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1H15 Earnings Release
Hyundai Capital Services
1
Disclaimer
This presentation material is being presented to you solely for your information only and may not be taken away by you and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, in whole or in part, for any purpose.
These presentation materials have been prepared by Hyundai Capital Services., Inc. (“HCS or the Company”), solely for the use at this presentation and have not been independently verified. No representations or warranties, express or implied, are made as to, and no reliance should be placed on, the accuracy, fairness or completeness of the information presented or contained in this presentation. Neither the Companies nor any of theirs affiliates, advisers or representatives accepts any responsibility whatsoever for any loss or damage arising from any information presented or contained in this presentation. The information presented or contained in this presentation is current as of the date hereof and is subject to change without notice and its accuracy is not guaranteed. Neither the Companies nor any of their affiliates, advisers or representatives make any undertaking to update any such information subsequent to the date hereof. This presentation should not be construed as legal, tax, investment or other advice.
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Major Issues in 1H15
Asset growth through Enhanced Business as a Captive Finance despite unfavorable market conditions
Laid foundations for better profitability through Asset Quality improvement and Bad Debt Expense decrease, as a result of constant risk management.
Overseas operation expansion through strengthened Global Business capabilities
3
Business Environment
Domestic Economy Domestic Auto Sales
Stagnant captive auto sales
• Strong sales recorded by Import auto makers
• Improvement expected in 2H through full model change of
best-sellers (HMC Avante, KMC K5 etc.)
(unit : *1,000)
Economic recovery delayed
• GDP growth rate lowered (Bank of Korea, ‘15. 7)
Low interest continued
• Competition intensified as funding cost gap narrows
2.0%
2.8%3.3%
2.4%
2.75% 2.50%2.00%
1.50%
2012 2013 2014 1H15
GDP growth rate Key rate
668 641 685 336
482 458 465
243
392 441 510
279
1,542 1,540 1,660
857
74.6%71.4%
69.3%67.5%
2012 2013 2014 1H15
HMC KMC Others HMG M/S
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Asset
Asset Portfolio Business Strategies 2015
(unit: KRW bn)
2012 2013 2014 1H15 YTD
New car 11,000 10,510 10,472 10,832 3.4%
Auto lease 3,805 3,976 3,818 3,896 2.0%
Used car 1,410 1,484 1,464 1,418 -3.1%
P-loan 1,959 2,111 2,162 2,075 -4.0%
Mortgage 1,641 1,796 1,745 1,667 -4.5%
Auto-finance
• Competitiveness reinforced through OEM co-marketing
• Specialized products launch to meet customer needs
(PCP, Personal lease)
Personal-finance
• Strengthened marketing to target prime customers
Reference : OEM co-marketing(unit: KRW bn)
Jan Interest lowered by 1% on all KMC vehicles
Mar Interest lowered by 1% on all HMC vehicles
KMC “Morning Coffee” promotion
HMC “KRW 100,000 Miracle – Avante” promotion
May HMC interest-free on Sonata
16,214 15,970 15,754 16,146
4,070 4,428 4,569 4,590
20,285 20,397 20,323 20,735
79.9% 78.3% 77.5% 77.9%
2012 2013 2014 1H15
Auto asset Non-auto asset % of Auto asset
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Profitability
① Excluding FX effects② Including one-off disposal loss
Summary of Income Statement
2013 2014 1H14 1H15 YoY
Operating Rev① 2,915.1 2,745.9 1,355.6 1,328.2 -2.0%
Operating Exp① 2,486.8 2,423.8 1,212.0 1,121.3 -7.5%
Interest expense 800.6 752.6 387.3 336.2 -13.2%
