Axis Bank's margin falls to 3.36% and its new CFO drops the timetable for 3.8%

Margin fell below the level management called the bottom

In the September 2026 quarter Axis Bank's net interest margin, the gap between what it earns on loans and pays on deposits, was 3.36%. In July management had described the quarter before as the bottom of the cycle, so the reported margin has gone through that level.

Calculated from the margins reported on each call, it has fallen quarter on quarter in each of the last six quarters checked.

A deposit drive and thinner spreads

Part of the explanation is a push for FCNR(B) deposits, foreign-currency term deposits from non-resident Indians, where the bank said it won a larger share of the market. Total assets rose 8.4% in six months, and interest earned grew faster than net interest income, what is left after paying for deposits: more earning assets at thinner spreads.

The bank attributes 11 basis points of margin loss to the deposits and puts the margin without that effect at 3.47%. That is the bank's own estimate, and the filed results cannot test it.

The 3.8% margin target stays and the timetable goes

In October 2025 the bank said margins should bottom out in its fiscal third quarter if no further rate cut came. That call put the 3.8% through-cycle margin at 15 to 18 months out. A further rate cut then followed, calculated from the cumulative cuts the bank cited on its October and January calls, and the margin kept falling. On 25 April 2026 the bank repeated the 15-to-18-month path, counted from the transmission of that last cut. In July management said the 3.8% target, including its time period, was unchanged.

On this call the new chief financial officer, Rajeev Mantri, said the target stays but declined to put a date on it: "from a time line perspective, we won't be able to specifically guide on how much time frame this will take". Asked whether this quarter was the bottom, he answered that the bank had said the previous quarter was "sort of the bottom", pointing to the figure without the FCNR effect. He said the time frame was difficult to ascertain but that, quarter on quarter, the bank should be able to show an improvement going forward. He pointed to improvement from quarter to quarter, with a benefit from deploying the FCNR money in the next two quarters. The gain from the repo-rate rise on the loan book comes a quarter later, because loans reprice in the last week of a quarter.

Profit growth leans on a weak year-ago base

Net profit rose 37.6% on a year ago, but the year-ago quarter carried a one-time provision of 1,231 crore. Adding that back, pre-tax profit grew about 16%, calculated from the reported figures. Against the quarter before, net profit slipped.

Lower credit costs explain part of the profit gain

Net credit cost, the provisions charged against loans, was 0.45% against 0.73% a year ago. The CFO said that "though some portion of this improvement that has come through is also because of the mix". Retail was 54% of loans, unchanged from July. The bank attributes part of the yearly margin fall to a change in balance-sheet mix; on the call, the bank did not say how much of that is loan mix. The two explanations may overlap: on the call, the bank did not say whether the year-ago provision is inside that quarter's credit cost.