Axis Bank Profit Jumps 23% as Provisions Fall and Margins Slip

Axis Bank’s net profit jumped 23% to ₹7,114 crore ($850 million) for the quarter ended June 30, beating brokerage estimates from Nomura and Kotak Institutional. That was up from ₹5,806 crore a year earlier.

Underneath the beat, the engine had changed. Provisions fell 43.7% from a year ago and did most of the work behind the jump, while core lending income grew just 8% and margins kept sliding. The loan book that used to be built on retail leaned hard on corporate credit instead.

Provisions Drop 44% While Profit Beats Estimates

India’s third-largest private lender said provisions and contingencies fell to ₹2,223 crore for the quarter. That is down from ₹3,947.66 crore a year earlier, a drop of 43.7%. The decline essentially bridged the gap between an 8% rise in core income and a 23% jump in profit.

Specific loan loss provisions came in at ₹2,079 crore. Profitability ratios improved alongside the relief: return on assets rose to 1.51% from 1.47% a year earlier, and annualized return on equity climbed to 14.16% from 13.14%.

Not all brokerages had the same bar. Axis Bank’s profit topped Motilal Oswal’s forecast of ₹6,677 crore, a projected 15% gain. It came in below Systematix Research’s more bullish call of ₹7,452 crore, a 28.4% jump, on expected net interest income of ₹14,840 crore, faster than the 8% the bank actually delivered.

This quarter, we continued to invest across these priorities.

Amitabh Chaudhry, Axis Bank’s managing director and chief executive, said this in the bank’s earnings statement, pointing to digital security and artificial intelligence tools as spending priorities. The bank splits its balance sheet across treasury, retail and corporate banking segments, and this quarter’s growth sat overwhelmingly in the last of those.

Net Interest Margin Slips to 3.46%

The margin between what Axis Bank earns on loans and pays on deposits measured 3.46% for the quarter. That is down from 3.64% in the December 2025 quarter, according to the bank’s own Q3 disclosures showing NIM slipping 9 basis points even back then.

The mechanics are visible in the deposit mix. Term deposits, the priciest funding source, grew 23% year on year, the fastest of any deposit category. Savings accounts grew 14%, and current accounts, the cheapest money a bank can raise, grew just 6%.

That shift toward costlier term money shows up directly in the income statement. Interest earned rose 9.4% to ₹33,985.63 crore, but interest expenses climbed a faster 10.5%, capping how much of that could reach the bottom line as net interest income.

Analysts had flagged this before results landed, pointing to rising deposit costs as the culprit. The squeeze is not confined to India. In the United States, bank net interest margins declined from 3.30% to 3.22% between the fourth quarter of 2025 and the first quarter of 2026, per the Federal Reserve Bank of St. Louis, as loan yields fell faster than funding costs could catch up.

Corporate Lending Becomes the Bank’s New Growth Engine

Total advances grew 19% year on year to ₹12,61,557 crore. That is more than double the 8% advances growth the bank posted in the same quarter last year.

The acceleration came overwhelmingly from business and corporate lending.

The overall balance sheet grew 20% year on year to ₹19,21,966 crore. Retail loans, the segment that anchored Axis Bank’s growth story for years, grew just 8% year on year to ₹6,75,546 crore, still 54% of net advances but the slowest pace among the bank’s major loan books.

• Home loans – 26% of the retail book, within a secured retail share of 73%
• Rural loans – up 16% year on year, among the fastest retail lines
• Loan against property – up 11% year on year
• Personal loans – up 7% year on year
• Credit card advances – up 5% year on year, the slowest of the group

Small Business Banking, tracked separately from core retail, grew 18% year on year and 2% from the previous quarter. The SME book overall reached ₹1,51,619 crore.

A ₹2,001 Crore Middle East Buffer Sits Untouched

The story behind that corporate pivot runs through West Asia, the term Indian banks use for the Middle East. During the March 2026 quarter, Axis Bank built a large precautionary cushion against regional shocks.

“Based on an assessment of evolving and unpredictable macroeconomic and geopolitical uncertainties, the Bank had created an additional one-time provision of ₹2,001 crores during Q4FY26,” the bank said in its filing. That single decision weighed heavily on the prior quarter’s results, with Axis Bank’s March quarter profit rising just 0.7% short of flat year on year to roughly ₹7,071 crore as provisioning absorbed the gains from otherwise strong loan growth, market trackers noted at the time.

Three months later, the buffer has not moved. “The Bank has not drawn down from the West Asia provision created in Q4FY26 and the said provision continues to remain at ₹2,001 crores at June 30, 2026,” the bank said, adding that the reserve “does not reflect any deterioration in asset quality or adverse credit trends” in its loan or investment book.

Layered on top of that single buffer, Axis Bank now holds ₹15,608 crore in cumulative standard and additional provisions beyond its non-performing asset coverage, translating into standard asset coverage of 1.24%. Aggregate provision coverage, combining specific, standard and additional buffers, stands at 161% of gross non-performing assets. Annualized credit cost for the quarter was 0.63%.

Gross Slippages Rise From March, Fall From a Year Ago

Fresh bad loans moved in two directions at once. Gross slippages totaled ₹5,566 crore for the quarter, up from ₹4,675 crore in the March quarter but down sharply from ₹8,200 crore in the same quarter last year.

Net slippages, adjusted for recoveries from written-off accounts, came to ₹2,479 crore. Retail contributed ₹2,614 crore and commercial banking added ₹136 crore, while the wholesale book posted a net recovery of ₹271 crore.

Recoveries from written-off accounts added ₹961 crore. The bank recovered or upgraded ₹2,126 crore of stressed loans during the quarter and wrote off ₹2,399 crore.

Gross non-performing assets improved to 1.28% of loans, down from 1.57% a year earlier, though up slightly from 1.23% in March. Net non-performing assets eased to 0.39% from 0.45%. Provision coverage held steady at 70%, against 71% a year ago.

Is Axis Bank’s Profit Growth Built to Last?

Brokerages are split. Macquarie wants clearer management guidance on next year’s growth given geopolitical and monsoon risk, while Nuvama expects asset quality concerns to fade and earnings to accelerate in the second half as pandemic-era credit guarantees and West Asia effects wear off.

• Macquarie – says management guidance on FY27 growth drivers is the critical variable for Axis Bank, Kotak Mahindra Bank and ICICI Bank, given geopolitical and El Nino monsoon risk to farm credit
• Nuvama – expects asset quality noise to gradually recede through the year, pointing to fading West Asia effects and pandemic-era credit guarantee support as reasons earnings should pick up for banks and non-bank lenders in the second half

Neither view disputes the quarter’s headline numbers. They disagree on how much of the provision relief is durable versus a one-time pause in an otherwise unsettled environment.

ICICI Reports the Same Weekend With a Smaller Jump

Axis Bank was not the only large lender on the calendar. HDFC Bank and ICICI Bank both scheduled their Q1 FY27 results for the same date, setting up a single weekend that moved the entire private banking sector.

ICICI Bank, India’s second-largest private lender, posted consolidated net profit of ₹15,440.06 crore, up 4.6% from the prior quarter. Interest earned there rose to ₹52,240.85 crore from ₹49,593.75 crore in the March quarter.

Axis Bank shares had already closed 2% higher at ₹1,329.40 on the National Stock Exchange the previous session, a full day before either bank’s numbers were public.

Disclaimer: This article is for general informational purposes only and does not constitute investment advice; figures are accurate as of publication and readers should consult a qualified financial advisor before making decisions involving bank stocks.