36
Hyundai Card is... Hyundai Card Investor Presentation 2012

Hcc 4 q12_eng

Embed Size (px)

Citation preview

Page 1: Hcc 4 q12_eng

Hyundai Card Hyundai Card is...Hyundai Card Investor Presentation 2012

Page 2: Hcc 4 q12_eng

DisclaimerThese presentation materials have been prepared by Hyundai Card Co., Ltd. (“HCC or the Company”), solely for the use at this presentation and havenot been independently verified. No representations or warranties, express or implied, are made as to, and no reliance should be placed on, theaccuracy, fairness or completeness of the information presented or contained in this presentation. Neither the Company nor any of its affiliates,advisers or representatives accepts any responsibility whatsoever for any loss or damage arising from any information presented or contained in thispresentation. The information presented or contained in this presentation is current as of the date hereof and is subject to change without notice andits accuracy is not guaranteed. Neither the Company nor any of its affiliates, advisers or representatives make any undertaking to update any suchits accuracy is not guaranteed. Neither the Company nor any of its affiliates, advisers or representatives make any undertaking to update any suchinformation subsequent to the date hereof. This presentation should not be construed as legal, tax, investment or other advice.

Certain information and statements made in this presentation contain “forward-looking statements.” Such forward-looking statements canbe identified by the use of forward-looking terminology such as “anticipate,” “believe,” “considering,” “depends,” “estimate,” “expect,” “intend,” “plan,”“planning,”“planned,” “project,”“trend,” and similar expressions. All forward-looking statements are the Company’s current expectation of futureevents and are subject to a number of factors that could cause actual results to differ materially from those described in the forward-lookingstatements. Caution should be taken with respect to such statements and you should not place undue reliance on any such forward-lookingstatements.

Certain industry and market data in this presentation was obtained from various trade associations, and the Company have not verified such data withindependent sources. Accordingly, the Company make no representations as to the accuracy or completeness of that data, and such data involves risksand uncertainties and is subject to change based on various factors.

This presentation does not constitute an offer or invitation to purchase or subscribe for any shares or other securities of the Company and neither anypart of this presentation nor any information or statement contained therein shall form the basis of or be relied upon in connection with any contract orcommitment whatsoever. Any decision to purchase shares in any offering of shares of the Company should be made solely on the basis of theinformation contained in the offering document which may be published or distributed in due course in connection with any offering of shares of theCompany, if any.

The contents of this presentation may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, in wholeor in part, for any purpose.

Page 3: Hcc 4 q12_eng

• Stable profitability : Operating profit of KRW 233 billion and ROA of 2.0%

1

Key Highlights 2012

• Effective marketing : Innovative branding increased market share to 14.4%

• Excellent asset quality : 0.7% delinquency rate, the lowest rate among Korean FIs

• Sound capital structure : Leverage of 5.1x and a capital adequacy ratio of 19.6%

• Strong liquidity : Short term debt coverage ratio of 65.5%

Page 4: Hcc 4 q12_eng

2

Resilient GDP Growth and Increasing Credit Card Usage

GDP Growth Rate & Unemployment Rate

3.6%

GDP Growth Rate Unemployment Rate

Credit Card Spending & Usage Rate

65.3%

Credit Card Spending (KRW Tn)

Credit card spending / Total private consumption

6.1%

3.6%

3.2%

3.6% 3.5%

3.0% 2.9%

279.3 303.9

350.7

390.2

219.3

49.7%52.8%

56.8%59.6%

65.3%

2.2%

0.2%

2.0%

2008 2009 2010 2011 2012

Source: Bank of Korea

2008 2009 2010 2011 1H12

Source: Credit Finance Association

Page 5: Hcc 4 q12_eng

3

Balanced-Risk Asset Portfolio and Consistent Market Share

Asset Portfolio (KRW Bn) Market Share Trend

9,5639,898

Lump Sum Installments Cash Advance

Card Loan Others

Total Credit Card Market (credit purchase*+ financial products)

