Axis Bank Q2 Results: Brokerages Bullish Despite Profit Dip, See Strong Core Performance
Axis Bank’s stock surged up to 4% following its Q2 FY26 earnings announcement, as the market looked past a one-time provision hit and focused on robust underlying fundamentals. While a significant rise in provisions led to a 26% year-on-year drop in net profit, a majority of top brokerages have reaffirmed their bullish ratings on Axis Bank, citing healthy loan growth, stable margins, and improving asset quality.
Q2 FY26 Performance: A Tale of Two Stories
The bank reported a net profit of ₹5,090 crore for the September quarter, down from the previous year. This decline was primarily driven by a 61% surge in provisions, which climbed to ₹3,547 crore. A key component was a one-time provision of ₹1,231 crore related to discontinued crop loan products, which the bank stated is fully secured and expected to be reversed by FY28.
Despite the profit contraction, the core income metrics showed resilience:
Net Interest Income (NII) grew 2% year-on-year to ₹13,745 crore.
The bank delivered a healthy ~12% loan growth alongside steady deposit expansion.
Asset quality improved, with Gross NPAs at 1.46% and Net NPAs at 0.44%.
A point of watch was the Net Interest Margin (NIM), which contracted to 3.73% from 3.99% a year ago, reflecting the impact of cumulative RBI rate cuts.
Brokerage Verdict: Overwhelmingly Positive on Long-Term Value
Most brokerages dismissed the weak bottom line as a temporary setback, emphasizing the bank’s strong operational performance. The consensus is that the one-off provisions obscure a fundamentally solid business poised for an earnings inflection.
Here’s a snapshot of leading brokerages’ views:
HSBC: Upgraded to ‘Buy’ with a Target Price of ₹1,460
HSBC anticipates strong loan growth and healthy asset quality will drive a powerful earnings turnaround.Nomura: ‘Buy’ with a Target Price of ₹1,440
Nomura highlighted resilient operations and a sharp drop in technical slippages, viewing the one-time drag as non-recurring.Jefferies: ‘Buy’ with a Target Price of ₹1,430
Jefferies noted that the quarterly profit beat estimates, supported by stable NIMs and strong business growth, with the extra provision being a short-term headwind.Bernstein: ‘Outperform’ with a Target Price of ₹1,250
Bernstein pointed to sequential growth, sharp asset quality recovery, and signs that stress has bottomed out.
Key Risks and Attractive Valuation
While the outlook is positive, analysts note certain risks. The lower Return on Assets (RoA) due to elevated provisions could test near-term profitability. Any deterioration in the economic environment leading to higher slippages remains a monitorable.
However, the general market view is that the current stock valuation is undemanding compared to peers. Investors appear to have priced in the near-term earnings weakness and are betting on a strong rebound in the coming quarters as the bank moves past these one-time headwinds.
The Bottom Line
Axis Bank’s Q2 FY26 results presented a mixed bag, but the market and analysts have chosen to focus on the core strengths. Strong loan growth, stable NII, and a clean asset quality picture have outweighed the negative impact of non-recurring provisions. With brokerages maintaining their buy ratings and attractive target prices, the sentiment remains firmly optimistic about Axis Bank’s ability to deliver long-term shareholder value.
