BofA Merril Lynch reiterates buy on SBI 22 Jun, 20

MUMBAI: BofA Merrill Lynch has reiterated its buy rating on State Bank of India (SBI) citing attractive risk-return ratios and earnings growth expectations of over 20% over the next couple of years as the reasons.

"We prefer SBI within Govt. Banks, as it has recognized a lot of 'asset quality' issues in FY12 (still est. 2.5% slippage rate; higher than the sector avg.), attractive risk-return and EPS growth of +20% through FY13/14," said BofA Merrill Lynch analysts Rajeev Varma and Veekesh Gandhi in a noe to clients.

At 3:20 PM on Friday, SBI shares were down 0.5% at Rs 2,166.80. The broker has reiterated its price target of Rs2,425 for SBI.

"We are comfortable with our full year est. of Rs220bn for gross slippages and Rs120bn for net. SME remains the key stress area, especially steel and textiles where the stress is deepening," the analysts said.

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