M&M Financial Services reports 48% net profit drop for Q2
Mahindra & Mahindra's financial division experienced a significant drop in net profit, with a 47.6% decrease to Rs. 235 crore during the second quarter of the current fiscal year. This is down compared to Rs. 448 crore in the same timeframe last year. Despite this decline, the total revenue of M&M Financial Services saw a 24% year-over-year increase, reaching Rs. 3,240 crore, thanks to growth in its asset book.
Company's focus was on net interest margin and credit cost
The net interest income for M&M Financial Services came at Rs. 1,674 crore, an increase of 9% on-year. The Net Interest Margin (NIM) was 6.5% in the July-September quarter, affected by higher borrowing rates and a shift in portfolio mix toward customers with better credit quality. Credit cost for Q2 FY24 amounted to Rs. 627 crore (2.4% of average assets), compared to Rs. 198 crore (1.0%) in Q2 FY23. Net write-offs decreased to Rs. 351 crore from Rs. 543 crore.
Improvement in provisions for Stage 2 and Stage 3
During the reported quarter, the company saw significant improvements in both Stage 2 and Stage 3 provisions, resulting in a provision write-back of Rs. 345 crore. Both stages have now reached more normalized levels. The provision charge for Q2 FY24 was Rs. 276 crore. M&M Financial's capital adequacy remained strong at 18.7%, with prudent provision coverage of 61.2% on Stage 3 loans.
The performance of subsidiaries was also evaluated
Mahindra Rural Housing Finance recorded a net profit of Rs. 11.6 crore for the quarter ending September 30, 2023, compared to Rs. 31.1 crore during the same quarter last year. The company's income experienced a modest 1% growth, reaching Rs. 331 crore. Meanwhile, Mahindra Insurance Brokers reported a net profit of Rs. 28.6 crore in the July-September quarter, marking a 365% increase over the same period last year, as income rose to Rs. 289 crore from Rs. 94 crore.
