Axis Bank Q3 FY26 Net Profit Up 3% to 6490 Cr, NII Up 5%

Axis Bank reported a steady set of numbers for the December quarter, with net profit rising 3% year-on-year to ₹6,490 crore, according to its quarterly disclosure. The performance was supported by continued growth in lending and fee income, even as pressure on margins persisted compared with the same period last year.

Net interest income for the quarter increased 5% to ₹14,287 crore, reflecting a 14% year-on-year expansion in advances to ₹11.59 lakh crore. Corporate loans recorded the sharpest growth, rising 27%, while lending to small and medium enterprises grew 22% during the period. Retail loans, which account for the largest share of the bank’s loan book, rose 6% year-on-year. Net interest margin moderated to 3.64% in the December quarter, down from 4.06% a year earlier.

How Did Provisions and Asset Quality Move?

Axis Bank recorded a sharp sequential decline in provisions and contingencies in the December quarter, with the charge falling 37% to ₹22.46 billion. Provisioning levels had been higher earlier in the financial year due to specific, one-time factors. These included a benchmarking exercise undertaken in the June quarter and an additional standard asset provision created for discontinued crop loan products, following an advisory issued by the Reserve Bank of India.

Asset quality indicators also moved marginally during the quarter. The gross non-performing asset ratio eased to 1.40% from 1.46% in the preceding quarter. Over the same period, the bank’s net interest margin declined sequentially by 9 basis points to 3.64%.

Is Axis Bank Reconsidering its Strategy for Axis Finance?

Axis Bank said it is continuing to evaluate multiple alternatives for its consumer lending subsidiary, Axis Finance, including the possibility of a stake sale, according to executive director Subrat Mohanty. He said the bank has not taken a final view and remains flexible on the course of action for the non-banking unit.

Last week, Reuters reported that Axis Bank had paused its plans to divest a stake in Axis Finance after the Reserve Bank of India eased proposed norms on overlapping business activities between banks and their subsidiaries. The regulatory clarification has allowed the lender to reassess its approach.

Mohanty said the bank is considering a range of options, including a capital infusion into Axis Finance or bringing in a strategic partner through a partial stake sale to raise funds. He added that the subsidiary could also fund its future expansion independently by reducing leverage, noting that all possible routes remain under consideration.

Retail Loan Mix and Balance Sheet Growth

Axis Bank management said the reduced share of retail loans reflected a deliberate slowdown taken earlier in response to stress in certain retail segments. The bank noted that retail disbursements have since begun to pick up.

On the funding side, total deposits rose 15% year-on-year to ₹12,60,786 crore, supported by a 14% increase in current and savings account (CASA) deposits. The bank’s balance sheet expanded at a similar pace, growing 15% to ₹17,52,171 crore during the period.

Conclusion

Axis Bank’s quarter suggests investors should watch two things closely: margin recovery and the Axis Finance outcome. Lower provisions remove a near-term drag, but the bank’s ability to lift margins will decide earnings momentum. The pending decision on Axis Finance will shape capital allocation and risk exposure, so any update on stake sale or capital infusion could be a trigger for re-rating.

Will the bank’s next move on Axis Finance unlock clearer growth and capital direction for investors?

Sources:

TimesOfIndia

Reuters