Axis Bank, one of India’s leading private-sector banks, reported a 4% decline in its net profit for the first quarter of FY26, amounting to ₹5,806 crore. The decline was primarily driven by higher provisions and a rise in bad loan slippages. However, the underlying performance, including revenue growth and fee income, paints a more balanced picture. Let’s dive into the numbers and understand what’s behind this profit drop.
Profit Fall Explained: Higher Provisions and Slippages
Axis Bank’s net profit for Q1 FY26 fell by ₹229 crore compared to the same period last year, primarily due to a rise in provisions and bad loan slippages. Fresh slippages for the quarter stood at ₹8,200 crore, a 71% increase YoY. The bank had to make provisions of ₹3,948 crore, which was 2.85 times higher sequentially and 1.52 times higher YoY, significantly impacting its profitability.
The key reason behind this rise in provisions was the bank’s internal recalibration of its bad loan classification. This change, which Axis Bank referred to as a “technical impact,” was applied to cash credit, overdraft products, and one-time settled accounts. It led to ₹2,709 crore in fresh slippages, prompting additional provisions of ₹821 crore. Axis Bank emphasized that this was a “prudential application” of regulatory guidelines and does not signal a real deterioration in asset quality.
Despite these adjustments, Axis Bank assured that 80% of the slippages due to this technical impact were fully secured, and the economic loss from these changes would be minimal over time.
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Key Financial Metrics for Axis Bank Q1 FY26:
| Metric | Q1 FY26 | Q1 FY25 | QoQ Change |
| Net Profit | ₹5,806 crore | ₹6,035 crore | -4% |
| Gross NPAs | ₹17,764 crore | ₹16,141 crore | +10% |
| Net NPAs | ₹5,066 crore | ₹3,685 crore | +37% |
| Provisions | ₹3,948 crore | ₹2,039 crore | +93% |
| Net Interest Income (NII) | ₹13,560 crore | ₹13,324 crore | +1% |
| Total Income | ₹38,322 crore | ₹35,844 crore | +7% |
| Operating Profit | ₹11,515 crore | ₹10,106 crore | +14% |
| Loan Growth | 8% YoY | 10% YoY | – |
| Retail Loan Growth | 6% YoY | 9% YoY | – |
| SME Loan Growth | 16% YoY | 14% YoY | – |
| Corporate Loan Growth | 9% YoY | 10% YoY | – |
| Total Deposits | ₹11.61 trillion | ₹10.66 trillion | +9% |
| CASA Deposits | 40% of total deposits | 38% of total deposits | – |
Asset Quality Takes a Hit
The rise in provisions was primarily due to the deterioration in the bank’s asset quality. Its gross non-performing assets (NPAs) rose to 1.57% of gross advances from 1.54% in the previous quarter, a 29 basis point (bps) increase. Similarly, net NPAs rose to 0.45% from 0.34% in the previous quarter. While these increases were attributed to higher slippages in retail loans, the bank reassured investors that a large portion of the NPAs was fully secured.
The bank also clarified that it had not changed its days past due (DPD) parameters, which are regulated. Axis Bank follows a rigorous internal benchmarking process for asset-classification, conducted annually to ensure the resilience of its balance sheet. The recalibration that led to higher provisions was in line with these updated technical guidelines.
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Growth in Revenue and Advances
Despite the challenges in asset quality, Axis Bank showed growth in key financial metrics, including net interest income (NII) and operating profit. The bank’s NII rose by 1% YoY to ₹13,560 crore, while its total income increased by 7% YoY, reaching ₹38,322 crore. Operating profit surged by 14% YoY, reaching ₹11,515 crore, reflecting growth in both interest income and non-interest income.
The loan book of Axis Bank grew by 8% YoY, though this was slower than its typical growth rate. Retail loans, which constitute a significant portion of the bank’s portfolio, grew by 6% YoY, totaling ₹6.22 trillion. The small and medium enterprises (SME) book grew 16% YoY, while corporate loans rose 9% YoY. The bank’s deposit base also grew by 9% YoY to ₹11.61 trillion, with term deposits growing 12% YoY.
The Path Ahead
Although Axis Bank faced challenges in Q1 FY26, there are signs of optimism moving forward. The bank’s diversified loan book, with strong growth in retail and SME segments, provides a solid foundation for future growth. Moreover, the higher provisions for bad loans, while a short-term setback, will help the bank strengthen its balance sheet in the long run.
The management has indicated that despite the technical adjustments, the bank’s focus remains on resilient growth, especially in retail and small business banking. With a robust capital adequacy ratio of 16.85%, Axis Bank is well-positioned to navigate future credit cycles.
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Conclusion: How to Interpret Axis Bank’s Q1 Results?
While Axis Bank’s Q1 FY26 results showed a decline in net profit, primarily due to higher provisions and bad loan slippages, the bank’s underlying growth in key areas like revenue and fee income paints a more balanced picture. Investors should consider both the short-term impact of the recalibration and the long-term potential of the bank’s diversified portfolio.
Axis Bank remains one of the most significant private-sector banks in India, and its ability to manage asset quality while focusing on growth in retail and SME loans could continue to drive its performance in the upcoming quarters.
