Bangkok--30 Jan--Fitch Ratings
Fitch Ratings (Thailand) has today affirmed AEON Thana Sinsap (Thailand) Public Company Limited’s (AEONTS) National Long-term rating at ‘BBB+(tha)’ and its National Short-term rating at ‘F2(tha)’. The Outlook is Stable.
The ratings are based on AEONTS strong capital, maintenance of profitability and asset quality. Nonetheless, the company faces further deterioration due to the economic environment in 2009, which could affect its growth and asset quality, given the sensitivity of its low-income retail consumer finance business.
AEONTS reported net income rose 6.2% yoy to THB0.9bn in 9M08 (ending November 2008) from THB0.8bn in 9M07 due to growth in personal loans; although the weakening credit environment and an expected sharp economic slowdown in 2009 could affect the company’s performance this year. Its net interest margins (NIMs; including fees) declined to 22.7% in 9M08 from 25.2% in FY07 (ending February 2008), due mainly to an increase in long-term funding costs to support business growth.
At end-November 2008, AEONTS’ average lagged delinquency rate (overdue payments and write-offs) declined slightly to 9% from 10% at end-February 2008, due mainly to an increase in receivables. Given the weakening credit environment, delinquency rates and provisioning may rise. At end-November 2008, AEONTS had a credit exposure of THB1.8bn in subordinated loans to its securitisation vehicles.
The company’s total equity at end-November 2008 amounted to THB5.1bn; AEONTS’ equity-to-receivables ratio of 17% appears strong but necessary, given the sensitivity of the business to deteriorating economic conditions.
Established in 1992 by AEON Credit Service of Japan (AEON), AEONTS has a network of 82 Bangkok and provincial branches, and 337 ATM machines, mainly in provincial areas. AEON has a direct stake of 35.1% in AEONTS, and other parent-related entities own an additional 28%. AEONTS provides retail finance to the low- income segment, including hire-purchase, credit card and personal loans.