AEON Credit seeks out M40

Maeda: AEON Credit may venture into the BNPL business once it is regulated and brought under the purview of national laws.

Aeon Credit Service (M) Bhd has always been known for serving the poor – the bottom 40% income segment (B40) – as a non-bank financial services provider.

This segment has become increasingly challenging to service today.

AEON Credit is now eyeing an expansion of its market share and improved business synergies through its 50%-owned digital bank, AEON Bank (M) Bhd.

AEON Bank, one of five digital banks in Malaysia licensed by Bank Negara, also facilitates AEON Credit’s further expansion into the middle-income segment, popularly known as the M40.

Citing its recent performance in the financial year ended Feb 28, 2025 (FY25), AEON Credit’s managing director Daisuke Maeda tells StarBiz 7 that profits were weighed down year-on-year (y-o-y) by higher impairment losses and startup losses at AEON Bank.

Impairment losses on financing receivables in FY25 amounted to RM187.78mil, while its share of losses in AEON Bank totalled RM68.33mil.

“For FY26, we hope to maintain the same levels of profit. But the startup losses in AEON Bank will be highest this year (FY26), so there will be no dramatic growth in profit for now despite growth in our loans portfolio.

“From FY27, the losses will reduce, and by FY29, we project AEON Bank to be profitable,” Maeda says.

AEON Credit’s net profit for FY25 fell by 24.7% y-o-y to RM338.57mil despite revenue rising by 15.1% y-o-y to RM2.2bil.

In its latest first quarter ended May 31 (1Q26), impairment losses on financing receivables rose further to RM229.43mil from RM163.46mil in the preceding period of the corresponding quarter, while its share of losses in AEON Bank hit RM15.92mil from RM11.59mil previously.

Its loan loss coverage ratio remained healthy at 217%.

Revenue rose by 14.9% y-o-y to RM599.92mil in 1Q26 despite net profit falling 27.1% to RM77.55mil.

“There are also higher impairment losses that are putting pressure on our profit. In the low-income segment, particularly in areas like Kuala Lumpur, Selangor and Johor, repayments are declining.

“This is especially noticeable among the younger generation aged 25 and below. The economic environment is uncertain, so we must be very cautious about credit.

“We need to improve our portfolio and reduce impairments – and this is why we are moving towards serving the middle-income segment,” he adds.

Despite the reduced profit in FY25, its dividend payout ratio rose to 39.6% compared with its policy to pay out 30% of profits.

Maeda says the company aims to maintain yields at historical levels of around 4% to 5%.

As for AEON Bank, Maeda says the business allows AEON Credit to grow its M40 portfolio, noting that most of the bank’s depositors are from this segment.

AEON Bank was officially launched in May 2024 and counts Tokyo-listed AEON Financial Service Co Ltd and AEON Credit as shareholders, each holding equal stakes.

“Malaysia is moving towards a high-income economy, and we find that our customer base is also shifting to the M40.

“We also want to respond to the growing incomes in this segment by offering relevant products,” Maeda says.

“Loans are currently limited, but AEON Bank will soon launch business banking and offer working capital loans and cash management services to micro, small, and medium enterprises.

“This includes motorcycle shops – capitalising on our position as the largest motorcycle loans provider in the country,” he says.

AEON Credit has a 25% market share in providing credit facilities for total motorcycle sales – a figure that also includes cash purchases.

In March 2025, AEON Bank further expanded its product offerings with the introduction of Personal Financing-i. As of February 2025, AEON Bank held RM336mil in deposit balances.

Meanwhile, Maeda says AEON Credit may venture into the buy now, pay later (BNPL) business once it is regulated and brought under the purview of national laws.

“BNPL transactions doubled from 2023 to 2024. Based on statistics, around five million people use BNPL. This is disrupting the credit market.

“Anyone can now borrow to buy a product – even food. Some people are paying for their lunch using BNPL instalment plans,” he says.

“This tends to encourage less responsible repayment behaviour. BNPL providers do not report to the Central Credit Reference Information System (CCRIS), which we rely on to assess creditworthiness for loan approvals. The fact that BNPL is outside this system creates many issues,” Maeda adds.

CCRIS is a system owned and operated by Bank Negara, which lists a borrower’s financing and repayment history over the past 12 months, as reported by participating financial institutions.

He says BNPL users are predominantly younger individuals, and such credit services send the wrong message by encouraging irresponsible borrowing behaviour among this demographic.

“The ease of BNPL can easily ruin a person’s future. It becomes too easy, and people don’t feel a sense of responsibility to repay.

“This leads to overleveraging and overcommitment to debt. It’s already happening in other Asean countries, and now we are seeing the trend here in Malaysia. I hope BNPL is properly regulated,” Maeda says.

He points out that AEON Credit is currently unable to properly assess an individual’s credit history or repayment behaviour when they apply for loans.

BNPL will eventually fall under regulation via the Consumer Credit Act, once the Consumer Credit Bill 2025 – which was recently tabled for its first reading – is passed in Parliament.

“Once it is regulated, we will explore BNPL, but we will approach it in a more responsible manner – through responsible lending,” Maeda says.