Axis Bank Q2 preview: NIM may fall on FCNR(B) flows; PAT could rise 37-43%

Axis Bank is set to announce its second-quarter results, with analysts forecasting a significant jump in net profit. The bank is expected to report a 37-43% year-on-year increase in its bottom line, driven by strong credit growth and improved operating leverage. However, investors should pay close attention to the bank's net interest margin (NIM), a key measure of profitability. The bank has been aggressively mobilising foreign currency non-resident (bank) (FCNR(B)) deposits to fund its loan book. This strategy is expected to put mild pressure on its NIM, potentially causing a sequential decline of 7-12 basis points.

For investors, the primary focus will be on how the bank manages this trade-off between funding its growth and maintaining healthy margins. A stable or resilient NIM would be a positive signal, indicating that the bank is efficiently pricing its assets despite the higher cost of foreign currency deposits. The upcoming management commentary will be crucial to understand the sustainability of this growth trajectory and the bank's outlook for the remaining quarters of the fiscal year.