Hyundai Card Hyundai Card is...Hyundai Card Investor Presentation 3Q2012
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.
• Stable profitability : Operating profit of KRW 195 billion and ROA of 2.3%
1
Key Highlights 3Q 2012
• Effective marketing : Innovative branding increased market share to 14.5%
• Excellent asset quality : 0.7% delinquency rate, the lowest rate among Korean FIs
• Sound capital structure : Leverage of 3.2x and a capital adequacy ratio of 20.9%
• Strong liquidity : Short term debt coverage ratio of 82.2%
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
219.30
49.7%52.8%
56.8%59.6%
65.3%
2.2%
0.2%
1.6%
2008 2009 2010 2011 3Q12
Source: Bank of Korea
2008 2009 2010 2011 1H12
Source: Credit Finance Association
3
Balanced-Risk Asset Portfolio and Consistent Market Share
Asset Portfolio (KRW Bn) Market Share Trend
9,1869,563 9,450
Lump Sum Installments Cash Advance
Card Loan Others
Total Credit Card Market (credit purchase*+ financial products)
Credit Purchase* Market
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%
9.9%
23.8%
13.8%
15.7% 15.7% 15.5% 15.4%
11.2%
13.1%
14.1% 14.3% 14.5%
2008 2009 2010 2011 3Q12
44.0%
48.5% 40.7%42.8%
42.5%
2008 2009 2010 2011 3Q12
* Excludes corporate accountsSource: FISIS
4
Good Profitability Underscores Strong Fundamentals
2009 2010 2011 9M11 9M12 YoY
Income Statement (KRW Bn)
16.7% 17.6%
Return on Equity & Return on Assets
ROE ROA
Key Highlights
Operating Revenues 1,841 2,336 2,408 1,818 1,861 2.4%
(Excluding FX effect) 1,795 2,259 2,378 1,768 1,836 3.8%
Operating expenses 1,555 1,961 2,084 1,502 1,666 10.9%
(Excluding FX effect) 1,509 1,884 2,054 1,452 1,642 13.1%
16.7%15.1%
17.6%
12.6%10.3%
3.9%3.5% 3.5%
2.6%2.3%
2008 2009 2010 2011 3Q12
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 113 185 200 133 144 8.3%
Operating income 286 375 324 316 195 -38.3%
Net Income 213 281 239 238 162 -31.9%
199.1% 191.1%
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
204 210
143.3%123.9% 127.7%
199.1% 191.1%
0.7%
0.3% 0.4%0.6%
0.7%
189
378383
94 114148
190 201
135 142166
174 173
2008 2009 2010 2011 3Q12 2009 2010 2011 3Q122008
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
5.4x5.0x
3.5x
4.4x
3.5x 1,6991,843 1,845
1,958
23.5% 22.5%18.7% 19.6% 20.9%
3.2x3.5x
3.5x3.2x
2008 2009 2010 2011 3Q12
1,406 1,699
2008 2009 2010 2011 3Q12
• Maintain the proportions of ABS and CP
under 20% and 10%, respectively
7
Well Diversified, Stable Funding Portfolio
ABS ABS ABS ABS 13.2%13.2%13.2%13.2%
Funding Portfolio by Product Funding Principles
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 84.4%84.4%84.4%84.4%
Loans Loans Loans Loans 2.5%2.5%2.5%2.5%
13.2%13.2%13.2%13.2%
• Funding Balance : KRW 6,825Bn
• Long-term funding : 71.0%
liability-to-asset at over 100%
• Contingency plans under regular review
8
Strong Liquidity Position and Well-Spread Debt Maturity
Liquidity Profile (Unit: KRW Bn) Debt Maturity Profile (Unit: KRW Bn)
79.0% 82.2%
Credit LineCash Short-term Debt Coverage Ratio*
27.6%27.6%27.6%27.6%
24.7%24.7%24.7%24.7%1,886
CP LoanBond ABS
498
841 8341,148
1,584 1,626
32.7%
18.6%
36.7%
79.0%
1,697
1,270 1,233 -30
40
100
149
298 450
8.8%8.8%8.8%8.8%
24.4%24.4%24.4%24.4% 24.7%24.7%24.7%24.7%
9.5%9.5%9.5%9.5%
5.0%5.0%5.0%5.0%
600
1,668 1,683
650
360 391
650 743 792120 20
480 411
2008 2009 2010 2011 3Q12
* Short-term Debt Coverage Ratio= (Cash + Unused committed credit line)/ Short-term debt balance
570
1,270 1,233
650
338
-30 5.0%5.0%5.0%5.0%
338
4Q12 2013 2014 2015 2016 2017~
Hyundai Card Hyundai Card Company OverviewHyundai Card Investor Presentation 3Q 2012
