Hyundai Capitalis... Investor Presentation Hyundai CapitalMay 2012
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No.1 Consumer Finance Company01
One of the most successful finance companies in Korea
Leading auto financier in Korea with a high market share
Eight-year-long partnership between two global leaders ;Hyundai Motor and GE Capital - Jointly-formed boards committed to pro-active oversight - GE Capital appoints key executives in risk management & finance
Increasingly profitable since the inception of the joint venture(JV)
Captive finance company for Hyundai Motor Group in Korea, and the only Korean consumer finance platform for GE Capital
Growing Partnership with GE Capital02
- Leading car makers in Korea with approximately 80% market share- Stable & solid operational base- Extensive sales network
- Powerful financing arm- Effective marketing tool- Most successful joint venture- Sole consumer finance window in Kore
GE Capital increases its back-upcredit line from USD 600 mm toUSD 1 bn
(Total investment as of 1Q12: USD 2.2 Bn)
2009
GE Capital provides USD 871mm in direct funding
2007
GE Capital extends its credit lineto 2015
2012
- Hyundai’s JV with GE Capital makes HCS the sole consumer finance business in Korea for GE Capital
- GE Capital provides USD 600mm back-up credit line
2006
GE Capital increases its holdings to 43.3%2005
GE Capital acquires 38% equity interest in HCS2004
56.5%
- Advanced knowledge on risk management- Financial support- Active involvement in daily operations as well as in management
43.3%
03
Performance of Hyundai Motor Company
· Increase in residual value of vehicles due to
strengthened brand awareness
· Boost in luxury car sales has increased the
average selling price of vehicles
Strength
Product Mix
Compact
58%
Mid&Large
19%
RV
17%
Commercial
6%
Korea
16.7%
N.Am.
18.9%
Europe
14.6%
Asia
31.4%
Other
18.4%
Market Diversification
1Q11
10.0%
2009
7.0%
2010
8.8%
2011
10.4%
OP Margin
Brand Value
Performance
1Q11
914
2009
3,106
2010
3,612
2011
4,059
Total Sales(‘000s)
1Q11
1,877
1Q12
11.3%
1Q12
1,019
1Q12
2,451
2009
2,962
2010
6,001
2011
8,105
Net Profit(KRW Bn)
Strategy : Capitalize on Our Leading Position04
Maintain leadership in auto financing while operatingin non-auto financing sector to diversify business portfolio
Use innovative marketing to attract customers and keep themsatisfied
Place top priority on stringent risk management
- Maintain a diversified and stable funding portfolio - Employ risk-based pricing (RBP) and stress pre-emptive risk management
Investment Highlights05
Achieved stable 1Q12 financial results with operating profit ofKRW 181 billion and net income of KRW 129 billion
Maintained healthy asset quality with 2.1% 30+ day delinquency rate
Strong commitment to abide by the target leverage of 8x
Liquidity increase indicated by CP Coverage of 632%
Continuously successful funding diversification- Swiss Franc, Malaysian Ringgit, 144A/RegS Issuances
Hold excellent credit ratings based on strong fundamentals- S&P : BBB+(S), Fitch : BBB(P), Moody's : Baa2(P)- Domestic : AA+(S)
Macroeconomic Indicators in Korea
GDP Growth Trend
Source : KAMA
Domestic Auto Sales (YoY, unit : 000)
HMC KMC Others
Source : Bank of Korea
2.8%3.6%
1Q122008 2009 2010 2011
2.2%
0.2%
6.1%
06
2009
80.0%
1,394
413
279
703
2010
1,465
78.1%
485
321
660
2011
1,474
79.8%
493
297
684
331
1Q12
81.8%155
116
60
1Q11
363
80.2%167
126
70
Korean Consumer Finance Market’s Unique Features07
Conservative lending environment- Average auto loan life of 1.5Y (Notional life of 36M + Amortization Structure)- Average down-payment for a car is around 30%- Low usage of revolving credit card products
Favorable market environment for captive finance companies- New car dealerships exclusively managed by auto makers- Stable second-hand car market : high residual value of used cars
Strong credit infrastructure- Govemment’s strict regulation on LTV & DTI Ratios . Average LTV ratio for mortgages is less than 50% (Commercial Banks)
- Well developed Credit Bureau system
Disciplined Asset Portfolio : Stability and Profitability
Receivables Breakdown by Product (KRW Bn)
MortgagePersonal Loan
Used Car Financing
Others
Auto LeaseNew Car Financing
08
Maintain auto-related and nonauto-related assets in the ratio of80 : 20
Only 9.4% of portfolio ispersonal loan and notcollateralized by auto asset orreal estate
57.2%
81.9% 82.4%81.1%
82.8%
8.7%
8.8%
18,788
16.3%
8.4%
9.4%
7.4%
19,596
17.9%
7.6%7.4%
9.9%
16,480
15.8%
7.2%
9.1%
7.4%
19,806
17.3%
7.9%
1Q122009 2010 2011
56.9%
58.1%57.6%
Pre-emptive Approach to Risk Management09
Risk control committee - Sets policies and reports to BOD- Equal membership between Hyundai Motor and GE Capital- Includes GE Capital’s Asia Chief Risk Officer
Using GE Capital’s expertise in risk management- Tailored use of GE Capital’s credit scoring system- Rigorous compliance and anti-fraud processes- Dynamic monitoring of payments, status changes - Adoption of GE Capital’s risk reporting format
