Aeon Credit’s NPL spikes

by **Cals** Sun 21 Sep 2014, 18:46

Business & Markets 2014

Written by Sulhi Azman of theedgemalaysia.com

Friday, 19 September 2014 09:42

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On operations, Aeon Credit’s total transaction volume inched 3% to RM867.6 million in 2QFY15. Photo by The Edge file photo

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KUALA LUMPUR: Non-bank financial institution Aeon Credit Service (M) Bhd saw its non-performing loans (NPL) in the second quarter of financial year ended Aug 20, 2014 (2QFY15) touching 2.65% from the 2.18% it recorded in the previous corresponding quarter.

However, executive director and chief financial officer Lee Kit Seong told The Edge Financial Daily on the sidelines of an analysts’ briefing yesterday that the rise is cyclical in nature and that he expects the ratio to “normalise” in upcoming quarters.

“There are various reasons for the rise in NPL. This year, the Hari Raya celebrations fell within our second quarter. The same trend can be seen from previous years. The ratio should ease to [a more] comfortable number in upcoming quarters,” he said, adding that the ratio is not alarming as it’s still below its minimum threshold of 3.7%.

Aeon Credit, a unit of Japan’s Aeon Financial Service Co Ltd, has a collection ratio of 96.79%, while its first and second delinquent ratios are at 79.13% and 61.8%, respectively. The group’s debt-to-equity ratio softened to 4.3 times from 4.6 times last year.

The company’s net profit in 2QFY15 climbed 10% to RM47.43 million from RM43.14 million a year ago, on sharper growth in its automobile financing scheme and credit card divisions.

Revenue, meanwhile, grew 29% to RM209.32 million from RM162.87 million.

For the first half of financial year 2015 (1HFY15), net profit rose 23% to RM103.71 million from RM84.48 million a year ago, while revenue jumped 33% to RM410.22 million from RM306.74 million previously on strong net financing receivables which grew 35% to RM4.12 billion from RM3.05 billion a year ago.

Its major business units — easy payment, personal financing and general easy payment — continue to be major contributors to the group’s operating income, with contributions of 32%, 19% and 17%, respectively.

The group’s current capital ratio stands at 18.6%, higher than Bank Negara Malaysia’s requirement of 16%, while its capital adequacy ratio inched to 17.8% from 17.1% in FY14.

On operations, Aeon Credit’s total transaction volume inched 3% to RM867.6 million in 2QFY15, while its card member base rose 21% to 2.87 million, as its prepaid and express card members grew 58% and 10% to 27,000 and 1.27 million, respectively.

Its credit card members decreased 3% to 178,000, but total transaction volume expanded 2% to RM223.9 million.

On its outlook, Lee said the group is set to improve its impairment loss and bad debt recovery, ensure optimum costs and enhance its credit-scoring system.

On perpetual notes, Lee said the programmes, both conventional and sukuk, allow for an issuance of up to RM800 million, and the group has issued RM146 million to date.

“We will issue the balance of RM654 million as and when required,” he said, adding that the group targets to increase the perpetual notes issuance to RM200 million by year-end.

This article first appeared in The Edge Financial Daily, on September 19, 2014.

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