Hyundai Card CorporationHyundai Card Corporation

Investor Presentation (1Q 2014)

DisclaimerThese presentation materials have been prepared by Hyundai Card Corporation, Inc. (“HCC or the Company”), solely for the use at this presentation These presentation materials have been prepared by Hyundai Card Corporation, Inc. (“HCC 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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Finance Business of Hyundai Motor GroupFinance Business of Hyundai Motor GroupFinance Business of Hyundai Motor GroupFinance Business of Hyundai Motor Group

Main Business Structure of HMG Finance Companies in HMG

Car MakerCar Maker Auto PartsAuto Parts Business Shareholders

FinanceFinance

HyundaiCard

Credit CardHMG 54%

GECC 43%

HyundaiCapital

Auto Finance(PassengerVehicles)

HMC 56.5%

GECC 43.3%

Hyundai Auto Finance(Commercial HMG 50%

3

SteelSteelConstructionConstruction

Commercial(Commercial

Vehicles)HMG 50%

HyundaiLife

LifeInsurance

HMG 98%

Solid Marketing Base Superior Management DNA

Shareholding Structure and Strengths of HCCShareholding Structure and Strengths of HCCShareholding Structure and Strengths of HCCShareholding Structure and Strengths of HCC

43.0%54.0%

• Solid growth base of M Point program aligned with HMG

9 years Joint Venture between HMC and GE Capital

4

• Solid growth base of M Point program aligned with HMG

• Stable performance based on the successful Joint venture structure

• Incomparable leadership in super premium market + Icon of culture marketing and design

• Inheritor of GE’s business management know-how

• Unparalleled corporate culture embodied in the organization

• Business synergy among 4 Hyundai Finance Companies (Card, Capital, Commercial, Life)

Characteristics of Korean Credit Card IndustryCharacteristics of Korean Credit Card IndustryCharacteristics of Korean Credit Card IndustryCharacteristics of Korean Credit Card Industry

High Usage of Credit Card (unit: KRW Tn)

Private Consumption Credit Card Usage Ratio*

Strong Credit Infrastructure

• Finance transactions centrally collected (Banks, Credit card, Non-bank FIs, Insurance)

• Extensive information for sequential analysis(default and good credit)

595 637

679 708 729

63.3% 64.8% 65.2%67.6% 67.2%

Rigorous Regulation

• Exclusive organizations within FSS: capital market supervisory and investigation

• Monthly management of capital adequacy,

(default and good credit)

• i.e. customer profile(job, income, etc), Accounts(loans, credit transaction and limits, etc), history (payment, card usage), delinquency(amount, payment schedule, etc)

5

'09 '10 '11 '12 '13

* Purchase payments only (excludes corporate accounts)

Source: Credit Finance Association

• Monthly management of capital adequacy, leverage, loan ratio, marketing expense, new product and etc.

• Frequent supervision on information security and customer satisfaction/protection

• Regular (every 3 year) and irregular (when necessary) business assessment

Credit Card Market SizeCredit Card Market SizeCredit Card Market SizeCredit Card Market Size

Check Card Credit Card (Purchase)

Credit Card As Frequent Payment Method (unit: KRW Tn)

• Credit card centric payment habit

• Credit + Check, dual payment portfolio

412443

478 490

406

464 510

561 578

98 105 104 100 97

• Credit + Check, dual payment portfolio

– Small amount-check, Big spending-credit card

– Check-card growth nearly matured

• Consistent demand for card benefits and finance service

Finance service amount (unit: KRW Tn)

6

Source: Credit Finance Association

29 51 67 83 88

377412

'09 '10 '11 '12 '13

97

'09 '10 '11 '12 '13

HCC position in MarketHCC position in MarketHCC position in MarketHCC position in Market

Byword of Super Premium Card Icon of Culture Marketing

Design Company

7

Macro EconomyMacro EconomyMacro EconomyMacro Economy

GDP Growth Rate & Unemployment Rate

2010 2011 2012 2013 1Q14 2014(e)

GDP Growth Rate 6.1% 3.6% 2.0% 2.8% 3.9% 4.0%

Source: Bank of Korea* Seasonal adjustment rate

Unemployment (yr.) 3.7% 3.4% 3.2% 3.1% 3.5%* 3.2%

Macro & Private Consumption: Direct Macro & Delinquency: Inverse

8%

GDP growth rate

Private consumption growth rate4%8%

GDP growth rate (left)

