AEON Credit Service (Asia) Co. Ltd. Outlook Revised To Negative; Ratings Affirmed At 'BBB/A-2'

  • In our view, ACSA's immediate parent, AFS, would have less flexibility in managing the funding between its various subsidiaries under the group's new organization structure.
  • AFS may increase its overall risk appetite toward its consumer financing business, undermining its overall risk profile. In our opinion, the creditworthiness of AFS and ACSA would still benefit from the group's stronger parent, AEON Co. Ltd. (BBB+/Negative/--), given their business ties and reputation.
  • We are revising the rating outlook on ACSA to negative from stable due to AFS' weakening credit profile. The negative outlook reflects that on Aeon Co. Ltd.
  • At the same time, we are affirming our 'BBB' long-term and 'A-2' short-term issuer credit ratings on ACSA.
HONG KONG (S&P Global Ratings) April 1, 2019--S&P Global Ratings today revised 
the outlook on AEON Credit Service (Asia) Co. Ltd. (ACSA) to negative from 
stable. We also affirmed the 'BBB' long-term and 'A-2' short-term issuer 
credit ratings on ACSA.

In our view, ACSA's immediate parent AEON Financial Services Co. Ltd. (AFS; 
not rated) may face increased constraints to provide timely support to ACSA in 
case of need under the group's new organization structure implemented on April 
1, 2019. 

Under the new structure, AFS is creating a new wholly-owned intermediate bank 
holding company for its banking operations. As a result, it would be more 
difficult for AFS to manage funding between its regulated banking operations 
and its nonbanking financial institution (NBFI) business especially under 
stressed situations. AFS would not be able to channel funding from the new 
bank holding company to other AFS subsidiaries, such as ACSA.

AFS may develop a higher overall risk appetite toward its consumer finance 
business, leading to increased business activities outside of regulated 
operations. This is despite the synergy opportunities that the business 
expansion could provide AFS within the wider AEON group's retail businesses.  

In our view, ACSA remains integral to AFS' business. The creditworthiness of 
AFS and ACSA would still benefit from that of their stronger ultimate parent, 
Aeon Co. Ltd., given meaningful business ties between the retail and consumer 
finance businesses. We also consider the two companies to be closely linked to 
the group's reputation, given that they share the same brand.

The negative outlook on ACSA reflects that on Aeon Co. We believe ACSA will 
likely maintain its importance within the wider AEON group for the coming 
12-24 months.

We may downgrade ACSA if we downgrade AEON Co. We could also consider revising 
the rating downward if we consider ACSA's importance within the group to have 
weakened.

We could revise the outlook back to stable if the same occurred for the 
outlook on AEON Co.

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