Axis Bank Shares Rally 4% After Q2 Results; Brokerages See Upside Despite One-Offs
Axis Bank shares gained over 4 percent in early trade on Thursday after the private sector lender posted its Q2 FY26 results, which showed a 26 percent year-on-year decline in net profit to ₹5,090 crore. Despite the earnings hit from higher provisions, brokerages maintained a bullish stance, citing the bank’s resilient core operations, steady asset quality, and strong growth outlook.
The stock surged to an intraday high of ₹1,216.9, compared with the previous close of ₹1,172.5 on the NSE, before paring some gains.
Earnings Decline Driven by One-Off Provisions
Axis Bank’s total income for the September quarter rose 1 percent year-on-year to ₹37,595 crore, while net interest income (NII) increased 2 percent to ₹13,745 crore. However, the bank’s net interest margin (NIM) declined to 3.73 percent, down from 3.8 percent in Q1 FY26 and 3.99 percent a year earlier, reflecting the impact of 100 basis points in rate cuts by the Reserve Bank of India (RBI) this year.
The bank reported a 61 percent jump in provisions, totaling ₹3,547 crore. This included a one-time ₹1,231 crore provision linked to discontinued crop loan products, classified as standard assets. According to CFO Puneet Sharma, these loans are fully secured, and the provision is expected to be written back by FY28.
Despite the near-term hit, Axis Bank maintained healthy loan growth of 12 percent and steady deposit expansion, signaling underlying business resilience.
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Asset Quality Strengthens Further
A major positive takeaway from the Q2 results was the continued improvement in asset quality.
The gross non-performing asset (NPA) ratio declined to 1.46 percent, while the net NPA ratio improved to 0.44 percent, among the best levels in the private banking space.
Analysts noted that lower slippages, controlled credit costs, and sustained recoveries reaffirm Axis Bank’s strong risk management framework.
Brokerages Retain Bullish Ratings
HSBC Securities maintained a ‘Buy’ rating and raised its target price to ₹1,460, highlighting “strong loan growth and asset quality supporting an earnings inflection point.”
Nomura reiterated its ‘Buy’ call with a target of ₹1,440, acknowledging that while one-offs dragged profits, operational performance remained strong with technical slippages sharply lower.
Jefferies also maintained a ‘Buy’ rating with a target price of ₹1,430, noting that Q2 profits were ahead of estimates, backed by stable NIMs, healthy credit growth, and robust deposit accretion. It flagged the ₹1,200 crore provision and ₹900 crore PSLC cost as short-term negatives.
Bernstein issued an ‘Outperform’ rating with a target price of ₹1,250, pointing to sequential business growth and recovering asset quality as signs that stress levels may have bottomed out.
Collectively, these views indicate that analysts see limited downside and strong recovery potential as one-off charges fade.
Steady Fundamentals Amid Near-Term Headwinds
Market experts believe Axis Bank remains well-positioned among large private lenders to benefit from rising credit demand, digital transformation, and diversified business growth.
While near-term earnings volatility may persist due to higher provisions and rate-cycle adjustments, the bank’s solid balance sheet, improving margins, and sustained retail and SME traction are likely to drive consistent performance in the coming quarters.
Analysts also point to valuation comfort, with Axis Bank trading at attractive price-to-book multiples compared with peers, leaving room for potential re-rating as macroeconomic conditions stabilize.
Bottom Line
Axis Bank’s Q2 performance underlines its operational strength amid temporary earnings drag. With improving asset quality, stable NIMs, and broad-based growth, the lender appears poised for steady medium-term performance. Brokerages remain largely bullish, expecting the bank to regain earnings momentum as one-offs normalize and credit growth accelerates.
