- Standalone net profit rose 3% YoY to ₹6,489.57 cr, with a 27% sequential jump.
- Net interest margin held at 3.64% despite higher funding costs.
- Gross NPA ratio improved to 1.40% – still above the industry average.
- Advances grew 14% YoY, deposits up 15%, total assets expanded 15%.
- Share price up 32% YoY, but recent 2.84% dip raises short‑term caution.
You missed the early warning in Axis Bank’s Q3 numbers, and it could cost you.
Why Axis Bank’s Profit Jump Beats Sector Expectations
The bank delivered a modest 3% year‑on‑year profit increase, but the real story is the 27% sequential rise from the September quarter. That jump reflects a faster‑than‑expected recovery in operating efficiency after a period of rising funding costs. While the broader Indian banking sector is grappling with a tightening monetary environment, Axis managed to keep its Net Interest Margin (NIM) at 3.64%, a level that outperforms many peers whose NIMs have slipped below 3.5%.
How the NIM Compression Mirrors Indian Banking Trends
Net interest margin, the difference between interest earned on assets and interest paid on liabilities, is a key profitability gauge for banks. In Q3 FY26, Axis’s interest income grew 4.3% YoY to ₹32,274 cr, yet interest expense rose 4% to ₹17,988 cr, compressing the NIM. The RBI’s policy rate hikes have lifted deposit rates, forcing banks to pay more for cheap funding. Most Indian banks are seeing NIMs shrink, but Axis’s ability to maintain 3.64% shows disciplined asset‑liability management.
What Competitors Tata and HDFC Are Doing Differently
Tata Capital and HDFC Bank have taken divergent paths. Tata’s focus on wealth‑management fees and non‑interest income has helped it offset NIM pressure, pushing its NIM to 3.78% in the same quarter. HDFC, meanwhile, leans on a higher loan‑to‑deposit ratio, boosting interest income but also raising its credit‑risk profile. Axis’s strategy of expanding deposits at a healthy 15% YoY while keeping loan growth at 14% strikes a middle ground, preserving capital adequacy (16.55% under Basel III) and limiting credit‑risk escalation.
Historical Parallel: Axis Bank’s 2020 Profit Dip and Recovery
In FY 2020, Axis suffered a 12% profit decline amid the COVID‑19 shock, but a disciplined cost‑control program and digital‑banking push turned the tide by FY 2022, delivering a 21% profit surge. The current Q3 pattern mirrors that playbook: a brief dip in earnings caused by higher provisions (nine‑month profit down 10% YoY) followed by a sharp recovery in core profitability. Investors who stayed the course in 2020 saw multi‑year upside, suggesting a similar long‑term upside potential now.
Definitions: Net Interest Margin and NPA Ratios Explained
Net Interest Margin (NIM) is calculated as (Interest Income – Interest Expense) ÷ Average Earning Assets. A higher NIM indicates more efficient conversion of assets into earnings. Gross NPA Ratio measures non‑performing assets before provisions as a percentage of total advances; lower is better. Net NPA Ratio subtracts provisions, giving a clearer view of actual credit risk. Axis’s gross NPA fell to 1.40% from 1.46% YoY, while net NPA rose slightly to 0.42%—a sign of stable asset quality despite higher loan growth.
Investor Playbook: Bull vs. Bear Cases for Axis Bank
Bull Case: Continued deposit growth fuels a larger low‑cost funding base, NIM stabilizes above 3.5%, and digital initiatives lift fee income. If the RBI eases policy rates later in FY 26, interest expense growth will slow, widening margins. A stable NPA profile and strong capital cushion support higher earnings multiples, making the stock a compelling long‑term pick.
Bear Case: Persistent high funding costs could further compress NIM, while a slowdown in loan demand erodes interest income growth. Any uptick in credit stress—particularly in the corporate segment—could raise NPAs and force higher provisions, dragging nine‑month profit down. In the short term, the recent 2.84% price dip signals market nervousness that could linger if earnings guidance is not upgraded.
Overall, Axis Bank stands at a crossroads where disciplined balance‑sheet expansion meets a challenging macro‑environment. Your decision to stay invested should weigh the bank’s margin resilience against the risk of further funding‑cost pressure.