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UBS sees scope for a re-rating as the unsecured lending cycle revives. It also expects asset quality to remain robust.

With a revised target price of Rs 1,110, UBS analysts forecast an upside potential of 9% in Bajaj Finance, while a hiked target price of Rs 380 implies an upside of about 25% from current market levels. In Wednesday’s session, Bajaj Finance rose 3% to Rs 1,025, while LT Finance was up 3% to Rs 313.

“We upgrade our rating on Bajaj Finance from Sell to Neutral, as we expect cyclical EPS upgrades on yield-accretive growth and strong asset quality, though its valuation remains demanding,” UBS said in a note. “We also upgrade our rating on L&T Finance from Neutral to Buy, expecting faster personal loan growth and ROA improvement toward 3%,” it added.

UBS on Bajaj Finance shares

“We believe BAF has cleared its asset quality issues across unsecured products, while an increased provision coverage ratio acts as a cushion against macro headwinds,” UBS analysts said in a note.

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This could provide a cyclical push toward higher-yielding loan growth in the near term, driving cyclical earnings acceleration. The company’s EPS downgrades have largely passed and foresee strong EPS growth of 30%+ in FY27, although it may slow to the high teens in FY28.

UBS on LT Finance

UBS said LT Finance has been on a path of improving return on assets (ROA) over the past few quarters. It noted that growth in higher-yielding segments such as personal loans and gold loans has remained strong, while microfinance (MFI) growth is recovering after weakness driven by asset quality. This has resulted in a significant shift in the loan mix towards higher-yielding segments.The brokerage also said credit costs have been gradually declining, supported by a benign asset quality cycle, while operating expenses have provided additional support. Overall, UBS factors in around 25 basis points of improvement in opex to AUM, around 15 basis points in credit costs and the remainder from margins, resulting in its assumption of a 50-basis-point improvement in ROA over FY26-28.

UBS on India financials

India entering into strong credit cycle – UBS expects India to enter a strong unsecured credit growth cycle, led by personal loans. The brokerage said this is supported by healthy asset quality across banks and NBFCs, flat unsecured household leverage over the past three years, ample system liquidity and a more risk-on approach among lenders.

UBS added that stabilising gold prices could moderate gold loan growth, which has been a key substitute for personal loans in recent years. This could benefit private banks and large NBFCs with strong personal loan franchises.

Rate hike largely priced in – The brokerage believes the market is underestimating the expected recovery in personal loan growth, which could lead to earnings upgrades and expansion in return on assets (ROA) for select lenders. It said concerns over higher interest rates appear overstated given the significant liquidity surplus in the system, which could keep funding conditions supportive. With most NBFCs trading below their one-year average valuations, the brokerage sees scope for a re-rating as personal loan growth recovers.

The brokerage expects around Rs 12-13 trillion of FCNR inflows to create excess liquidity, as system credit demand of around Rs 45-50 trillion is unlikely to absorb the entire pool in the near term, with domestic savings flows remaining stable. It said this could support NBFC funding through bank lines and NCD markets, keeping funding conditions favourable. The brokerage factors in a 15-20 basis point rise in FY27 funding costs, leaving limited downside risk from rate hikes.

Healthier credit cycle ahead – It said that following a three-year credit cycle, asset quality across these segments is now at its best levels in several quarters, although NBFCs continue to see some residual stress in low-ticket business loans.

Also read:70% IPOs in September gave a listing bounty for investors. Can NSE beat its weak GMP?

According to UBS, unsecured leverage in India increased from 6% of GDP in FY19 to 10% in FY24, but has remained stable since then. In contrast, gold loans grew from around 1% of GDP to around 5% by FY26, although growth is expected to moderate as gold prices flatten.

Alongside the improvement in asset quality across unsecured lending segments, CRIF data for August 2026 showed personal loan growth accelerating to around 30% for NBFCs and 9% for banks, marking a two-year high.

The brokerage maintained its Buy rating on Cholamandalam Investment, Shriram Finance and Poonawalla Fincorp. Among banks, it expects ICICI Bank, HDFC Bank and Axis Bank to benefit from a pick-up in personal loan growth.

Disclaimer: This article has been written by Veer Sharma, who is not a SEBI-registered Research Analyst or an Investment Adviser. Veer Sharma and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.

