Axis Bank Q2 Net Profit Soars 38% to ₹7,003 Crore on Lower Provisions

Axis Bank, the third largest private sector bank in India, announced a substantial 38 percent increase in its net profit for the second quarter of the fiscal year 2026-27. The bank’s net profit climbed to ₹7,003 crore, supported primarily by growth in net interest income and a significant decline in provisions.

During Q2FY27, Axis Bank’s net interest income (NII), which reflects the difference between interest earned on advances and interest paid on deposits, rose 12 percent year-on-year to ₹15,371 crore. Despite this growth, the bank’s net interest margin (NIM) slightly dipped to 3.36 percent from 3.55 percent in the same quarter last year. When excluding the effect of foreign currency non-resident (FCNR-B) deposits, the margin stood at 3.47 percent.

The bank’s FCNR-B deposits amounted to ₹1.018 trillion. These deposits include funds supported by advances from Axis Bank’s international branches along with standby letters of credit. The bank’s management indicated that these deposits would be used strategically, either to replace high-cost deposits coming up for renewal or to fuel loan growth.

Subrat Mohanty, Executive Director of Axis Bank, explained during a media call that the bank remains flexible in how it deploys FCNR-B funds. He noted, "In this quarter itself, we used some of our FCNR (B) to retire or substitute the high cost deposits. There are multiple levers, both on cost of funds as well as on the asset mix side." This suggests a balanced approach to managing funding costs and asset expansion.

Other income for the quarter saw a slight decline of 1 percent year-on-year, falling to ₹6,531 crore. This was largely due to a sharp decrease in trading income, which dropped to ₹85 crore from ₹498 crore in the previous year. However, fee income, a major component of other income, increased by 6 percent to ₹6,381 crore.

When asked about the potential impact of the insurance regulator’s proposed distribution reforms on fee income, Mohanty remarked that since the consultation paper is still under consideration, the bank has various options to mitigate any effects. He said, "We think we will have some amount of time when the final regulatory provisions might apply. Between now and then, there are multiple levers in terms of having alternative sources of fee and also mitigating the possible impact of these provisions - in terms of getting better volumes, changing product mix, and also making right kind of discussions with our insurance partners to increase the pie." The executive emphasized that customers could benefit from lower prices, and the bank is exploring several strategies to adapt.

Provisions and contingencies saw a steep 52 percent drop year-on-year to ₹1,694 crore, contributing significantly to the improved bottom line. The bank’s annualized credit cost also declined to 0.45 percent from higher levels seen previously, reflecting improvements in asset quality.

Axis Bank’s asset quality indicators improved further during the quarter. The gross non-performing asset (GNPA) ratio fell to 1.16 percent as of September 30, 2026, from 1.28 percent three months earlier. The net NPA ratio also decreased to 0.35 percent from 0.39 percent. Gross slippages reduced to ₹4,762 crore compared with ₹5,696 crore in the year-ago quarter and ₹5,566 crore in the preceding quarter. Recoveries and upgrades from non-performing assets totaled ₹2,380 crore, while write-offs amounted to ₹2,729 crore. The provision coverage ratio, excluding prudential write-offs, remained steady at 70 percent.

Loan growth continued to be strong, with advances rising 23 percent year-on-year and 9 percent sequentially to ₹13.74 trillion by September 30, 2026. Retail loans increased by 16 percent to ₹7.4 trillion, making up 54 percent of net advances. Small and medium enterprise (SME) loans expanded by 25 percent to ₹1.65 trillion, while corporate advances jumped 34 percent to ₹4.69 trillion.

On the deposits front, the bank recorded a 21 percent increase year-on-year to ₹14.52 trillion at the end of September. Term deposits grew 27 percent on a year-on-year basis, while current and savings account (CASA) deposits rose by 7 percent and 12 percent, respectively. The CASA ratio stood at 36 percent, down from 40 percent a year earlier. Management indicated that retail term deposit rates have not been revised yet.

Capital adequacy remained healthy, with the capital adequacy ratio at 16.27 percent and the common equity tier-1 (CET-1) ratio at 14.61 percent as of the quarter’s end. These metrics demonstrate the bank’s strong capital position to support its operations and growth plans.

In governance updates, Axis Bank’s board appointed Ananth Narayan, former Whole-Time Member of the Securities & Exchange Board of India (SEBI), as an additional independent director effective October 19, 2026. Rahul Shukla was also named Group Head for Commercial and Bharat Banking, signaling the bank’s focus on leadership to drive its commercial and retail banking segments.

Axis Bank’s performance this quarter reflects ongoing trends in the Indian banking sector, where private lenders are concentrating on expanding loan books while maintaining asset quality and optimizing funding costs. The bank’s ability to navigate regulatory changes and adjust its income streams will be important as the industry evolves.