KEY RATING DRIVERS
AEONTS' ratings are driven by its standalone credit profile. AEONTS is one of Thailand's largest consumer-finance companies, with an established and sustainable franchise in the unsecured lending (credit card and personal loan) segment and sound profitability. The ratings also reflect the significant competitive pressure in this segment, including from larger commercial banks. AEONTS is not a depository corporation and hence relies on wholesale funding, but its funding sources are diverse compared with other non-bank financial institutions.
Thailand's household debt levels were a high 78% of GDP as of March-2018. The central bank implemented macro-prudential measures on credit cards and personal loans in September 2017 due to the poor asset-quality trends. However, Fitch believes the country's operating environment has been stabilising over the previous few quarters, with a gradual upturn in economic growth and continued low unemployment rates. This should present more benign circumstances for consumer finance companies, such as AEONTS, in the near term.
AEONTS has been building up its capitalisation and its loan-loss allowance exceeds its current impairments. Fitch believes these are buffers adequate and should enable the company to cope with downside risk should the economic situation deteriorate. Capital levels may be affected on a one-off basis by the upcoming implementation of IFRS 9 accounting standards, but underlying trends in profit accumulation are sound and Fitch expects the capital buffers to remain reasonable over the medium term.
RATING SENSITIVITIES
The ratings could see upside if AEONTS continues to build its franchise and strengthen its capital without a concurrent increase in risk appetite. There could be downside risk to the ratings if AEONTS' financial performance were to significantly deteriorate, particularly in terms of asset quality and leverage.
The rating actions are as follows:
National Long-Term Rating affirmed at 'A-(tha)'; Outlook Stable
National Short-Term Rating affirmed at 'F2(tha)'
National Long-Term Rating on senior unsecured bonds affirmed at 'A-(tha)'