Axis Bank’s September-quarter results (Q2 FY26), released in mid-October 2025, show a mix of near-term pain and structural positives — a combination that helps explain why analysts and investors think this quarter could be a turning point for the stock. The headline numbers were striking: reported consolidated net profit fell about 26% year-on-year, driven largely by higher provisions, but core operating metrics such as net interest income, deposit growth and improved asset quality pointed to underlying resilience. Here’s a clear, fact-based look at the results, why they matter for the bank’s long-term valuation, and the key indicators Indian investors should watch.

The numbers that mattered this quarter

Profit: Axis reported a Q2 net profit in the region of ₹5,090 crore, down roughly 25–26% YoY compared with the prior year — a decline the bank said was largely because of higher provisions booked during the quarter.
Net interest income (NII): Core interest income rose about 2% YoY to roughly ₹13,744–13,745 crore, indicating continued traction in the bank’s spread-earning activities.
Net interest margin (NIM): NIM eased marginally — Reuters reports a small decline to 3.73%, a 7-basis-point dip, which was notably much better than some market expectations of a larger fall. That modest reduction helped calm concerns about margin erosion.
Deposits and growth: Total deposits grew around 11% YoY, an important sign of retail franchise strength and funding stability.
Provisions and one-offs: The profit decline was heavily influenced by higher provisions, including a reported one-time standard-asset provision related to crop loans (various press reports place this figure in the ~₹1,200–1,231 crore range). Such one-offs compressed reported PAT but are by definition non-recurring.

Together, these items explain the market’s immediate reaction — short-term disappointment on headline profit but relief on core operating metrics and asset quality.

Why this quarter could influence Axis Bank’s share price for years

It clarifies the earnings base.
One-time provisions create volatility in headline profit, but they also “clear the decks” — if provisions are booked now rather than later, subsequent quarters can show cleaner operating trends. Investors prize predictability; a clarified earnings base helps analysts model future earnings with more conviction. The Q2 provisions therefore matter more for future predictability than for the single quarter headline.
Improved asset quality reduces tail-risk.
Reuters and other reporting emphasised sequential improvement in asset quality and lower credit costs. Falling slippages and a stable NPA ratio reduce downside risk to future profitability and capital adequacy — two drivers that influence long-term bank valuations.
Deposit growth strengthens the franchise.
Double-digit deposit growth shows that customers continue to trust Axis as a deposit taker. Strong retail deposits mean lower reliance on wholesale funding and give the bank optionality to grow loans without a costly funding mix — a structural plus for future margins.
Analyst re-ratings can re-price the stock.
Ahead of and after the results, brokerages such as Morgan Stanley have set bullish targets (e.g., ₹1,450) and reiterated ‘overweight’ calls, arguing that Axis trades at a valuation discount to larger private peers and can re-rate as NIMs, growth and credit costs normalize. Upgrades and target-price revisions by large brokers tend to attract institutional flows and can materially affect multi-year returns.
The recovery narrative is now testable.
Management’s guidance and execution around slippage control, NIM stabilization and fee-income growth will be validated (or not) in subsequent quarters. If Axis delivers improving margins and stable credit costs, the stock’s discount to peers may narrow — an outcome that would lift long-term returns for investors who buy at today’s prices. Several brokers (JM Financial, Jefferies, HSBC) have already framed their post-Q2 views around this recovery trajectory.

Market reaction and what analysts are saying

Despite the profit dip, Axis Bank shares rose in early trade after the results — Reuters noted the stock climbed as much as 4%, reflecting relief on asset quality and the smaller-than-feared NIM decline. Brokerages have been active: Morgan Stanley’s higher target and ‘overweight’ rating highlight expectations of a gradual re-rating versus larger private banks, while other houses (Bernstein, Jefferies) point to improving slippages and potential upside once credit costs normalize. Such converging analyst views can sustain investor interest over multiple quarters.

What investors should watch next (the checklist)

To judge whether Q2 was indeed the start of a multi-year rerating, monitor these objective indicators in coming quarters:

Sequential NIM movement. A stable or rising NIM (vs the modest dip this quarter) will be crucial to long-term earnings power.
Credit costs and gross slippages. Continued reduction in slippages and a return to lower credit costs (annualised) will validate the asset-quality improvement story.
Loan growth quality. Growth in high-quality retail loans and retail fees (cards, retail distribution) is a durable earnings lever
Promoter / management commentary and capital actions. Any capitl-raising, large write-offs, or change in dividend policy will affect valuation assumptions.
Brokerage revisions and foreign flows. Continued upgrades from global houses and positive FII flows would help close the valuation gap to peers.

Risks to the recovery story (clearly stated)

Recurring one-offs: If provisions remain elevated or similar regulatory provisioning recurs, headline profitability will stay volatile.
Macro shocks: A slowdown in credit demand or a sharp macro shock could pressure margins and growth, delaying rerating.
Competitive pressure on NIMs: Pricing pressure in retail and corporate lending could compress margins if liability costs rise or competition intensifies.

Bottom line — why Q2 matters beyond one quarter

Axis Bank’s Q2 FY26 results combined a headline profit drop with several encouraging structural signs: resilient NII, deposit growth and evidence of improving asset quality. For long-term investors, the quarter matters because it both removes certain uncertainties (through provisioning) and sets a clearer baseline against which management’s execution can be judged. If the bank can convert the operational positives into sustained margin expansion and stable credit costs, the share price stands to re-rate materially over time — and Q2 will be seen as the quarter that started that transition. If not, headline volatility will continue.

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Last Updated on: Thursday, October 16, 2025 2:47 pm by Sakethyadav | Published by: Sakethyadav on Thursday, October 16, 2025 2:47 pm | News Categories: News