Axis Bank expects credit slippages to stabilise and margins to bottom by Q3 FY26, signaling a more predictable operating environment. The private lender reported a weaker than expected Q2FY26 performance, with net profit falling 26 percent YoY as bad loans weighed on earnings.
CFO Puneet Sharma said the elevated credit cost relative to net slippages reflects security erosion on select accounts and faster-than-required aging provisions, but overall provision cover remains stable.
During the quarter, gross slippages fell to Rs 5,696 crore, down from Rs 8,200 crore in Q1 FY26, though slightly higher than Rs 4,443 crore in Q2 FY25. Recoveries and upgrades from NPAs totaled Rs 2,887 crore, while write-offs aggregated Rs 3,265 crore, leaving gross NPAs at 1.46 percent and net NPAs at 0.44 percent as of September 30, 2025, showing steady improvement from the previous quarter.
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Sharma explained why credit cost remains high despite lower slippages: “On a single loan account or a couple of loan accounts we’ve seen security erosion, and on that we provide 100 percent provisioning. Additionally, there’s partly aging provision — we provide faster than RBI norms. If you combine the two, you will see relative stability in the provision cover number. Do not look at incremental provision cover to incremental slippage.”
On margins, Axis Bank’s net interest income rose 2 percent year-on-year to Rs 13,745 crore, but net interest margins contracted to 3.73 percent, from 3.8 percent in Q1 and 3.99 percent a year ago, following cumulative RBI rate cuts of 100 basis points this year.
On the outlook, Sharma said, “Assuming no other rate cuts, Q3 is when we should expect bottoming of margins. Deposit repricing and portfolio management should support stabilization from here.”
The bank also highlighted improved liquidity management, with growth in interbank and other balances. “We continue to do the best we can on managing our balance sheet and liquidity,” Sharma added.
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