MANILA — The Australian Government has launched a flagship 45 million AUD economic development initiative in the Philippines, committing substantial grant funding to accelerate the growth of renewable energy, facilitate carbon market development, and advance the domestic offshore wind industry over a five-year period.

The initiative, officially designated as the Promoting Growth, Resilience, Economic Stability and Sustainability in the Philippines (PROGRESS) program, runs from 2026 through 2031. Formally unveiled during official proceedings in Manila, the bi-national strategy represents a milestone in expanding economic cooperation between Canberra and Manila, targeting structural reforms, ease of doing business improvements, and sustainable infrastructure investments across the archipelago.

Strategic Framework and Scope of the PROGRESS Program

The PROGRESS framework operates as a co-designed economic platform created to support priority development sectors identified directly by Philippine national agencies. Rather than functioning as an immediate single disbursement, the total funding package—equivalent to approximately 2 billion Philippine pesos—will be deployed incrementally across specific projects as scoping assessments conclude and joint government approvals are finalized.

To guide project selection and ensure rigorous economic viability, Australia has appointed Boston Consulting Group to partner directly with Philippine government departments. The consulting firm will assist in structuring targeted intervention plans, defining policy reform benchmarks, and administering capital allocation across clean energy, infrastructure, and digital economy initiatives.

“This is a program that has been developed jointly by the Australian government and the Philippine government to deliver better economic outcomes to boost infrastructure and to improve living standards in communities throughout the Philippines,” stated Australian Assistant Minister for Foreign Affairs and Trade Matt Thistlethwaite during a press briefing in Manila. “We are very much in the scoping phase and working with the various Philippine government departments to identify where the priorities are and ensuring that the projects stack up and they make solid economic sense.”

Pioneering Offshore Wind and Carbon Market Infrastructure

A primary focus of the five-year grant centers on modernizing the Philippine energy grid and establishing regulatory infrastructure to support zero-emission power generation. With the Philippines possessing extensive untapped offshore wind capacity along its coastlines, technical assistance and capital deployment under the PROGRESS initiative aim to streamline project permitting, enhance grid integration, and attract private sector investment into marine wind farms.

Simultaneously, the program addresses the development of a formal national carbon market. By building robust verification frameworks and transparent trading mechanisms, the joint initiative seeks to enable local industries to generate and trade accredited carbon credits, establishing new capital streams for conservation and industrial decarbonization projects throughout Southeast Asia.

Beyond energy sector investments, the grant framework incorporates mandatory social inclusion baselines. Program guidelines require that funded initiatives actively incorporate women, persons with disabilities, and marginalized rural communities into project supply chains, ensuring that economic benefits from green transition projects are distributed equitably.

Deepening Bilateral Ties and Southeast Asian Stability

The launch of the PROGRESS initiative aligns with Australia’s broader foreign policy strategy to bolster economic resilience, energy security, and supply chain diversification across partner nations in the Indo-Pacific region. As Southeast Asian economies navigate accelerating power demand alongside decarbonization mandates, bilateral development programs offer essential technical and financial backing.

Philippine government officials welcomed the multi-year commitment, emphasizing that targeted support for renewable energy infrastructure directly reinforces national energy security objectives while mitigating vulnerability to global fossil fuel price volatility. Joint announcements detailing the first round of approved individual projects under the PROGRESS funding pool are expected in the coming months following completion of initial scoping reviews.

Core Objectives of the Bilateral PROGRESS Initiative

• Establishing structured regulatory and market frameworks to support commercial offshore wind developments and formal carbon credit trading platforms across the Philippines.
• Providing technical expertise and capital deployment through Boston Consulting Group to assist Philippine government agencies in identifying high-impact infrastructure projects.
• Mandating inclusive growth guidelines that guarantee equal participation and economic opportunities for women, persons with disabilities, and marginalized communities throughout program execution.

Long-Term Economic and Environmental Outlook

The five-year rollout of the PROGRESS program marks a decisive transition toward structured, sustainable economic collaboration between Australia and the Philippines. By providing targeted seed funding and technical oversight rather than generic budgetary aid, the partnership aims to crowd in private capital for commercial-scale clean energy projects.

As project allocations are finalized and bilateral working groups commence implementation, success will be measured by concrete improvements in regional power grid stability, increased foreign direct investment in renewable infrastructure, and the successful establishment of transparent market mechanisms. The collaborative framework stands as a practical model for international climate finance and regional economic integration across the Asia-Pacific area.