Delinquncy ratio of Non-bank Finance (right)

8

0%

4%

'06 '07 '08 '09 '10 '11 '12 '132%

3%

0%

4%

'07 '08 '09 '10 '11 '12 '13

Product PortfolioProduct PortfolioProduct PortfolioProduct Portfolio

Receivables Breakdown by Product Market Share

Others 0.7% Credit Purchase* Market

LumpSum

42.1%

Installment

21.2%

CashAdvance

8.6%

CardLoan

27.4%

0.7%

15.7% 15.5% 15.5%

14.5% 14.3%

14.1% 14.3% 14.5%13.8% 13.8%

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

Credit Purchase* Market

9

21.2%8.6%

• Financial Receivables : KRW 9.9Tn (Approx. USD 9.3 Bn)

• % credit purchase : 63.3%

14.1% 13.8% 13.8%

'10 '11 '12 '13 1Q14

* Excludes corporate accountsSource: FISIS

Chapter 2: New Start for Next 10 yearsChapter 2: New Start for Next 10 yearsChapter 2: New Start for Next 10 yearsChapter 2: New Start for Next 10 years

Two Track Brand Portfolio and Simplified Customer Benefits

Simplified Product Structure

Reasonable Compensation Scheme

• Focus more on core benefits

• Eliminate or reduce undifferentiated and immaterial benefits

• Premium vs. Point vs. Cash back

• 22 products → 7 products

10

Differentiated Reward Level

• Higher accumulation rate for loyal customers(M card: over 1Mn KRW/month → x 1.5)

• No points if monthly spending under 0.5M KRW

Revenue and ProfitRevenue and ProfitRevenue and ProfitRevenue and Profit

2012 2013 1Q 13 1Q 14 YoY

Operating Revenues 2,526 2,527 643 642 -

(unit: KRW Bn)

• Increase in operating revenues

– Interest income increased from higher

(excl. FX effect) 2,469 2,515 609 635 4.2%

Operating Expenses 2,288 2,308 581 535 -7.9%

(excl. FX effect) 2,232 2,295 547 527 -3.7%

Interest expenses 343 313 79 76 -4.0%

Bad Debt expenses 203 248 55 60 9.5%

– Interest income increased from higher finance service volume in 2013

• Decrease in operating expenses

– Decreased expense from 1 month industry wide freeze in TM and sales of P.loan after customer information leakage by 3 credit card companies

– Decreased credit card point expense since late 2013 (Chapter 2)

– Declined interest expenses from lower

11

Operating Income 237 220 62 108 73.7%

Net Income 194 163 47 82 76.6%

ROA 2.0% 1.7% 2.0% 3.4% 1.4%

ROE 9.2% 7.1% 8.5% 13.6% 5.1%

– Declined interest expenses from lower funding rate offset by increase in bad debt expenses

• Increase cost efficiency from increased active member ratio*

* Ratio of members who used more than once within a month

Well Maintained Reserve (unit: KRW Bn)

Stable Asset Quality and ReserveStable Asset Quality and ReserveStable Asset Quality and ReserveStable Asset Quality and Reserve

30+ Delinquency Ratio Maintained Low

Reserve Allowance for bad debt Regulatory Coverage

378

544 594 589

128%

199%

157%144% 143%

0.4% 0.6% 0.7% 0.8% 0.9%

12

174 181 205 206

204

363 389 384

189

378

'10 '11 '12 '13 1Q14'10 '11 '12 '13 1Q14

Characteristics of HCC Risk Management

• Major decision regarding Risk • Systematic response to Business Cycle

Multi-layered Risk Management Framework

Governance

Strategy

Infrastructure

Major decision regarding Risk

• Controlling Risk limits

• System

• Analytic models

Systematic response to Business Cycle

• Profit & Risk Optimization

• Support new business growth

• Monitor major Risk Indexes

• Risk Model & Score Validation

i.e.– Risk Control Committee– New Product Introduce– Credit Review Point

i.e.– Debt To Income Ratio– Champion-Challenger Test– Collection Channel Optimization