Credit Purchase* Market

5,616

7,136

9,1869,563

9,898

13.8%

15.7% 15.7% 15.5% 15.4%

11.2%

13.1%

14.1% 14.3% 14.4%

28.9%

12.6%

14.5%

25.8%

10.7%

15.0%

25.0%

12.6%

21.6%

25.4%

10.6%

21.0%

22.3%

9.5%

23.4%

2008 2009 2010 2011 2012 2008 2009 2010 2011 3Q12

* Excludes corporate accountsSource: FISIS

44.0%

48.5% 40.7%42.8% 44.4%

Page 6: Hcc 4 q12_eng

4

Good Profitability Underscores Strong Fundamentals

2009 2010 2011 2012 YoY

Income Statement (KRW Bn) Return on Equity & Return on Assets

ROE ROA

16.7%15.1%

17.6%

Key Highlights

Operating Revenues 1,841 2,337 2,408 2,526 4.9%

(Excluding FX effect) 1,795 2,260 2,370 2,460 3.8%

Operating expenses 1,555 1,966 2,084 2,292 10.0%

(Excluding FX effect) 1,509 1,890 2,045 2,227 8.9%

15.1%

12.6%

9.0%3.9%

3.5% 3.5%

2.6%2.0%

2008 2009 2010 2011 2012

Key Highlights

� Operating income was down YoY due to:

- Reduced profitability as a result of regulatory changes

- Higher operating expenses in response to intensified competition

� Maintained stable market share and number of card holders

Bad debt expense 113 185 200 203 1.4%

Operating income 286 371 324 233 -28.0%

Net Income 213 278 239 191 -19.8%

Page 7: Hcc 4 q12_eng

199.1%

5

Excellent Asset Quality and Conservative Reserve Policy

30+ Day Delinquency Rate (%) Total Reserve VS Regulatory Requirement (KRW Bn)

Regulatory Requirement Reserve under Accounting Principles

Supplemental Reserve Total Reserve/ Regulatory Requirement

23

204 191

143.3%123.9% 127.7%

199.1%174.1%

0.7%

0.3% 0.4%0.6%

0.7%

189

378 371

94 114148

190 213

135 142166

174 181

2008 2009 2010 2011 2012 2009 2010 2011 20122008

Page 8: Hcc 4 q12_eng

6

Leverage and Capital Adequacy Soundly Managed

Leverage Trend Capital Adequacy Ratio (KRW Bn)

Total Assets / Total Shareholders' Equity

Managed Borrowings / Total Shareholders' Equity

Adjusted Capital CAR

4.6x4.9x

6.0x

5.4x5.1x

3.5x

4.4x

3.5x 1,6991,843 1,845

1,900

23.5% 22.5%18.7% 19.6% 19.6%

3.2x3.5x

3.5x3.2x

2008 2009 2010 2011 2012

1,406 1,699

2008 2009 2010 2011 2012

Page 9: Hcc 4 q12_eng

• Maintain the proportions of ABS and CP

under 20% and 10%, respectively

7

Well Diversified, Stable Funding Portfolio

Funding Portfolio by Product Funding Principles

ABS ABS ABS ABS 12.7%12.7%12.7%12.7% under 20% and 10%, respectively

• Diversify funding portfolio in terms of

currency, region and product

• Maintain the average maturity ratio of

liability-to-asset at over 100%

Bonds Bonds Bonds Bonds 80.4%80.4%80.4%80.4%

Loans Loans Loans Loans 1.9%1.9%1.9%1.9%

CP 4.9%CP 4.9%CP 4.9%CP 4.9%

12.7%12.7%12.7%12.7%

• Funding Balance : KRW 7,073Bn

• Long-term funding : 67.3%

liability-to-asset at over 100%

• Contingency plans under regular review

Page 10: Hcc 4 q12_eng

8

Strong Liquidity Position and Well-Spread Debt Maturity

Liquidity Profile (Unit: KRW Bn) Debt Maturity Profile (Unit: KRW Bn)

