Key Points:
- Profit drops 26% to ₹5,090 crore due to higher bad-loan provisions.
- Asset quality improves with GNPA at 1.5% and NIM at 3.73%.
- Stock up 3% as investors focus on operational strength despite cautious broker views.
Axis Bank shares surged nearly 3% on Oct. 16, following the release of the bank’s second-quarter results for fiscal year 2026. The private lender reported a 26% year-over-year drop in net profit, but investors focused on operational strength and improving asset quality, driving Axis Bank shares higher.
The bank’s net profit for Q2 FY26 stood at Rs 5,090 crore, down from Rs 6,918 crore in the same quarter last year. The decline was attributed to higher provisions for bad loans, including a one-time provision of Rs 120 crore on crop loans, as directed by the Reserve Bank of India (RBI).
Axis Bank’s net interest margins (NIM) also contracted to 3.73% in Q2 FY26 from 3.8% in Q1 FY26 and 4% a year ago. The contraction followed a 100-basis-point reduction in key lending rates by the RBI earlier in 2025. Despite these pressures, the lender’s total income rose 1% year-over-year to Rs 37,595 crore, while net interest income increased 2% to Rs 13,745 crore.
Brokerage ratings remain cautious
Motilal Oswal has maintained a Neutral rating on Axis Bank shares, with a revised target price of Rs 1,300 per share. The brokerage noted that the bank’s pre-provision operating profit (PPOP) was in line with expectations, though net earnings were affected by higher one-time provisions. Margins contracted modestly by seven basis points quarter-on-quarter.
“Asset quality improved sequentially as gross NPA and net NPA ratios improved and slippages moderated quarter-on-quarter, driven by a decline in both core and technical slippages,” Motilal Oswal said. “Business growth has gained traction, with deposits expected to grow at a healthy rate. The bank aims to outperform systemic credit growth by 300 basis points annually over the medium term.”
Nuvama Wealth Management retained its Hold rating on Axis Bank shares and kept its target price at Rs 1,180. The brokerage highlighted strong loan growth of 5% quarter-on-quarter, largely driven by corporate lending, while retail loans lagged. Nuvama pointed out that credit costs remained high at 1.3%, the highest among large banks.
“In view of the repeated volatility in credit cost and a weak loan mix, we recommend switching to ICICI Bank for a more sustainable business model and higher CASA growth,” Nuvama said.
Asset quality and stock performance
Axis Bank’s gross non-performing assets (NPA) declined slightly to 1.5% in Q2 FY26 from 1.57% in Q1 FY26. Net NPAs also fell to 0.44% from 0.45% quarter-on-quarter. The bank’s provisions and contingencies increased 61% year-over-year to Rs 3,547 crore, reflecting RBI inspection-driven adjustments.
Axis Bank shares have experienced a 1% decline over the past five trading sessions but has risen more than 6% in the last month and 5.4% over the past six months. Axis Bank’s share price delivered a 1.6% return in the last year.
Outlook for investors
While Q2 results showed a decline in net profit and compressed margins, analysts emphasized operational improvements and stronger asset quality. Investors appear to be weighing these factors against higher provisions and interest rate pressures.
The management has indicated that net interest margins are expected to stabilize in Q3 FY26. Analysts suggest monitoring loan growth patterns, credit costs, and the bank’s ability to maintain deposit momentum in the coming quarters.
Axis Bank remains one of India’s key private sector lenders, with a diversified loan portfolio spanning retail, corporate, and agriculture segments. The Q2 results highlight ongoing challenges from macroeconomic factors and regulatory guidelines, while also showcasing the bank’s efforts to maintain stable operations amid external pressures.
