AXISBANK

Q2 Results Beat Expectations Despite RBI Rate Cut Impact

's Q2FY26 results exceeded subdued market expectations, managing to mitigate the anticipated negative effects of the Reserve Bank of India's (RBI) monetary policy easing. Although analysts predicted a 25–30 basis points (bps) sequential compression in Net Interest Margin (NIM), the actual drop was only 7 bps to 3.73%. This better-than-expected outcome was because the cost of funds decreased by 24 bps, nearly offsetting the 30 bps compression in yields on advances. Contrary to forecasts of a decline, Net Interest Income (NII) saw a 2% increase. Loan growth of 12% year-on-year (y-o-y) outpaced the industry average (10.4%), primarily driven by 20% corporate-credit growth which neutralized sluggish retail loans. A healthy 10% y-o-y increase in fee income ($\text{₹}6,037$ crore) compensated for a 55% drop in trading income, which suffered from rising bond yields. The bank's asset quality improved sequentially, with Gross NPA easing to 1.46% and Net NPA to 0.44% in Q2FY26. However, profit dropped 26% y-o-y, mainly due to technical provisions (standard provisions on crop loans, priority sector lending certificates) that followed the RBI's FY25 annual inspection, which mandated a change in NPA classification standards. Deposit growth (10.7%) lagged credit growth (12%), causing the Credit-Deposit ratio to accelerate to 92.8%, which could limit future credit growth or pressure margins if the bank must resort to higher-cost borrowing. Despite short-term pressure on NIM, the bank's strong focus on unsecured retail asset quality is expected to allow it to beat industry credit growth by 300 bps.