79.0%

Credit LineCash Short-term Debt Coverage Ratio*

25.2%25.2%25.2%25.2%26.1%26.1%26.1%26.1%

1,843

CP LoanBond ABS

498

841 824

1,148

1,584 1,514

32.7%

18.6%

36.7%

79.0%

65.5%

1,420 1,393

350

53

23

63

149

298 450

17.7%17.7%17.7%17.7%

15.0%15.0%15.0%15.0%

10.2%10.2%10.2%10.2%

5.9%5.9%5.9%5.9%

1,253

1,059

1,781 1,843

720

360 391

650 743 690120 20

480 411

2008 2009 2010 2011 2012

* Short-term Debt Coverage Ratio= (Cash + Unused committed credit line)/ Short-term debt balance

850 887720

418

418

1H13 2H13 2014 2015 2016 2017~

Page 11: Hcc 4 q12_eng

Hyundai Card Hyundai Card Company OverviewHyundai Card Investor Presentation 2012

Page 12: Hcc 4 q12_eng

I. Who is Hyundai Card?

Page 13: Hcc 4 q12_eng

9

The Premier Korean Credit Card Company

• Industry leader across key quality metrics- Excellent asset quality with the industry’s lowest delinquency rate of only 0.7%

- Strong customer loyalty with high card usage per customer

• Marketing innovations differentiate brand and drive growth- Strategic marketing program with Hyundai Motor Group

- Leadership position in super premium segment

• Seven-year-long partnership between two global leaders:

Hyundai Motor Group and GE Capital - Strong governance with GE Capital's active involvement in management & daily operations- Strong governance with GE Capital's active involvement in management & daily operations

- Joint promotions with Hyundai Motor Group

• Strong credit profile based on robust fundamentals- International – Fitch: BBB / S&P: BBB

- Domestic – AA+

Page 14: Hcc 4 q12_eng

- Innovative “Point Programs”

- Stable & solid operational base

- Extensive sales network

Shareholder Financial & Operational Support

Relationship with Shareholders GE Capital’s Financial Support

2012201220122012 - Total Investment to date : U$725mm(As of 2012 end)

10

- GE Capital increases paid in capital by KRW 165bn

- 2006 ~ 2008Exercising of Warrants(Additional equity investment)

- GE Capital provides U$200mm back-up credit-line

54.0%- Extensive sales network

- Powerful financing arm

- Effective marketing tool

- Most successful joint venture

- Sole consumer finance window in Korea

2010201020102010

2008200820082008

2006200620062006

- GE Capital acquires KRW 313bn equity interest in HCC

- Establishment of joint venturewith GE Capital43.3% - Advanced knowledge of risk

management

- Financial support

- Active involvement in management and daily operations

2005200520052005

- GE Capital purchases KRW 200bn subordinated bond

Page 15: Hcc 4 q12_eng

11

Management Strategy

• Continuous product and service innovation and profit improvement to

overcome regulatory changes and intensifying market competition

• Enhance customer value through spending stimulation and increasing

customer loyalty

• Achieve sustainable growth through prioritizing risk management and

a strong capital structure

Page 16: Hcc 4 q12_eng

12

Committed to Transparent Corporate Governance

Board of DirectorsBoard of DirectorsBoard of DirectorsBoard of Directors

• HMC 5 : GECC 1 : Outside directors 6

• GECC has veto rights

Risk Control CommitteeRisk Control CommitteeRisk Control CommitteeRisk Control Committee

• Member : 5 from HMC, 5 from GECC

• Frequency : Monthly

• Function

-Determination of risk indicator levels and appropriate course of actions in

Executive Finance CommitteeExecutive Finance CommitteeExecutive Finance CommitteeExecutive Finance Committee

• Member : 4 from HMC, 3 from GECC

• Frequency : Monthly

• Function

-Approval of various operating expenses, Capex, business and

Compliance Review BoardCompliance Review BoardCompliance Review BoardCompliance Review Board

• Member : 9 from HMC, 7 from GECC

• Frequency : Quarterly

• Function

-Formulation and execution of compliance strategy, schemes, and and appropriate course of actions in

respect thereofexpenses, Capex, business and funding plans

compliance strategy, schemes, and improvements

• C-Suite executives: Vice President, Deputy CFO, Deputy CRO, Deputy CMO, Controller

