27,732 crore in the same period a year ago.