IR Presentation: Hyundai Capital 1Q2011

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Hyundai Capital IR 1Q 2011 Investor Presentation

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IR Presentation: Hyundai Capital 1Q2011

  1. 1. Hyundai Capitalis...Investor Presentation Hyundai CapitalMay 2011
  2. 2. DisclaimerThese presentation materials have been prepared by Hyundai Capital Services., Inc. (“HCS or the Company”), solely for the use at thispresentation and have not been independently verified. No representations or warranties, express or implied, are made as to, andno reliance should be placed on, the accuracy, fairness or completeness of the information presented or contained in this presenta-tion. Neither the Companies nor any of theirs affiliates, advisers or representatives accepts any responsibility whatsoever for any lossor damage arising from any information presented or contained in this presentation. The information presented or contained in this presenta-tion 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, advisersor representatives make any undertaking to update any such information subsequent to the date hereof. This presentation should not be construed as legal, tax, invest-ment or other advice.Certain information and statements made in this presentation contain “forward-looking statements.” Such forward-looking statements can be identified by the use offorward-looking terminology such as “anticipate,” “believe,” “considering,” “depends,” “estimate,” “expect,” “intend,” “plan,” “planning,” “planned,” “project,” “trend,” andsimilar expressions. All forward-looking statements are the Companies’ current expectation of future events and are subject to a number of factors that could causeactual results to differ materially from those described in the forward-looking statements. Caution should be taken with respect to such statements and you should notplace undue reliance on any such forward-looking statements.Certain industry and market data in this presentation was obtained from various trade associations, and the Companies have not verified such data with independentsources. Accordingly, the Companies make no representations as to the accuracy or completeness of that data, and such data involves risks and uncertainties and issubject 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 Companies and neither any part of thispresentation nor any information or statement contained therein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever.Any decision to purchase shares in any offering of shares of the Companies should be made solely on the basis of the information contained in the offering documentwhich may be published or distributed in due course in connection with any offering of shares of the Companies, 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 whole or in part, for anypurpose.
  3. 3. No.1 Consumer Finance Company 03 One of the most successful finance companies in Korea Leading auto financier in Korea with a high market share Seven-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
  4. 4. Growing Partnership with GE Capital 04 - Leading car makers in Korea with approximately 80% market share 2009 - GE Capital increases its back-up credit line from US$ 600 mm to US$ 1 bn - Stable & solid operational base (Total investment as of 1Q11: USD2.5 Bn) 56.5% - Extensive sales network 2007 - GE Capital provides US$ 871mm in direct funding - Powerful financing arm 2006 - Hyundai’s JV with GE Capital makes - Effective marketing tool HCS the sole consumer finance business - Most successful joint venture in Korea for GE Capital - Sole consumer finance window in Korea - GE Capital provides US$ 600mm back-up credit line 2005 - GE Capital increases its 43.3% - Advanced knowledge on risk holdings to 43.3% management - Financial support 2004 - GE Capital acquires 38% equity interest in HCS - Active involvement in daily operation as well as management
  5. 5. Strategy : Capitalize on Our Leading Position 05 Maintain leadership in auto financing while operating in non-auto financing sector to diversify business portfolio Use innovative marketing to attract customers and keep them satisfied Put the first priority on stringent risk management - Maintain a diversified and stable funding portfolio - Employ risk-based pricing (RBP) and stress pre-emptive risk management
  6. 6. Investment Highlights 06 Stable macroeconomic conditions such as low unemployment rates and increased consumer spending - Domestic new car sales remained robust in 1Q11 Achieved stable 1Q11 financial results with operating profit of KRW 182 billion and net income of KRW 145 billion Maintained healthy asset quality with 1.9% 30+ day delinquency rate Strong commitment to abide by the target leverage of 8x Liquidity increase indicated by up to 270% of CP Coverage Proof of HCS’s existence in global bond market as a regular issuer - US 700mm 144A/Reg S Issuance in January - CHF issuance and MYR refinancing issuance Achieved credit ratings upgrades based on strong fundamentals - RAM upgraded the rating to AAA