Prioritizing risk management over volume growth- Application of Risk-Based Pricing(RBP)
Combining Strong Governance with Innovation
Committed to excellence in governance
. Transparent corporate governance
. GE Capital has veto rights on all major decisions
. Active board oversight supported by three key committees- Risk Control Committee- Executive Finance Committee- Asset & Liability Committee
10
Supporting innovative culture and meritocracy. Merit-based culture with performance-linked compensation. Rewards for innovation and development of new business opportunities
. High quality employees from diverse background
- Used car brokerage web-site - Extended warranty program for vehicles
Income Statement (KRW Bn) Operating Income (KRW Bn)
Operating Income
ROA
Net Income
Operating Expense
(Excluding FX Effect)
Bad debt Expense
Operating Revenue
(Excluding FX Effect)
1Q12
181
3.7%
129
735
588
83
916
796
YoY
-0.4%
-11.1%
-2.9%
2.4%
39.0%
-2.4%
1.6%
2011
3.4%
659
507
2,672
2,466
354
3,331
3,125
1Q11
182
3.8%
145
757
575
60
939
757
3.6%
633
489
2,642
2,256
145
2,889
3,274
2010
Solid Profit Underscores Strong Fundamentals11
- Operating income remained stable in 1Q12
- Maintained high ROA based on strategy with a focus
on achieving sustainable profitability
1Q11
182
1Q12
181
2009
541
2010
633
2011
659
Excellent Asset Quality & Conservative Reserve Policy
* IFRS impact: Estimated Loss based calculations->Incurred Loss based calculations
30+Delinquency Rate (%) Total reserve VS Regulatory Requirement(KRW Bn)
1Q12
153.3%
118.1% 117.1% 115.5%
534
281
336
288
427
2009
401
474
265
208
2010
521
610617
265
345
2011
12
Regulatory Requirement
Supplement Reserve
Reserve under K-IFRS
Total Reserve/ Regulatory Requirement
1.6%
2.0%2.1%
1.8%
2009 2010 2011 1Q12
* IFRS impact: Asset increase due to Inclusion of securitized receivables from 10% to 100%
Leverage Trend (KRW Bn) Capital Adequacy Ratio (KRW Bn)
6.7x
7.4x
6.5x
6.2x
14,378
16,56017,330 17,396
1Q122009 2010 2011
15.7%
13.7%13.0%
13.9%
2,216
2,375
2,156
2,432
2,6562,622
2,8132,755
1Q12*2009 2010 2011
Solid Capital Base13
Maximum LeverageAccording to Dividend Policy :
8.0x
Managed Borrowing Leverage CARShareholder’s Equity Adjusted Capital
14
Well Diversified Funding Portfolio
Funding Portfolio by Product
Funding Balance : KRW 17,396 Bn
Funding principles
Key Achievements 1Q 2012
Maintain the proportion of ABS under 20% and CP under 10%
Diversify funding portfolio in terms of currency, region and product
Maintain the average maturity ratio of liability to asset over 100%
Contingency plans under regular review
Increased long term funding proportion
- 144A/RegS: 5.5 years - USD 500 mm
- Malaysian Ringgit: 5 years - MYR 320 mm
- Swiss Franc: 5 years - CHF 200 mm
New Overseas Issuances :
Bonds74.0%
Loans8.5%
ABS13.8%
Long-term funding : 66.7 %
CP3.7%
Strengthened Liquidity Position
CP Coverage Ratio (KRW Bn) Cash Flow Profile (KRW Bn)
Financial Receivables
Liabilities (Debt)
Net Cash Flow
CP Cash Credit Line CP Coverage
216.8%
971
1,367
739 650
2,489
1,621
167.7%
507.7%
632.3%
1Q122009 2010 2011
~1Y 1-2Y 2-3Y 3-4Y 4-5Y Over 5Y
15
- GE Capital : 1,138Bn*- Others : 1,351Bn
Total : KRW 2,489Bn
~1Y 1-2Y 2-3Y 3-4Y 4-5Y Over 5Y
~1Y 1-2Y 2-3Y 3-4Y 4-5Y Over 5Y
10,481
5,693 2,268 602 170 382
5,7943,227 3,097
1,865 1,3912,022
4,6862,466 -829 -1,263 -1,852 -1,009
2,511
1,297750
1,027
1,338
1,410
*$1= W 1,137.8 as of Mar 31st, 2012
16
Global Expansion
· Provide auto financing and related
services for HMC and KMC vehicles
· Minimize market entry risk through
establishing joint ventures
Connection with HMC/KMC Minimize Entry Risk
HCSStrategy
Established : Dec.2011Capital : £20 mmStake : HCS 29.99%
UKJV
Established : May.2010Capital : € 2.8 mmStake : HCS 100%
Hyundai Capital Europe
Established : Sep.2009Capital : € 2mmStake : HCS 30.01%
Office/Corporate without funding
Hyundai Capital Germany
Representative OfficeEstablished: Jul. 2010
India Office
Established : Jun.2012(expected)Capital : RMB 0.5 bnStake : HCS 46%
China JV
Russia
RepresentativesDispatched
Australia OfficeRepresentativesDispatched
Brazil Office
Established : Sep.1986Capital : $ 1 bnStake : HMA 94%, KMA 6%
HCA
17
Investment Highlights
Achieved stable 1Q12 financial results with operating profit ofKRW 181 billion and net income of KRW 129 billion
Maintained healthy asset quality with 2.1% 30+ day delinquency rate
Strong commitment to abide by the target leverage of 8x
Liquidity increase indicated by CP Coverage of 632%
Continuously successful funding diversification
Hold excellent credit ratings based on strong fundamentals
Investor Relations Contacts
Jungsang Kim, Head of Investor RelationsPhone +82 2 2167 [email protected]
Brett Moffat, Manager of Investor RelationsPhone +82 2 2167 [email protected]
http://ir.hyundaicapital.com/
Minchul Seo, Deputy General Manager of Investor RelationsPhone +82 2 2167 [email protected]
Youn Chung, Manager of Investor RelationsPhone +82 2 3770 [email protected]