BofA Merrill turns positive on Indian state-owned banks

Tue Jan 8, 2013 2:29pm IST

An employee arranges Indian currency notes at a cash counter inside a bank in New Delhi June 8, 2010. REUTERS/Mukesh Gupta/Files

An employee arranges Indian currency notes at a cash counter inside a bank in New Delhi June 8, 2010.

Credit: Reuters/Mukesh Gupta/Files

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Reuters Market Eye - Bank of America Merrill Lynch upgraded State Bank of India, Bank of Baroda (BOB.NS), and Oriental Bank of Commerce Ltd (ORBC.NS) to 'buy'.

The investment bank says upgrades come on the back of a steepening bond yield curve in the anticipation of RBI rate cuts, stronger-than-expected loan recoveries, and reduced quality pressures.

BofA Merrill also upgrades its price objectives for private banks, retaining ICICI Bank Ltd (ICBK.NS) as its top pick, and HDFC Bank Ltd (HDBK.NS) and Axis Bank Ltd (AXBK.NS) as its "preferred" names. All three banks have 'buy' ratings.

"Private banks will likely continue to deliver structurally superior earnings and RoEs, especially over the medium term," BofA Merrill says in a note dated Tuesday.

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