M&M Financial Q1 Review - Sharp Deterioration In Asset Quality; Stress Pool Getting Bigger: Motilal Oswal
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Motilal Oswal Report
Mahindra and Mahindra Financial Services Ltd. reported a net loss of Rs 15.3 billion versus our profit after tax estimate of up Rs 2.9 billion.
While operating profit declined by 28% y-o-y to Rs 7.5 billion (31% miss), higher credit costs of Rs 28.2 billion (estimate- Rs 7 billion) drove the profit after tax miss.
Elevated credit costs are a function of forward flows into S2/S3, higher provisions on restructured loans, and additional Covid-19 provisions to strengthen the expected credit loss overlay.
M&M Financial Services' net interest income was down by 16% y-o-y/25% q-o-q, driven by:
interest income reversals on non performing assets,
6% y-o-y decline in business assets, and
some moderation in loan yields.
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