13

Monitoring

Infrastructure • Analytic models

• Information

• Risk Model & Score Validation

• Operation Risk Minimize

i.e.– Maturity Expected Loss– Economic Capital– Anti-Fraud System– Collection scoring system

i.e.– Portfolio Quality Review– Risk Appetite Monitoring– Stress Test– Contingency Plan

Diversified, Stable Funding PortfolioDiversified, Stable Funding PortfolioDiversified, Stable Funding PortfolioDiversified, Stable Funding Portfolio

Funding Portfolio by Product

Loans

Funding Portfolio by Maturity (Unit: KRW Bn)

Domestic

Bond 89.6%

3.0% ABS 7.4%

597 760

1,963

1,520

1,168 1,111

14

• Total balance : KRW 7.1Tn

• Product mix guidelines : ABS 20%, CP 10%

• ALM ratio :155%

2Q14 2H14 '15 '16 '17 '18~

8.4% 10.7% 27.6% 21.4% 16.4% 15.6%

Ratio to total balance

Sound Capital Structure StrengthenedSound Capital Structure StrengthenedSound Capital Structure StrengthenedSound Capital Structure Strengthened

Improved Capital Profile (Unit: KRW Bn) Capital Adequacy Ratio / Leverage

20.5%

1,769

2,008 2,197

2,367 2,447 18.7%

19.6%18.7%

19.4%20.5%

Regulation: Over 8%

Regulation: Under 6X (Since 2012)

15

'10 '11 '12 '13 1Q 14

6.0 x5.4 x 5.1 x 5.0 x 4.8 x

'10 '11 '12 '13 1Q 14

* Separate Financial sheet

Liquidity Profile (unit: KRW Bn)

Strong Liquidity Position and Contingency PlansStrong Liquidity Position and Contingency PlansStrong Liquidity Position and Contingency PlansStrong Liquidity Position and Contingency Plans

Credit LineCash Short-term Debt Coverage Ratio*

Contingency Framework

Crisis Detection

• Daily monitoring of key market indicators (Early Warning System)

Stress TestLiquidity

Management

Decision Body

Normal

• FC (Funding Committee)

• ALCO (Asset Liability Committee)

• EFC (Executive Finance Committee)

• Short term 1M841 824 866 770

1,148

1,584 1,514 1,646 1,580

36.7%

79.0%65.5%

87.5% 88.1%

16

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

Volatile

Actions • Contingency funding• Asset slow down (Sales)

• Crisis communication• Contingency monitoring

• Long term 12M

650 743 690 780 810

498

841 824 770

'10 '11 '12 '13 1Q14

InvestmentInvestmentInvestmentInvestment HighlightsHighlightsHighlightsHighlights

– Strategic Subsidiary within HMG that endowed business base from Co-Marketing

– Strong presence in premium card segment and unrivaled in culture marketing

• Value Proposition of HCC

– Steady and solid fundamental

– Corporate DNA that promises constant growth

• Key Financials of 1Q 2014

– Financial Receivables : KRW 9.9 Tn

– Operating Income : KRW 108 Bn

17

– Net Income : KRW 82 Bn

– ROA : 3.4%

– 30+ Delinquency Ratio : 0.9%

– Leverage : 4.8X

Appendix. Credit Card Crunch: Then and NowAppendix. Credit Card Crunch: Then and NowAppendix. Credit Card Crunch: Then and NowAppendix. Credit Card Crunch: Then and Now

Non-core Business Ratio

65%57% 58%

30+ Delinquency Ratio

6.6%

Avg = 60% Avg = 32% Avg = 4.1% Avg = 1.7%

33% 31% 33%

'00 '01 '02 '11 '12 '13

Leverage

3.2%2.6%

1.6% 1.9% 1.5%

'00 '01 '02 '11 '12 '13

Infrastructure & Regulatory Changes

Avg =12.5X Avg = 4.1X • Credit bureau system established

• Reinforce regulation

18

Source: FSS

16.8

9.411.3

4.3 4.1 3.8

'00 '01 '02 '11 '12 '13

• Reinforce regulation

– reinforce credit card issue hurdle and process

– reinforce limit on non-core business ratio

– conservative Reserve appropriation and asset classification

– establishment of recommended risk management standard

Further InformationFurther InformationFurther InformationFurther Information

19

IR Homepage : http://ir.hyundaicard.com/

IR email address : irhcc@hyundaicard.com