Axis Bank Q2 profit may surge 37-43% but margins face headwinds

Axis Bank is poised to report robust profit growth in the second quarter of fiscal 2026-27, with net profit estimates pointing to a year-on-year increase of 37-43 percent, driven by improved asset quality and operational efficiencies.

However, the lender's profitability gains may be tempered by margin pressures emerging from elevated foreign currency non-resident deposit flows. Net interest margin, a key profitability metric, is expected to decline sequentially by 7-12 basis points during the quarter, primarily attributed to increased FCNR(B) deposit mobilisation by the bank.

FCNR(B) deposits, which are typically priced higher to attract foreign remittances, compress net interest margins as banks need to offer competitive rates while managing currency risk. The anticipated margin contraction reflects broader industry dynamics as banks compete aggressively for dollar deposits amid volatile foreign exchange conditions.

Despite the margin headwinds, analysts remain optimistic about Axis Bank's overall financial performance, citing strong loan growth, improved credit quality and contained slippage ratios as counterbalancing factors. The bank's deposit growth strategy, while impacting near-term margins, is expected to support medium-term balance sheet expansion and revenue diversification.

Axis Bank is scheduled to announce its Q2FY27 results in the coming weeks, providing clarity on operational metrics and management guidance for the remainder of the fiscal year.