AEON Credit 1Q net profit fell 39% on higher impairment losses

KUALA LUMPUR (July 10): Aeon Credit Service (M) Bhd net profit fell 39.07% for the first quarter ended May 31, 2023 (1QFY2024) to RM99.36 million, from RM163.07 million posted a year ago, despite higher revenue, mainly because of higher impairment losses on financing receivables.

Quarterly revenue jumped 15.9% to RM452.67 million from RM390.57 million posted in 1QFY2022, due to stronger loan and financing growth, the lender’s bourse filing showed.

Gross financing receivables for the quarter stood at RM11.22 billion, representing an increase of RM1.22 billion as compared to a year ago. “The net financing receivables after allowance for impairment loss was RM10.42 billion as at May 31, 2023, as compared to RM9.28 billion as at May 31, 2022,” it said.

The group’s non-performing loans (NPL) ratio rose to 3.13% for 1QFY2024 compared to 2.53% in 1QFY2023; other income for the current quarter was recorded at RM49.22 million — mainly due to bad debt recoveries.

Its ratio of operating expenses against revenue was at 63%, as compared to 40% previously. “The increase in operating expenses was mainly due to higher impairment losses on financing receivables of RM152.54 million, as compared to RM37.28 million in the preceding year’s corresponding quarter,” said AEON Credit.

Funding cost for 1QFY2024 was 9.2% higher than in 1QFY2023, mainly due to higher borrowings, in line with the receivables growth, it further said. “The nominal value of borrowings as at May 31, 2023 was RM8.07 billion, as compared to RM7.37 billion as at May 31, 2022,” it added.

The group said it remains cautious on the outlook for the year, in view of prevailing economic headwinds, tightening policy rates to curb inflationary pressures, and volatility in the global banking industry and financial markets.

“Nevertheless, the group will continue to closely monitor its asset quality and assess the inherent credit risks in its financing portfolios, adopt prudent cost management, and improve on financial and operational efficiencies by leveraging on its positive business fundamentals,” the group said.

AEON Credit shares closed unchanged at RM11.18 on Monday (July 10), valuing the group at RM2.85 billion.