KUALA LUMPUR (Dec 19): Aeon Credit Service (M) Bhd (KL:AEONCR) reported a 27.44% drop in net profit for the third quarter ended Nov 30, 2024 (3QFY2025), primarily dragged by a share of its associate's loss and increased interest expense.

Net profit for the quarter fell to RM62.07 million from RM85.55 million in 3QFY2024, despite a 15.51% increase in revenue to RM562 million from RM486.51 million, according to the consumer financing firm's bourse filing on Thursday. No dividend was declared for the quarter.

Aeon Credit's bottom line was significantly impacted by the share of loss incurred by its 50%-owned Aeon Bank (M) Bhd, amounting to RM15.18 million. It jointly owns the digital bank with its Japanese parent, Aeon Financial Service Co Ltd.

Higher interest expense also contributed to the decline in profitability. Interest expense increased to RM108.28 million from RM90.04 million in the previous year, reflecting a rise in borrowings that paralleled the increase in net financing receivables from RM11.15 billion to RM12.9 billion. The nominal value of borrowings at end-November 2024 stood at RM10.47 billion, up from RM8.67 billion at the end of November last year.

Despite these challenges, Aeon Credit's non-performing loans ratio improved to 2.42% from 2.73% due to effective credit management and continuous monitoring of underperforming portfolios.

However, the ratio of total operating expenses against revenue increased to 71.1% from 68.6% in the previous year, primarily due to higher impairment losses on financing receivables, which rose to RM215.31 million from RM182.82 million.

For the first nine months ended Nov 30, 2024 (9MFY2025), Aeon Credit's net profit declined 21.45% to RM239.64 million from RM305.1 million, even as revenue rose 15.22% to RM1.63 billion from RM1.41 billion.

Aeon Credit is cautious as it moves into the final quarter of the financial year ending Feb 28, 2025 (FY2025), saying it will maintain prudence, prioritise growth of quality assets and closely monitor credit risks within its financial portfolios.

It also aims to leverage the strength of the Aeon group of companies operating in Malaysia to expand its customer reach by establishing a more integrated ecosystem.

Shares in Aeon Credit closed one sen or 0.16% higher at RM6.10 on Thursday, giving the company a market capitalisation of RM3.11 billion.