Bangkok--28 Aug--Fitch Ratings
Fitch Ratings (Thailand) has affirmed the National Long-Term Rating on AEON Thana Sinsap (Thailand) Public Company Limited (AEONTS) at 'A-(tha)', with a Stable Outlook. A full list of rating actions is at the end of this rating action commentary.
KEY RATING DRIVERS
AEONTS's ratings are driven by its standalone credit profile and financial strength. AEONTS is one of the largest consumer finance companies in Thailand, with a sound and sustainable position in the credit card and personal loan segments, a nation-wide branch network, and a well-established franchise. The ratings also reflect the company's lack of diversification compared with larger financial institutions, competitive pressures in the consumer finance industry (including from commercial banks), and its reliance on wholesale funding.
The operating environment for Thai financial institutions has been weak over the past several years, with muted economic growth and consumer sentiment constrained by high levels of household debt (which totalled 79% of GDP as of March 2017). Nevertheless, AEONTS has been able to maintain consistent levels of profitability, and has continued to build up its capitalisation. In Fitch's view, AEONTS has sufficient scale and expertise to operate profitably over the course of a normal business cycle. Fitch also believes that AEONTS' current capital buffers and loan-loss reserves enable the company to cope with potential downside risks to asset quality, as well as provisioning requirements that may arise from the implementation of IFRS 9 accounting standards, over the next couple of years.
RATING SENSITIVITIES
There could be potential upside to the ratings if the company can continue to expand its activities to increase revenue diversification and stability, while maintaining current levels of risk appetite and an above-average financial performance and capitalisation. Meanwhile, the ratings could see downside if there is a very severe and sustained downturn that leads to significantly weaker financial buffers in terms of asset quality and capital.
The rating actions are as follows:
National Long-Term Rating affirmed at 'A-(tha)'; Outlook Stable
National Short-Term Rating affirmed at 'F2(tha)'
National Long-Term Rating on senior unsecured bonds affirmed at 'A-(tha)'