• Working level : GE employees also involved in day-to-day operations

• Transfer of advanced knowledge in various functions through best practice sharing program

GEPresence

Page 17: Hcc 4 q12_eng

13

Business Area Features

Product Overview & Market Share

Market Share Trend

Total Credit Card Market (credit purchase*+ financial products)

Credit Purchase* Market

Credit Purchase

Lump sum• Single-payment purchases

• Repaid on a monthly billing cycle

Installment• Multiple-payment purchases

• Payment period of 2-12 months

Card loan• Unsecured loans to cardholders

9.8%

11.8%

12.8%

13.8%

15.7% 15.7% 15.5% 15.4%

10.1%

11.2%

13.1%

14.1% 14.3% 14.4%

Financial Products

Card loan• 3 – 36 month maturity

Cash advance• Cash withdrawal

• Lump sum or installment payback

7.0%

8.8%

10.1%

2005 2006 2007 2008 2009 2010 2011 3Q12

* Excludes corporate accountsSource: FISIS

Page 18: Hcc 4 q12_eng

II. Premium Brand & Marketing

Page 19: Hcc 4 q12_eng

14

One of Korea’s Most Well Recognized & Respected Brands

Strong Brand Drives Higher Customer Loyalty Innovative Branding Activities

Strategy:

Innovative Experience

- Liquid metal card plates

- British Rock Sound Identity - Pop-up stores

- Super event series

Emotional Emotional Emotional Emotional CommunicationCommunicationCommunicationCommunication

• Customizable card materials & design

• Music platform promoting independent artists

Innovative Experience

Classic Dynamic

*88.1% (Source: TNS RI Research 2011)

• Restaurant review Smartphone application

• ‘Pop-up stores’ in style-focused locations

Result:

- Well respected, trendsetting image with high customer awareness*

- Higher customer loyalty & spending, evidenced through average card usage per customer

Page 20: Hcc 4 q12_eng

15

Effective Market Segmentation & Positioning

Customer Segmentation Product Positioning

• Joint marketing with Hyundai Motor Company- Vehicle price discounts based on reward point programs

Life

styl

e

• Tailored reward programs & brand tie-ins- Demographic catered promotions, discounts, and rewards

• Events & performances- Discounted access to Hyundai Card Super-event series

• Exclusivity- Limited membership, targeting VVIPs by invitation-only

Life

styl

eIn

com

e Le

vel

• Premium services- Travel, leisure & luxury brand promotions

• VVIP Community- High-class events, fine culture performances & exclusive

lounges

Inco

me

Leve

l

Page 21: Hcc 4 q12_eng

III. Macro & Industry Environment

Page 22: Hcc 4 q12_eng

16

Korea’s Macro Environment

GDP Growth Rate & Consumer Price Index

4.7%

GDP Growth Rate Consumer Price Index

Credit Card Spending & Usage Rate

65.3%

Credit Card Spending (KRW Tn)

Credit card spending / Total private consumption

6.1%

3.6%

4.7%

2.8% 3.0%

4.0%

2.2%

279.3 303.9

350.7

390.2

219.3

49.7%52.8%

56.8%59.6%

65.3%

2.2%

0.2%

2.0%

2008 2009 2010 2011 2012

Source: Bank of Korea

2008 2009 2010 2011 1H12

Source: Credit Finance Association

Page 23: Hcc 4 q12_eng

Korean Credit Card Market Features17

• Conservative lending environment - Low usage of revolving credit card products, as full payment of monthly balance

preferredpreferred

• Strong credit infrastructure - Well developed credit bureau system provides a quantitative customer credit score

based on all previous credit history

• Cash-less society - Ubiquitous acceptance of credit cards, high popularity of online shopping, and tax

incentives for credit card use

• Strict government oversight- Regulations governing new origination practices and customer cash advance limits

Page 24: Hcc 4 q12_eng

18

Korea Credit Card Industry: Then & Now

Combined Asset portfolio Total Asset Quality (30+ Day Delinquency Rate)

Credit Purchase Financial Products

Combined Capital Adequacy Ratio Regulatory & Infrastructure Changes:

