Global brokerage UBS has expressed a cautious outlook on several Indian banks and non-banking financial companies (NBFCs), citing concerns over rising non-performing loans (NPLs) and deteriorating portfolio quality.
UBS maintained a neutral call on IndusInd Bank, reducing its target price to Rs 1,150 per share from Rs 1,350. Similarly, it remained neutral on Axis Bank, but lowered its target to Rs 1,210 from Rs 1,250. AU Small Finance Bank also faced a target cut, with UBS revising it down to Rs 640 from Rs 750, while retaining its neutral rating.
On the other hand, UBS maintained HDFC Bank, ICICI Bank, and Federal Bank as its top picks in the sector.
At 9.15 am, Axis Bank shares were lower by 0.4 percent at Rs 1,141.1 apiece, while IndusInd Bank shares quoted Rs 997, lower by one tenth of a percent. AU Small Finance Bank's stock price tumbled one percent to Rs 585.2 apiece.
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The brokerage raised alarms over increased risks of non-performing loans, particularly in commercial vehicle (CV) and business loan segments. A static pool analysis of recent disbursements indicated a decline in portfolio quality.
For NBFCs, UBS adjusted its credit cost estimates upwards by 1–20 basis points for FY25 and FY26, while cutting earnings per share (EPS) forecasts by 1–7 percent for companies like Bajaj Finance, Cholamandalam Investment, Shriram Finance, and M&M Finance.
The brokerage also raised credit cost estimates by 2–25 basis points across multiple lenders, reinforcing its view on rising NPL trends.
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