RAM Ratings affirms AA3 and A1 ratings of AEON Credit’s Senior and Subordinated Sukuk Wakalah Programme

Published on 10 Jul 2024.

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RAM Ratings has affirmed the respective AA3/Stable and A1/Stable ratings of AEON Credit Service (M) Berhad’s (AEON Credit or the Group) Senior and Subordinated Sukuk Wakalah Programme as well as the P1 rating of its RM1.0 bil Islamic Commercial Papers Programme. 

The affirmations are premised on the sustained resilience of the Group’s credit metrics, especially asset quality and profitability indicators, through economic cycles. We have also factored in our expectation of extraordinary support from AEON Co., Ltd – the Group’s ultimate parent – and AEON Financial Service Co., Ltd. (AFS), its immediate holding company. AEON Co., Ltd is a prominent Japan-based retail and financial services group. AEON Credit is expected to remain a notable player in the domestic consumer lending space, especially in motorcycle financing. 

The Group’s credit profile reflects its consistently strong track record of managing asset quality despite a sizeable exposure to non-prime borrowers. AEON Credit’s gross impaired financing (GIF) ratio eased to 2.6% as at end-February 2024 (end-February 2023: 2.9%), mainly owing to an enhanced credit framework and stronger collection efforts. By customer profile, GIF stemmed largely from new-to-credit, lower-income and younger borrowers. Lending to this segment has since tightened and related impairment write-offs should taper off this year.  The Group’s GIF coverage stayed robust at 221.3% as at end-February 2024 (end-February 2023: 251.7%), providing a strong loss absorption buffer.

Benefiting from growth in its receivables base of 12.9% and a wider net interest margin, AEON Credit’s pre-tax profit climbed to RM565.2 mil in FY Feb 2024 (FY Feb 2023: RM547.0 mil). Lucrative net interest margins (three-year average: 11.4%) give the Group ample headroom to absorb heftier credit costs (three-year average: 2.5%). While its newly licensed digital bank, AEON Bank, is expected to continue to incur losses, breaking even within five years of commencing operations, we expect the impact on the Group’s overall financials to be manageable. 

AEON Credit’s dependence on wholesale funding is a notable disadvantage when compared to deposit-taking institutions. However, its debt maturities are well spread out while cash balances and unutilised credit facilities covered 1.6 times the Group’s short-term borrowings as at end-February 2024 (end-February 2023: 2.5 times). Gearing (adjusted for fair value of hedging reserves) stood at 3.6 times (end-February 2023: 3.5 times).


Analytical contacts
Ho Chian Leng, CFA
(603) 3385 2527

Sophia Lee
(603) 3385 2619


The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
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Ratings on AEON Credit Service (M) Berhad