The leading private sector banks reported December 2025 quarter over the past few trading sessions. In particular, there was keen interest in the performance of Axis Bank, the third-largest private sector bank on various operational parameters.
One point of focus was the asset quality of Axis Bank. Earlier, following an RBI advisory post its FY25 annual inspection, Axis Bank in Q2FY26 had made an additional one-time standard asset provision of Rs 1,231 crore for two discontinued crop loan variants.
At the time, Axis Bank had highlighted that this standard asset provision will be written back when all the outstanding loans in the two discontinued product variants are recovered or closed in normal course or by March 31, 2028.
Nevertheless, higher provisioning had resulted in a 26% y-o-y fall in standalone net profit of Axis Bank in the second quarter of FY26.
Q3 Performance vs. Peers
Operational performance of Axis Bank, Kotak Mahindra Bank and HDFC Bank in December 2025 quarter
| NIM (%) | Loan growth (%) | Net profit growth (%) | |
| Axis Bank | 3.75% | 14.3% | 3% |
| Kotak Mahindra Bank | 4.5% | 16.2% | 4% |
| HDFC Bank | 3.5% | 12% | 11.5% |
Axis Bank’s domestic NIM was 3.75% in Q3FY26 vis-a-vis 4.06% a year earlier.
Loan Book Granularity
Its advances grew 14.3% y-o-y to Rs 11.59 lakh crore in the December 2025 quarter, and that was thanks to a 22% y-o-y growth in SME loans and 27% y-o-y growth in corporate loans. Retail loans of the bank grew 6% y-o-y in the quarter under review.
Retail loans and loans to smaller enterprises enable banks to earn a higher rate of interest on loans / credit vis-a-vis loans to top rated corporates, and help them manage the pressure on NIMs.
The RBI has taken several steps to boost lending in the broader banking system and this includes the cut in repo rates in early December 2025. This in turn has put temporary pressure on NIMs of banks.
Earlier, smaller rival, Kotak Mahindra Bank ’s net interest margin (NIM) was 4.5% in the December 2025 quarter vis-a-vis 4.9% a year earlier.
Although NIM of Kotak Mahindra Bank have come down in Q3FY26, yet they are superior to larger private sector and PSU rivals.
HDFC Bank, the largest private sector bank, reported net interest margin (NIM) was 3.5% based on interest earnings assets in the December 2025 quarter vis-a-vis 3.6% a year earlier.
Strong asset quality
Asset quality of these three leading private sector banks has been strong in the December 2025 quarter.
Axis Bank’s % of net NPAs was 0.42% in the December 2025 quarter vis-a-vis 0.35% a year earlier.
Its provisions and contingencies were Rs 2,245.9 crore in the December 2025 quarter, a rise of 4.2% y-o-y.
The bank has also highlighted a one-time hit of Rs 25.4 crore in Q3FY26 related to the new labour code. Also, its other operating expenses grew 13.3 % y-o-y to Rs 6,864 crore in the December 2025 quarter.
As a result, its standalone net profit grew just 3% y-o-y to Rs 6,489.6 crore in the quarter under review.
Axis Bank’s core banking operations are reflected in its standalone results.
Earlier, Kotak Mahindra Bank, its % of net NPA to net advances, was 0.31% in the December 2025 quarter vis-a-vis 0.4% a year earlier.
And HDFC Bank highlighted its % of net NPAs to net advances was 0.42% in the December 2025 quarter vis-a-vis 0.46%.
Efficiency kings – Return on Assets (RoA)
Axis Bank’s return on Assets (annualised) was 1.49% in the December 2025 quarter.
Earlier, Kotak Mahindra Bank and HDFC Bank highlighted that they enjoyed identical return on assets (RoA) in the third quarter of FY26, and among the highest in the domestic banking sector.
The return on average assets (not annualised) was 0.48% in the December 2025 quarter for both banks, and on annualising it for FY26 it would be nearly 1.92%.
Growth outlook
Axis Bank has highlighted it has issued nearly 1 million credit cards in Q3FY26, and it has more than 15 million credit cards in operation at the end of the quarter. Axis Bank is the fourth-largest credit card issuer in the country.
Investors will be closely monitoring the bank’s growth in retail loans via these credit cards, over the next few quarters.
The RBI had also on Friday announced a plan to inject Rs 2 lakh crore in the banking system via different instruments and in phases. The above measure should give a further boost to lending in the broader banking system, and also help to bring the cost of loans / credit.
Investors will be closely monitoring Axis Bank, Kotak Mahindra Bank, HDFC Bank and other leading bank to grow their loan book over the next few quarters as well as manage the pressure on NIMs and other key operational parameters.
Valuation & 2026 Outlook
Valuation comparison
| Standalone P/E | Price to (standalone) book value | ||
| Axis Bank | 16.1 | 2.1 | |
| Kotak Mahindra Bank | 31.4 | 3.4 | |
| HDFC Bank | 19.3 | 2.6 |
Axis Bank stock ended down 2.7% on Friday to Rs 1,260, and hovering not too far from its 52-week high of Rs 1,326 that was reached on 19 January, 2026.
Axis Bank trades at a standalone P/E of 16.1. On the preferred valuation matrix, price to (standalone) book value, it trades at 2.1 times. Over the past 5 years, Axis Bank has traded at a price to (standalone) book value between 1.7 times and 3.1 times.
Kotak Mahindra Bank trades at a standalone P/E of 31.4. On the valuation matrix, price to (standalone) book value, it trades at 3.4 times. Over the past 5 years, Kotak Mahindra Bank has traded at a price to (standalone) book value between 3.1 times and 7.1 times.
HDFC Bank trades at a standalone P/E of 19.3 times.
It trades at a price to (standalone) book value of nearly 2.6 times. Over the past 5 years, the HDFC Bank stock has traded at a price to (standalone) book value between 2.1 times and 4.8 times.
Axis Bank on account of its reasonable valuations and growth prospects could be added to the watch list of stocks for 2026.
Amriteshwar Mathur is a financial journalist with over 20 years of experience.
The writer and his family have no shareholding in any of the stocks mentioned in the article.
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