I. Who is Hyundai Card?
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+
- 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$734mm(As of 3Q12)
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
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
12
Committed to Transparent Corporate Governance
Board of DirectorsBoard of DirectorsBoard of DirectorsBoard of Directors
• HMC 5 : GECC 4 : Outside directors 3
• 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
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% 14.5%
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
II. Premium Brand & Marketing
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
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
III. Macro & Industry Environment
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%
2.0%
279.3 303.9
350.7
390.2
219.30
49.7%52.8%
56.8%59.6%
65.3%
2.2%
0.2%
1.6%
2008 2009 2010 2011 3Q12
Source: Bank of Korea
2008 2009 2010 2011 1H12
Source: Credit Finance Association
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
18
Korea Credit Card Industry: Then & Now
Combined Asset portfolio Total Asset Quality (30+ Day Delinquency Rate)
Credit Purchase Financial Products
35.1%64.8%
64.9%35.2%
2003 1H12
Combined Capital Adequacy Ratio
28.3%
2.0%
2003 1H12
Regulatory & Infrastructure Changes:
- Credit bureau system established
Source: FSS
-5.5%
26.9%
2003 1H12
- Credit bureau system established
- Marketing regulations restricting new originations
- Companies must maintain capital adequacy ratio of above 8%
- Leverage limit of 6x (Dec. 2012)
IV. Asset Portfolio & Performance
19
Balanced Asset Portfolio of Credit and Financial Products
Asset Portfolio (Unit: KRW Bn)
9,1869,563 9,450
Lump 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%
9.9%
23.8%
23.5%
12.3%
13.5%
11.9%
7.9%
5.0%
2005200520052005 2006200620062006 2007200720072007 2008200820082008 2009200920092009 2010201020102010 2011201120112011 3Q123Q123Q123Q12
44.0%
48.5% 40.7%42.8%
42.5%
50.6%
23.5%
58.5%
19.0%11.9%
63.6%
12.2%14.4%5.0%
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
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 3Q123Q123Q123Q12
22
Historical Reserve & FSS Requirement Coverage Ratio
178.1%200.4% 199.1% 191.1%
Total Reserve VS Regulatory Requirement (KRW Bn)
Regulatory Requirement Reserve under Accounting Principles Supplemental Reserve Total Reserve/ Regulatory Requirement
23
204 210
189
378 383
111.4%
178.1%
143.3%123.9% 127.7%
191.1%
125 89
52 94.1 114
148 190 201
139 158 104
134.8142 166 174 173
2009200920092009 2010201020102010 2011201120112011 3Q123Q123Q123Q122008200820082008
K-GAAP
2005200520052005 2006200620062006 2007200720072007
K-IFRS
Sustainable Growth Based on Strong Fundamentals
2006 2007 2008 2009 2010 2011 9M119M119M119M11 9M129M129M129M12 YoY
KKKK----IFRSIFRSIFRSIFRSKKKK----GAAPGAAPGAAPGAAP
Income Statement (KRW Bn)
23
Operating Revenues 1.109 1,121 1,594 1,841 2,336 2,408 1,818 1,861 2.4%
(excl. FX effect) 1,109 1,116 1,451 1,795 2,259 2,378 1,768 1,836 3.9%
Operating Expenses 809 1,049 1,337 1,555 1,961 2,084 1,502 1,667 10.9%
(excl. FX effect) 809 1,044 1,193 1,509 1,884 2,054 1,452 1,642 13.1%
Card expenses 314 380 506 730 863 924 678 776 14.5%
Interest expenses 113 139 187 220 319 357 269 259 -3.8%
SG&A Expenses 245 296 367 398 484 538 357 439 23.0%
PPOP 39 26 36 441 570 525 450 342 -23.8%
Bad Debt expenses 95 42 102 113 185 200 133 144 8.8%
Provision for unused Credit Line
- 142 -3 42 14 1 2 4 180.0%
Operating Income 300 73 258 286 371 324 316 195 -38.4%
ROA 8.9% 6.0% 3.9% 3.5% 3.5% 2.6% 3.5% 2.3% -34.3%
ROE 34.6% 23.9% 16.7% 15.1% 17.6% 12.6% 17.1% 10.3% -39.8%
Income before Tax 306 109 272 295 371 324 316 195 -38.4%
Net Income 281 234 202 213 281 239 238 162 -31.9%
V. Capitalization, Funding & Liquidity
Capital Adequacy Ratio (Unit: KRW Bn)
24
Strong Capital Structure
31.3%28.4%
Adjusted Capital CAR
1,699 1,843 1,865 1,958
12.4%
28.4%23.5% 22.5%
18.7% 19.6% 20.9%
383
1,080
1,306 1,406
1,843 1,865
2005200520052005 2006200620062006 2007200720072007 2008200820082008 2009200920092009 2010201020102010 2011201120112011 3Q123Q123Q123Q12
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
5.0x
11.3x
4.4x
2.6x 2.6x3.2x
3.5x
4.4x
3.5x3.2x
2005200520052005 2006200620062006 2007200720072007 2008200820082008 2009200920092009 2010201020102010 2011201120112011 3Q123Q123Q123Q12
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 7,0686,825
22.9%
84.1%
13.2%2.5%
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%
2,199
2005200520052005 2006200620062006 2007200720072007 2008200820082008 2009200920092009 2010201020102010 2011201120112011 3Q123Q123Q123Q12
%%%% 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% 71.0%71.0%71.0%71.0%
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%
27
Substantial Improvement in Liquidity Position
Liquidity Profile (KRW Bn)
79.0% 82.2%Credit LineCash Short-term Debt Coverage Ratio*
498
841 8341,148
1,584 1,626
4.9%13.1%
27.3%32.7%
18.6%
36.7%
65 143 149360 391
650 743 792
150
120 20
65143
299
480411
2005 2006 2007 2008 2009 2010 2011 3Q12
* Short-term Debt Coverage Ratio= (Cash + Unused committed credit line)/ Short-term debt balance
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]
Brett Moffat, Manager of Investor RelationsPhone +82 2 2167 [email protected]
Jay Moon, Manager of Investor RelationsPhone + 82 2 2167 [email protected]
http://ir.hyundaicard.com/
Recommended