- Credit bureau system established

35.1%65.7%

64.9%34.3%

2003 3Q12

28.3%

2.0%

2003 3Q12

Source: FSS

- Credit bureau system established

- Marketing regulations restricting new originations

- Companies must maintain capital adequacy ratio of above 8%

- Leverage limit of 6x (Dec. 2012)

-5.5%

26.7%

2003 3Q12

Page 25: Hcc 4 q12_eng

IV. Asset Portfolio & Performance

Page 26: Hcc 4 q12_eng

19

Balanced Asset Portfolio of Credit and Financial Products

Asset Portfolio (Unit: KRW Bn)

9,1869,563

9,898Lump Sum Installments Cash Advance

Card Loan Others

2,9903,508

4,507

5,616

7,136

28.9%

12.6%

14.5%

25.8%

10.7%

15.0%

25.0%

12.6%

21.6%

25.4%

10.6%

21.0%

23.5%

12.3%

13.5%

11.9%

7.9%

5.0%

22.3%

9.5%

23.4%

2005200520052005 2006200620062006 2007200720072007 2008200820082008 2009200920092009 2010201020102010 2011201120112011 2012201220122012

44.0%

48.5% 40.7%42.8%

50.6%

23.5%

58.5%

19.0%11.9%

63.6%

12.2%14.4%5.0%

44.4%

Page 27: Hcc 4 q12_eng

Best in Class Risk Management

Strong governance for risk monitoring Examples of pre-emptive risk management

Category Recent actions taken• Risk Control Committee (RCC)

– Decision making for most supreme risk– Review portfolio risk performance

20

Cash Advance

Lowered cash advance limits for lower credit quality customers

Card LoanTightened underwriting policy for heavy debtors

• Systematic New Product Risk Analysis

- Two-stage RCC approval process - Pre-launch new product introduction and credit

review point assessment

• Risk Appetite Management

– Establish guidelines for portfolio / asset quality – Determine risk management strategy per product

Credit Purchase

Tightened underwriting policy for revolving products and new originations

• Portfolio Quality Review

– Monitoring of main risk indices– Follow-up on effects of credit policy changes

• Stress Test & Contingency Planning

– Scenario analysis based on economic forecasting– Prepare action plans per contingency stage

Page 28: Hcc 4 q12_eng

4.3%

Historical Asset Quality

30+ Day Delinquency Rate (%)

21

2.2%

0.4%0.7%

0.3% 0.4%0.6%

0.7%

2005200520052005 2006200620062006 2007200720072007 2008200820082008 2009200920092009 2010201020102010 2011201120112011 2012201220122012

Page 29: Hcc 4 q12_eng

22

Historical Reserve & FSS Requirement Coverage Ratio

178.1%200.4% 199.1%

174.1%

Total Reserve VS Regulatory Requirement (KRW Bn)

Regulatory Requirement Reserve under Accounting Principles Supplemental Reserve Total Reserve/ Regulatory Requirement

23

204 191

189

378 371

111.4%

178.1%

143.3%123.9% 127.7%

174.1%

125 89

52 94.1 114

148 190 213

139 158 104

134.8142 166 174 181

2009200920092009 2010201020102010 2011201120112011 3Q123Q123Q123Q122008200820082008

K-GAAP

2005200520052005 2006200620062006 2007200720072007

K-IFRS

Page 30: Hcc 4 q12_eng

Sustainable Growth Based on Strong Fundamentals

2006 2007 2008 2009 2010 2011 2012 YoY

KKKK----IFRSIFRSIFRSIFRSKKKK----GAAPGAAPGAAPGAAP

Income Statement (KRW Bn)

