Bangkok--15 Jun--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 on the long-term rating is Stable.
The ratings of AEON Thana Sinsap (Thailand) Public Company Limited (AEONTS) reflect its strong capitalisation, and its ability to maintain adequate profitability and asset quality. The ratings also reflect AEONTS’ exposure to the more volatile lower income consumer finance segment. While performance has been resilient in the past year despite a severe economic downturn, asset quality and overall performance could weaken in 2010, due to further impact of political unrest, particularly in the hotel and retail sectors.
AEONTS’ net profit for FY09 (ending February 2010) declined to THB984m from THB1.2bn in FY08, mainly due to lower non-interest income (mainly fee-related). Net interest income was relatively stable at THB2.9bn in FY09, although non-interest income declined to THB4.8bn (down 8.6% yoy) following the introduction of fee reduction policy to support customers during the weak economic environment. Furthermore, net interest margin (including fees) also weakened to 23.4% in FY09 from 28.2% in FY08 given lower fees. Profit margins have declined significantly in the past few years due to regulatory controls and competition, as well as lower growth.
At end-FY09, AEONTS’ total gross receivables increased to THB34.5bn (up 10.1% yoy), although most of the growth was driven by the transfer of maturing credit card portfolio (THB1.8bn) from one of its securitised portfolio in February 2010. Credit card receivables accounted for 29% of total receivables, while personal loans and hire-purchase accounted for 55% and 16%.
Despite the sharp economic contraction in 2009, AEONTS’ delinquency (including write-offs) increased only moderately to THB3.6bn in FY09 from THB3.3bn in FY08. Moreover, its delinquency ratio improved slightly to 10% at end-FY09 (end-FY08: 10.6%) due to receivables growth. Nonetheless, the escalated civil unrest, disruptions to businesses and prolonged weak economic growth could result in higher delinquency rates in FY10. Total equity as at end-FY09 amounted to THB5.9bn. AEONTS’ equity to receivables ratio remained strong at about 17% but this is necessary given the sensitivity of the business to weak economic conditions.
Established in 1992 by AEON Credit Service of Japan (AEON), AEONTS has a network of 80 branches in Bangkok and other provinces, along with 320 ATM machines set up 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.
Applicable criteria available on Fitch’s website at www.fitchratings.com: “Global Financial Institutions Rating Criteria” dated December 29, 2009; “Rating Methodology for Finance and Leasing Companies” dated December 30, 2009; and “National Ratings-Methodology Update” dated December 18, 2006.
Contacts: Patchara Sarayudh, Vincent Milton, Bangkok, +662 655 4761/4759.
Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(tha)’ for National ratings in Thailand. Specific letter grades are not therefore internationally comparable.
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