Axis Bank Q2 results preview: Slower loan growth and NIM contraction expected

Loan Growth and Margin Pressure

Axis Bank is expected to report slower loan growth for the September quarter, likely moderating to low teens to mid-teens as deposit growth outpaces credit growth. The bank's net interest margins (NIMs) are also expected to contract and may decline 3-15 basis points sequentially anticipated due to rising funding costs.

Profit After Tax

Despite these pressures, Axis Bank's profit after tax is expected to report high single-digit growth, driven by lower provisions and growth in net interest income (NII).

Net Interest Margin (NIM) and Fee Income

Slower loan growth may weigh on fee income, but an improved mix of higher-yielding assets could cap the NIM contraction to around 3-15 basis points.

Slippages and Provisions

Slippages are expected to moderate sequentially, but recoveries from the previous quarter remain soft. Elevated provisions, combined with slower credit growth, may limit overall earnings growth.

Key Factors to Watch

Management’s guidance on deposit mobilization, NIM sustainability, asset quality, and slippages, especially in the unsecured lending portfolio.

Previous Quarter Performance

In Q1FY25, Axis Bank's loan book grew 14% YoY to ₹9.80 lakh crore, with deposits increasing by 13% YoY to ₹10.62 lakh crore. NIMs for the June quarter stood at 4.05%, slightly lower than the previous quarter (4.06%) and a year ago (4.10%). Gross NPA rose to 1.54% from 1.43% in Q4FY24, and Net NPA increased to 0.34% from 0.31%.

Stock Performance

Axis Bank shares delivered a -2.28% return in the July-September quarter, underperforming the Bank Nifty, which posted a 0.77% return. Year-to-date, Axis Bank gained 5.3%, as against Bank Nifty’s 7.53% return.

Axis Bank Share Price

Ahead of the Q2FY25 results announcement, Axis Bank shares declined for the 4th consecutive day by 0.33% and closed at ₹1,150 apiece on NSE at 3:30 PM.