Lease expense 505.9 500.5 250.1 250.3 0.1%
SG & A 671.7 702.3 321.2 360.1 12.1%
Bad debt expense 453.1 418.3 226.6 149.2 -34.2%
Operating Income 429.1 321.9 143.3 207.4 44.8%
Non-operating Income 3.3 9.1 11.0 21.8 98.2%
Equity method income 4.5 17.0 -20.9 19.1 TB
Net Income 391.4 237.7 85.1 173.9 104.3%
ROA 1.9% 1.3% 0.8%② 1.7% 0.9%p
Analysis on Income Statement
Operating Revenue
• Product interest lowered due to key rate drop
Operating Expense
• Interest expense decreased due to key rate drop
• Bad debt expense decreased due to asset quality
improvement
Net Income
• Equity method income increased due to stabilized
overseas operation
(unit: KRW bn)
6.8% 6.6% 6.0% 5.0%
2012 2013 2014 1H15
New car finance APR
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Asset Quality
Delinquency Reserve
(unit: KRW bn)
2.5%2.7%
2.4%2.2%
1.0% 1.1% 1.0% 0.9%
2012 2013 2014 1H15
30+days delinquency ratio
30+days delinquency ratio (New car)
385 437 440 449
280 326 334 300
665 763 774 749
144.9%
154.4%
162.2% 163.4%
2012 2013 2014 1H15
Allowance Reserve 30+ days coverage
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Capital Structure
Capital Adequacy RatioLeverage
① Based on previous quarter’s total capital since 2013
2012 2013 2014 1H15 YTD
Total Asset 21,885 22,369 22,508 22,682 0.8%
Total Capital① 3,031 3,400 3,395 3,502 3.2%
(unit: KRW bn)
2012 2013 2014 1H15 YTD
AdjustedTotal Asset 20,438 20,673 21,793 21,955 0.7%
AdjustedTotal Capital 2,954 3,130 3,346 3,552 6.2%
(Unit: KRW bn)
7.2X6.6X 6.6X 6.5X
2012 2013 2014 1H15
14.5% 15.1% 15.4% 16.2%
2012 2013 2014 1H15
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Domestic bond56.1%
Overseas bond22.0%
Domestic ABS9.3%
Overseas ABS3.9%
Loans7.2%
CP1.5%
Funding
Funding Portfolio by product Asset-Liability Maturity
2014 1H15
Total Funding 5,893 3,317Bond 3,353 1,957
Domestic 2,510 1,511
Overseas 843 446
ABS 600 400CP, Bank loan 1,940 960
2014 1H15
(unit: KRW bn)Funding Guidelines
• Long-term debt : 60% or more
• By Product: ABS <20%, CP <10%
• ALM ratio : 100% or more
2.0yr 2.0yr 1.9yr2.0yr
148.0%142.0%
132.0%139.2%
2012 2013 2014 1H15
Debt maturity ALM ratio
Domestic bond52.0%Overseas
bond26.2%
Domestic ABS7.6%
Overseas ABS5.3%
Loans7.8%
CP1.1%
KRW17.8tn
KRW17.8tn
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Liquidity
Liquidity Position Short-term debt Coverage
Contingency framework
• Early warning and response system in place
• Daily monitoring of key market indicators
(unit: KRW bn) (unit: KRW bn)
Liquidity Management
• Satisfies Basel III Liquidity coverage ratio
• Diversified Credit lines by lender and tenor
1,100 1,304 1,375 1,210
2,480 2,345 2,524 2,894
3,580 3,649 3,899 4,104
2012 2013 2014 1H15
Cash Credit line
5,176 4,953 5,790
4,889
69.2% 73.7% 67.3%83.9%
2012 2013 2014 1H15
Short-term debt Short-term debt coverage ratio
10
Overseas Business
Overseas Operations
Country(Corp. name) Founded Equity
structureFinancial Asset(local currency)
(HCA)
1989.9 HMA 80%KMA 20%
KRW 28.7tn(USD 25.5bn)
(HCUK)
2012.2
HCS 29.99%HMUK 10% KMUK 10%
SCUK 50.01%
KRW 2.2tn(GBP 1.3mn)
(BHAF)
2012.6HCS 46%HMC 14%BAI 40%
KRW 2.5tn(CNY 13.7bn)
(HCCA)
2014.4 HMC 60% KMC 40%
KRW 216bn(CAD 238mn)
Growth of Overseas Asset
(unit: KRW tn)
CAGR=36%
① FX rate as of 1H15-end
①
5 9
14
19
24
31 34
'09 '10 '11 '12 '13 '14 1H15
11
Appendix
Personal Lease Launch Certified Used Car Center Open
Reinforce Auto-finance Value chain
• Utilize systematically managed Lease-returned vehicles
• Manage Vehicles’ residual value efficiently
Initiate changes on vehicle “possession”
• Boost new car sales and shorten replacement period
• “Use” easy-to-manage cars on lower monthly payment