Axis Bank has reported a 26% year-on-year (YoY) decline in its standalone net profit for the second quarter of fiscal year 2026, a headline figure that initially concerned the market. However, for investors and analysts asking what drove this decline, the answer lies in a one-time provision mandated by the RBI. A deeper look reveals that the bank's core business remains resilient, with stable loan growth and consistently improving asset quality.
This detailed analysis breaks down Axis Bank's Q2 FY26 performance, explains the impact of the one-off provision, and provides a clear outlook for investors trying to understand the true health of the business beyond the headline numbers.
Table of Contents
- Why Did Axis Bank's Net Profit Fall 26% in Q2 FY26?
- Axis Bank's Core Financial Performance: A Detailed Look
- How Did Axis Bank's Business and Loan Segments Grow?
- Is Axis Bank's Asset Quality Improving?
- What is the Investment Outlook for Axis Bank After Q2 Results?
- Frequently Asked Questions (FAQs)
The significant drop in net profit to Rs. 5,090 crore from Rs. 6,918 crore last year was almost entirely due to a one-time provision of Rs. 1,231 crore. This provision was made for two discontinued crop loan products following an advisory from the Reserve Bank of India (RBI).
Crucially for investors, this is not a reflection of new bad loans. The bank has clarified that this provision is expected to be written back to the profit and loss account as the underlying loans are recovered, or by 31 March 2028, at the latest. Excluding this one-off item, the bank's performance was largely stable and in line with market expectations.
While the net profit was impacted, other key metrics show the resilience of the bank's core operations. Net Interest Income (NII) saw modest growth, though margins faced some compression, a trend seen across the sector.
Key Financial Highlights for Q2 FY26
/content-assets/a59a5370a3364b58baeedf12c88171c3.png)
The 61% jump in 'Provisions & Contingencies' directly reflects the one-time provisioning charge. The bank's Net Interest Margin (NIM) contracted slightly to 3.73% from 3.8% in the previous quarter, with management indicating that margins are expected to bottom out in the third quarter.
To evaluate how the market has interpreted Axis Bank’s Q2 FY26 performance and price action, check the latest Axis Bank share price, charts, and valuation ratios.
Axis Bank demonstrated healthy business momentum with robust, well-diversified growth in its loan book and a steady increase in deposits.
-
Loan Growth: Total advances grew by a healthy 12% YoY to reach Rs. 11,16,703 crore. This growth was broad-based:
-
Corporate Loans: Grew by a strong 20% YoY.
-
SME Loans: Increased by 19% YoY.
-
Retail Loans: Grew by 6% YoY.
-
Deposit Growth: Total deposits rose by 11% YoY to Rs. 12,03,487 crore. The share of low-cost CASA (Current Account Savings Account) deposits remained healthy at 40%.
Want to understand how broader sector sentiment is shaping up across banking stocks? Track movements in Nifty Bank to see how Axis Bank aligns with overall industry momentum.
Yes, a significant positive for investors was the continued improvement in the bank's asset quality, indicating strong risk management.
-
Gross NPA: The Gross Non-Performing Assets (NPA) ratio improved to 1.46% as of 30 September 2025, down from 1.57% in the previous quarter.
-
Net NPA: The Net NPA ratio saw a marginal improvement, declining to 0.44% from 0.45% in the prior quarter.
-
Slippages: Gross slippages for the quarter stood at Rs. 5,696 crore.
Despite the headline profit decline, most analysts and brokerages have maintained a positive view on Axis Bank, with many retaining a 'Buy' rating. The market also digested the news positively, with the stock jumping 4% post-results as investors looked past the one-off provision.
For investors, the key takeaways are:
-
The 26% profit dip is misleading and caused by a temporary, non-operational charge that is expected to be reversed.
-
The core business remains strong, with healthy loan growth across key segments.
-
Asset quality continues to improve, with both Gross and Net NPA ratios declining.
-
The bank's underlying pre-provision operating profitability is stable.
Looking ahead, investors should monitor the bank's ability to protect its Net Interest Margins. However, the stable core performance, improving asset quality, and attractive valuations present a favourable outlook for long-term investors.
/content-assets/6df44c9637e94e559c1b7dde6bd22c12.png)
There’s an insightful video by NDTV Profit on YouTube analysing Axis Bank’s Q2 FY26 results, highlighting why the reported numbers missed estimates and what investors should focus on next.
Why did Axis Bank's net profit fall by 26% in Q2 FY26?
The profit decline was primarily due to a one-time provision of Rs. 1,231 crore mandated by the RBI for two discontinued loan products. This is a non-operational charge and is expected to be written back in the future.
What is Axis Bank's current NPA level?
As of 30 September 2025, Axis Bank's Gross NPA ratio stood at 1.46%, and its Net NPA ratio was 0.44%. Both metrics have shown consistent improvement.
How is Axis Bank's loan growth?
The bank's total loan book grew by a healthy 12% year-on-year, driven by strong growth in the corporate (20%) and SME (19%) segments.
What do analysts recommend for Axis Bank stock after these results?
Most analysts remain positive on the stock, focusing on the strong core operational performance and improving asset quality. Several brokerages have maintained their 'Buy' ratings, with price targets as high as Rs. 1,525.
How did Axis Bank's stock price react to the Q2 results?
After an initial dip, Axis Bank's shares jumped by 4% as the market understood that the profit decline was due to a one-off provision and the underlying business remains strong.