AEON tempers gains with caution

AEON Credit Service (Asia) overcame low interest rates and increased competition to bounce back from a tough 2010 and post a HK$133 million profit in the first half of this year, the company said yesterday.

The Hong Kong-listed firm, whose local business consists mostly of consumer finance and credit cards, saw its attributable profit rise 14.6 per cent from HK$116 million during the same period last year. It had ended the year with a 2.7 per cent drop in profit.

Managing director Barry Fung said consumer finance business would remain difficult in the second half because of economic uncertainty and low prevailing interest rates.

AEON Credit Service (Asia) expects consumers to take a cautious approach to spending as Hong Kong faces inflationary pressures from the weak US dollar and rising food and commodity prices. It said its prospects faced uncertainty 'mainly arising from the weak fundamentals of the advanced economies'.

While Hong Kong continued to benefit from stronger growth in China and other Asian economies, 'the relatively fragile economic recovery of the US and Europe will curtail the sustained recovery of the global economy', the company said.

The firm's Japan-based parent, AEON, has substantial operations in department stores and supermarkets, especially in Japan. Its consumer finance services in Hong Kong have remained relatively small over the past two decades.

Interest income rose 1.2 per cent to HK$505 million. Interest expense in the first half dropped 8.4 per cent to HK$61 million year on year, on the back of lower funding costs.

Economic recovery led to a drop in revenue from late charges, down 10.4 per cent to HK$ 25.8 million. Revenue from credit cards still rose 0.5 per cent to HK$371 million.

The company's share price remained flat at HK$5.74 yesterday. It has dropped 13 per cent since late March.