Axis Bank's Q2 FY26: Navigating Growth Amidst Strategic Shifts

Axis Bank, a prominent player in India's banking sector, has unveiled its financial results for the second quarter and half year ended September 30, 2025 (Q2 FY26). The period reflects a dynamic macroeconomic environment, with the bank demonstrating robust growth in deposits and advances, alongside strategic digital and operational enhancements. While the bank's net profit saw a year-on-year decline, core operating performance remained stable, underpinned by healthy fee income growth and disciplined cost management.

For Q2 FY26, Axis Bank reported a Net Interest Income (NII) of ₹13,745 crore, contributing significantly to its operating revenue. The bank's total operating revenue stood at ₹20,369 crore. Fee income emerged as a strong performer, growing 10% year-on-year and 5% quarter-on-quarter to ₹6,037 crore, with retail fees constituting a substantial 71% of this figure. However, the net profit for the quarter was ₹5,090 crore, marking a 26% year-on-year decrease. For the half year (H1 FY26), net profit was ₹10,896 crore, down 16% year-on-year, primarily influenced by a one-time standard asset provision.

Financial Highlights at a Glance (Q2 FY26)

Strategic Initiatives and Operational Performance

Axis Bank's strategic focus during Q2 FY26 revolved around enhancing digital safety, financial inclusion, and customer-centric innovation. The bank launched several industry-first solutions, including 'Lock FD' to digitally block premature fixed deposit withdrawals and India's first gold-backed credit line on UPI for MSMEs and self-employed entrepreneurs. These initiatives underscore the bank's commitment to leveraging technology for real-world customer needs.

The 'open by Axis Bank' digital strategy continues to gain momentum, aiming to establish the bank as a fully digital entity. This includes efforts to acquire new customers at scale, become a digital consumer lending powerhouse, and set global benchmarks in mobile banking. The Axis Mobile app, for instance, remains highly rated on app stores, serving approximately 15 million monthly active users. The bank's leadership in the UPI Payer PSP space, with a market share of around 37% by volume, and crossing 15 million cards in force, further solidifies its digital prowess.

In terms of asset quality, the bank demonstrated stability. The Gross Non-Performing Assets (GNPA) ratio stood at 1.46%, an 11 basis points (bps) improvement quarter-on-quarter, while the Net Non-Performing Assets (NNPA) ratio was 0.44%, down 1 bps quarter-on-quarter. The Provision Coverage Ratio (PCR) remained healthy at 70%, with an aggregated coverage ratio of 147%. The one-time standard asset provision of ₹1,231 crore, while impacting current profitability, is considered a static amount that will be written back to the P&L by March 2028, with no expected increase in credit costs from these specific variants.

Segmental Growth and Future Outlook

The bank's advances grew across key segments, with Small Business, SME, and Mid-Corporate loans together growing at 8% quarter-on-quarter and 20% year-on-year, constituting 24% of total bank loans. Retail loans also saw a 6% year-on-year growth. This granular growth strategy, coupled with a focus on 'Bharat' banking in rural and semi-urban areas, is expected to drive future expansion. The bank's extensive distribution network, with 5,976 domestic branches and 259 Business Correspondent Banking Outlets, supports this outreach.

Management remains confident in the bank's trajectory, projecting advances to grow 300 bps faster than the industry in the medium term. They anticipate the bottoming out of Net Interest Margins (NIM) in Q3 FY26, assuming no further rate cuts. The bank's robust capital position, with a Capital Adequacy Ratio (CAR) of 16.55% and a CET-1 ratio of 14.43%, provides a strong foundation for continued growth and resilience against potential economic headwinds.

Axis Bank's Q2 FY26 performance highlights a strategic pivot towards digital innovation and granular growth, even as it navigates specific regulatory adjustments. The bank's commitment to building a resilient, all-weather franchise, creating multiplicative forces for competitive advantage, and building for the future remains central to its long-term vision. Investors can look forward to continued focus on operational efficiency, asset quality, and leveraging technology to deepen customer relationships and expand market reach.