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Axis Bank shares fell as much as 5% on Monday, October 19, after the bank's July-to-September (Q2) profit came in below what analysts had expected. The stock was the biggest loser on the Nifty Bank index. By 10:39 a.m., it was trading near Rs. 1,238.90, down 4%.
The private lender posted a standalone net profit of Rs. 7,003 crore for the quarter ended September 30. That is about 38% higher than the Rs. 5,090 crore it earned a year ago. Still, analysts had expected Rs. 7,124 crore, according to LSEG data.
The fall was the stock's steepest in a single day since September 24, and it touched its lowest point since October 5. HDFC Bank and ICICI Bank also slipped by 2.2% and 0.9%.
Loans kept growing. Total loans rose 23% from last year, while deposits grew 20.7%. Net interest income, the gap between what the bank earns on loans and pays on deposits, went up 11.8% to Rs. 15,371 crore.
But other income fell 1.4% to Rs. 6,531 crore. Rising bond yields and swings in the rupee hurt the bank's treasury earnings. Higher running costs and weaker fee income added to the pressure. Lower provisions for bad loans and steady core margins helped a little, but not enough to cover the gap.
Citi cut its earnings-per-share forecast for fiscal 2027 by about 4%. PhillipCapital warned that margins could stay under strain in the near term. It pointed to FCNR deposits, a larger share of wholesale loans and the use of bulk deposits. The brokerage trimmed its target price to Rs. 1,540 from Rs. 1,550.
Also Read: Apple Pay India Launch: Axis Bank May Be First Partner
Not everyone is gloomy. PhillipCapital expects margins to improve as the bank puts its FCNR funds to work, uses its balance sheet better, and reprices loans. BOB Capital Markets also sees margins getting stronger from the December quarter. It expects the bank to deploy its deposits, repay costly funds, and earn more on floating-rate loans.
Axis Bank is growing its loan book fast, but that has not yet turned into stronger profit. Investors will now look closely at three things: running costs, treasury income, and margins. If the bank can keep funding costs in check while loans keep rising, the recovery analysts expect may come through in the coming quarters.
