Axis Bank Q2 preview: Profit seen falling 19% YoY as margin and cost pressures persist – News Air Insight

Private lender Axis Bank is likely to post a 19% year-on-year decline in profit after tax (PAT) for the September quarter, according to the average of six brokerage estimates, as higher funding costs, subdued loan yields, and elevated operating expenses weigh on performance. The lender’s net interest income (NII) — a key measure of core profitability — is expected to fall around 1% YoY, as per the consensus of three brokerages.

Analysts believe that the private lender, which has been facing margin compression for over a year, will likely see a continuation of that trend in Q2FY26. Broking firms expect a muted quarter operationally, marked by weaker profitability and pressure on asset quality indicators.

Margins and costs under pressure

Motilal Oswal Financial Services said Axis Bank’s margins are likely to remain under pressure, reflecting the higher cost of deposits and limited repricing benefits on the loan side.The brokerage expects the cost-to-income ratio to stay elevated, with ongoing branch expansion and technology investments keeping expenses high. “Credit cost is expected to remain high and asset quality could deteriorate marginally this quarter,” it added.

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ICICI Securities’ estimates point to a 4.1% year-on-year fall in NII to Rs 12,928 crore, while pre-provision operating profit (PPOP) is expected to dip 3.7% YoY to Rs 10,311 crore. Profit before tax is estimated at Rs 7,111 crore, down 16.4% YoY, and PAT at Rs 5,319 crore, marking a sharp 23% annual decline.The lender’s net interest margin (NIM), a key profitability metric, is projected to contract to 3.59%, down 21 basis points sequentially and 40 bps year-on-year. Analysts say the drag is due to deposit repricing outpacing lending yield improvement.

Mixed asset quality and provisioning trends

While overall slippages are expected to moderate sequentially after a spike in Q1FY26, analysts remain cautious about asset quality. ICICI Securities expects slippages of Rs 5,500 crore, down nearly 33% quarter-on-quarter but still up 24% from a year earlier.

YES Securities said that while loan growth is expected to remain steady — around 3% quarter-on-quarter and 10% year-on-year, sequential fee income growth could outpace loan growth owing to seasonal factors. However, “NII growth will be slower than loan growth due to a fall in yield on advances outpacing the rise in cost of deposits,” it noted.

Provisions are likely to ease sequentially after a heavy Q1, but analysts see credit costs staying above pre-pandemic averages amid a mildly deteriorating macro backdrop.

Outlook cautious despite steady loan growth

Elara Capital, which expects Axis Bank’s recurring PAT to fall 21.7% YoY to Rs 5,417 crore, said the bank continues to face pressure from weak operating leverage. It expects EBITDA to decline by 10.2% YoY and 16.4% QoQ, reflecting cost inflation and sluggish top-line growth.

Overall, while loan growth remains resilient, earnings may take another hit in Q2 as margin compression, higher opex, and credit costs weigh on performance. Analysts, however, believe that Axis Bank’s retail and SME segments continue to offer steady traction, positioning it for a gradual recovery in profitability once deposit costs stabilise in the coming quarters.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)