How Is Axis Bank Balancing Growth and Asset Quality in Q3 FY26?
Axis Bank’s Q3 FY26 performance reflects a phase of calibrated growth rather than aggressive balance sheet chasing. In an environment where credit costs, funding competition, and asset quality remain under close scrutiny, the bank’s numbers indicate steady execution across deposits, advances, and risk management. Instead of sharp surprises, the quarter reinforces a narrative of stability, diversification, and incremental improvement.
What stands out is not just headline loan growth or profitability metrics, but the composition of growth. Corporate, SME, and SBB segments have emerged as key drivers, while retail lending remains largely secured and stable. This mix has helped Axis Bank navigate margin pressures and asset quality challenges without compromising long-term balance sheet strength.
Axis Bank’s Q3 performance signals consolidation of gains rather than pursuit of risky acceleration.
Balance Sheet Expansion Remains Broad-Based
Axis Bank’s balance sheet expanded 15 percent year-on-year to ₹17.52 lakh crore, underscoring sustained scale-up without distortion across funding or asset lines. Both deposits and advances grew in line with system trends, indicating that the bank is maintaining market share rather than relying on outsized pricing incentives.
Deposits rose 15 percent year-on-year and 5 percent quarter-on-quarter, with CASA share steady at 39 percent. While CASA ratios across the sector have faced pressure due to elevated term deposit rates, Axis Bank’s ability to hold CASA steady suggests stickiness in its retail and business banking franchise.
Within deposits, current accounts grew 20 percent year-on-year, reflecting improved traction among corporates and SMEs. Savings accounts also posted double-digit growth on a yearly basis, while term deposits continued to expand as customers sought higher yields in a competitive rate environment.
Advances Growth Driven by Corporate and SME Momentum
Advances increased 14 percent year-on-year and 4 percent quarter-on-quarter to ₹11.59 lakh crore, in line with market expectations. The growth mix reveals a conscious tilt toward segments offering better risk-adjusted returns and visibility.
The corporate loan book expanded 27 percent year-on-year, with mid-corporate lending growing even faster at 31 percent. Importantly, this growth has not come at the cost of credit quality. Around 90 percent of the corporate book is rated A- and above, while nearly 88 percent of Q3 sanctions were to corporates with similar ratings. This indicates disciplined underwriting rather than yield-chasing.
SME and Small Business Banking emerged as another strong pillar. The SME book grew 22 percent year-on-year and 6 percent quarter-on-quarter to ₹1.39 lakh crore. Diversification across industries and geographies reduces concentration risk and enhances portfolio resilience.
SME and mid-corporate lending is increasingly shaping Axis Bank’s growth trajectory.
Retail Portfolio Stability and Secured Bias
Retail advances stood at ₹6.45 lakh crore, accounting for 56 percent of total advances. The portfolio remains predominantly secured, with 73 percent of retail loans backed by collateral. Home loans alone form about 26 percent of the retail book, lending stability and predictability to cash flows.
This secured bias has been a conscious strategy, particularly as unsecured retail lending across the sector has faced rising delinquencies. By maintaining balance, Axis Bank has insulated its asset quality metrics from excessive volatility while still participating in retail credit growth.
Asset Quality Trends and Slippages Analysis
Fresh slippages in Q3 came in at ₹6,007 crore, marginally higher on a quarter-on-quarter basis. However, the slippage ratio of 2.11 percent remained within expectations and slightly better than some market estimates. This suggests that stress formation is stabilising rather than accelerating.
Write-offs stood at ₹3,276 crore, flat sequentially, indicating consistency in recovery and resolution efforts. Importantly, asset quality metrics are being managed proactively rather than reactively, with the bank maintaining adequate buffers against potential stress.
Return on Assets improved to 1.49 percent from 1.23 percent in the previous quarter, reflecting operating leverage and controlled credit costs. This improvement is particularly noteworthy in a quarter where margins saw slight compression.
Margins and Profitability Context
Net Interest Margins declined by 7 basis points quarter-on-quarter to 3.75 percent. This moderation is largely attributable to higher funding costs and competitive deposit pricing rather than deterioration in asset yields. In the current cycle, margin stability is increasingly valued over marginal expansion achieved through riskier lending.
Axis Bank’s ability to sustain margins near these levels while growing its balance sheet indicates efficient repricing and cost control. As deposit repricing stabilises, margins are expected to find a floor rather than continue declining sharply.
Traders and investors tracking banking sector trends alongside index movements often contextualise such margin and asset quality signals using structured market frameworks available at Nifty & Market Strategy Insights .
Margin compression without asset quality stress reflects disciplined banking rather than weakness.
Strategic Positioning Going Forward
Axis Bank’s Q3 performance suggests that the institution is entering a phase where execution consistency matters more than headline growth. Corporate and SME expansion, secured retail lending, and stable deposit mobilisation together form a balanced growth engine.
As the credit cycle matures, banks with diversified portfolios, strong underwriting standards, and prudent capital allocation are better positioned to compound value. Axis Bank’s emphasis on higher-rated corporates and diversified SMEs aligns with this long-term view.
Investor Takeaway
Derivative Pro & Nifty Expert Gulshan Khera, CFP®, believes that Axis Bank’s Q3 FY26 numbers highlight the importance of steady execution over aggressive expansion. In banking, sustainable returns are built through balance sheet quality, risk discipline, and incremental efficiency rather than quarter-on-quarter surprises. Investors evaluating financial stocks should focus on portfolio mix, underwriting standards, and return stability rather than short-term noise. For deeper market perspective and disciplined analysis, readers can explore insights at Indian-Share-Tips.com , which is a SEBI Registered Advisory Services.
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