23

Operating Revenues 1.109 1,121 1,594 1,841 2,336 2,408 2,526 4.9%

(excl. FX effect) 1,109 1,116 1,451 1,795 2,259 2,370 2,460 3.8%

Operating Expenses 809 1,049 1,337 1,555 1,961 2,084 2,292 10.0%

(excl. FX effect) 809 1,044 1,193 1,509 1,884 2,045 2,227 8.9%

Card expenses 314 380 506 730 863 924 1,044 13.0%

Interest expenses 113 139 187 220 319 357 343 -3.9%

SG&A Expenses 245 296 367 398 484 538 610 13.3%

PPOP 39 26 36 441 570 525 436 -17.0%

Bad Debt expenses 95 42 102 113 185 200 203 1.4%

Provision for unused Credit Line

- 142 -3 42 14 1.1 0 -

Operating Income 300 73 258 286 371 324 233 -28.0%

ROA 8.9% 6.0% 3.9% 3.5% 3.5% 2.6% 2.0% -

ROE 34.6% 23.9% 16.7% 15.1% 17.6% 12.6% 9.0% -

Income before Tax 306 109 272 295 371 324 233 -28.2%

Net Income 281 234 202 213 281 239 191 -19.8%

Page 31: Hcc 4 q12_eng

V. Capitalization, Funding & Liquidity

Page 32: Hcc 4 q12_eng

Capital Adequacy Ratio (Unit: KRW Bn)

24

Strong Capital Structure

31.3%28.4%

Adjusted Capital CAR

1,699 1,843 1,865 1,900

12.4%

28.4%23.5% 22.5%

18.7% 19.6% 19.6%

383

1,080

1,306 1,406

1,843 1,865

2005200520052005 2006200620062006 2007200720072007 2008200820082008 2009200920092009 2010201020102010 2011201120112011 2012201220122012

Page 33: Hcc 4 q12_eng

12.3x

Well Controlled Leverage

Leverage Trend

Total Assets / Total Shareholders' Equity Managed Borrowings / Total Shareholders' Equity

25

12.3x

4.1x4.1x

4.6x 4.9x

6.0x5.4x

5.1x

11.3x

4.4x

2.6x 2.6x3.2x

3.5x

4.4x

3.5x3.2x

2005200520052005 2006200620062006 2007200720072007 2008200820082008 2009200920092009 2010201020102010 2011201120112011 2012201220122012

Page 34: Hcc 4 q12_eng

Bond-domestic Bond-overseas ABS-domestic ABS-overseas Bank loans CP

Diversification of Funding Portfolio over Time

Managed Borrowings (KRW Bn)

26

2,6642,199

2,933

3,980

5,165

7,197 7,068 6,825

22.9%14.8% 10.1%

14.1%

8.3%

7.7%

11.0%6.4%

11.0%

73.2%

4.6%

9.2%

10.1%

83.6%

6.9%

6.3%

80.2%

12.7%1.9%

4.9%

2,199

2005200520052005 2006200620062006 2007200720072007 2008200820082008 2009200920092009 2010201020102010 2011201120112011 2012201220122012

%%%% of LT of LT of LT of LT FundingFundingFundingFunding 50.5%50.5%50.5%50.5% 50.5%50.5%50.5%50.5% 62.6%62.6%62.6%62.6% 63.1%63.1%63.1%63.1% 57.3%57.3%57.3%57.3% 56.5%56.5%56.5%56.5% 71.6%71.6%71.6%71.6% 67.3%67.3%67.3%67.3%

50.1%

18.8%

22.9%

59.4%

15.9%9.3%

47.3%

19.5%

14.8%

13.6%

49.6%

15.1%

61.8%

Page 35: Hcc 4 q12_eng

27

Substantial Improvement in Liquidity Position

Liquidity Profile (KRW Bn)

79.0%

65.5%

Credit LineCash Short-term Debt Coverage Ratio*

498

841824

1,148

1,5841,514

4.9%13.1%

27.3%32.7%

18.6%

36.7%

65 143 149360 391

650 743 690

150

120 20

65143

299

480411

2005 2006 2007 2008 2009 2010 2011 2012

* Short-term Debt Coverage Ratio= (Cash + Unused committed credit line)/ Short-term debt balance

Page 36: Hcc 4 q12_eng

Investor Relations Contacts

Jungsang Kim, Head of Investor RelationsPhone +82 2 2167 [email protected]

Minchul Seo, Deputy General Manager of Investor RelationsPhone +82 2 2167 [email protected]

Jay Moon, Manager of Investor RelationsPhone + 82 2 2167 [email protected]

http://ir.hyundaicard.com/