  7. 7. Improving Macroeconomic Indicators in Korea 07GDP Growth Trend Domestic Auto Sales Rose 3.8% in 1Q11 (YoY, unit : 000) HMC KMC Others 6.1% 1,465 5.1% 1,394 321 4.2% 1,154 279 267 413 485 316 2.2% 76.9% 80.0% 78.1% 350 363 571 703 660 76 70 78.1% 80.6% 105 126 0.2% 168 167 2007 2008 2009 2010 1Q11 2008 2009 2010 1Q10 1Q11Source : Bank of Korea Source : KAMA Strong private consumption and export led to 4.2%(YoY) GDP growth in 1Q11 Domestic car sales in 1Q11 was up 3.8%(YoY) due to consumption recovery
  8. 8. Korean Consumer Finance Market’s Unique Features 08 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
  9. 9. Disciplined Asset Portfolio : Stability and Profitability 09Receivables Breakdown by Product (KRW Bn) New Car Financing Auto Lease Used Car Financing Personal Loan Mortgage Others 18,788 19,358 16,030 16,480 8.8% 8.2% Maintain auto-related and non 10.9% 9.9% 8.7% 9.3% 7.4% auto-related assets in the ratio of 7.8% 8.4% 8.5% 7.2% 80 : 20 8.0% 16.3% 16.4% 15.8% 14.8% 81.9% 81.7% Only 9.3% of portfolio is 79.5% 81.1% 57.2% personal loan and not 56.8% 56.8% 58.1% collateralized by auto asset or real estate 2008 2009 2010 1Q11
  10. 10. Pre-emptive Approach to Risk Management 10 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)
  11. 11. Combining Strong Governance with Innovation 11 Committed to excellence in governance . Active board oversight supported by three key committees - Risk Control Committee - Executive Finance Committee - Asset & Liability Committee . Transparent corporate governance . GE Capital has veto rights on all major decisions Supporting innovative culture and meritocracy . Merit-based culture with performance-linked compensation . Rewards for innovation and development of new business opportunities - Used car brokerage web-site - Extended warranty program for vehicles . High quality employees from diverse background
  12. 12. Solid Profit Underscores Strong Fundamentals 12Income Statement (KRW Bn) Operating Income (KRW Bn) 2009 2010 1Q10 1Q11 YoY 633Operating Revenue 2,989 3,274 959 939 -2.1% 505 541(Excluding FX Effect) 2,485 2,889 691 757 9.5%Operating Expense 197 2,448 2,642 762 757 -0.7% 182(Excluding FX Effect) 1,944 2,256 494 575 16.3%Bad debt Expense 176 146 7 60 771.9% 2008 2009 2010 1Q10 1Q11Operating Income 541 633 197 182 -7.6% - Operating income slight decrease YoY basis due to bad debt expense increaseROA 3.4% 3.6% 4.7% 3.8% - - PPOP increase by 18.6% YoY basis - Maintain high ROA based on strategy with a focusNet Income 411 489 155 145 -6.3% on achieving sustainable profitability
  13. 13. Excellent Asset Quality & Conservative Reserve Policy 1330+Delinquency Rate (%) FSS Guideline VS Actual Reserve (KRW Bn) FSS Guide Actual Reserve Reserve for bad debt (Actual+Reserve for bad debt)/FSS 153.0% 153.5% 118.1% 120.1% 2.3% 504 1.9% 1.8% 474 442 420 213 1.6% 401 426 208 288 279 292 265 2008 2009 2010 1Q11 2008 2009 2010 1Q11
  14. 14. Solid Capital Base 14Leverage Trend (KRW Bn) Capital Adequacy Ratio (KRW Bn) Managed Borrowing Leverage Shareholder’s Equity Adjusted Capital CAR Maximum Leverage 15.7% According to 13.7% Dividend Policy : 11.9% 8.0x 11.5% 8.7x 7.5x 7.3x 2,432 2,375 2,362 6.7x 2,340 2,156 2,216 17,048 16,560 1,825 14,378 1,650 14,335 2008 2009 2010 1Q11 2008 2009 2010 1Q11* * IFRS impact: Asset increase due to Inclusion of securitized receivables from 10% to 100%
  15. 15. Well Diversified Funding Portfolio 15Funding Portfolio by Product Funding principles Maintain the proportion of ABS under 20% and CP under 10% Diversify funding portfolio in terms of currency, region and product ABS Maintain the average maturity ratio of liability 14.8% to asset over 100% Contingency plans under regular review CP 5.9% Bonds Loans 8.1% 71.2% 2011 Funding status Funding diversification - 144A issuance in January (US 700mm, 5.5 yrs) Funding Balance : KRW 17,048 Bn - CHF(300mm, 2.5 & 5 yrs) & MYR(650mm, 3yrs) Liquidity enhancement - Target Cash balance met: KRW 1.1Tn Long-term funding : 62.8 % - Credit line increase by KRW 301Bn Stability of the funding portfolio - CP proportion to be down to 5%, LT funding to be up to 65%
  16. 16. Strengthened Liquidity Position 16CP Coverage Ratio (KRW Bn) Cash Flow Profile (KRW Bn) CP Cash Credit Line CP Coverage 269.5% Financial Receivables 216.8% 167.7% 10,126 117.6% - GE Capital : 1,107Bn* 5,740 496 185 412 - Others : 500Bn 2,399 ~1Y 1-2Y 2-3Y 3-4Y 4-5Y Over 5Y Total : KRW 1,607Bn Liabilities (Debt) 1,607 6,335 4,284 1,361 1,445 2,032 1,591 1,338 ~1Y 1-2Y 2-3Y 3-4Y 4-5Y Over 5Y 1,367 1,082 Net Cash Flow 1,522 1,410 1,027 971 1,010 1,115 707 3,790 739 953 1,455 -1,536 -1,406 -949 2008 2009 2010 1Q11 ~1Y 1-2Y 2-3Y 3-4Y 4-5Y Over 5Y*$1= 1,107.2 as of Mar 31st, 2011
  17. 17. Investment Highlights 17 Stable macroeconomic conditions such as low unemployment rates and increased consumer spending Achieved stable 1Q11 financial results with operating profit of KRW 182 billion and net income of KRW 145 billion Maintained healthy asset quality with 1.9% 30+ day delinquency rate Strong commitment to abide by the target leverage of 8x Liquidity increase indicated by up to 270% of CP Coverage Proof of HCS’s existence in global bond market as a regular issuer Achieved credit ratings upgrades based on strong fundamentals
  18. 18. Investor Relations ContactsDaniel Lee, Head of Investor Relations Minchul Seo, Deputy General Manager of Investor RelationsPhone +82 2 3770 9932 Phone +82 2 2167 7051hyungseok_lee@hyundaicapital.com mcseo@hyundaicapital.comMJ Bae, Manager of Investor Relations Youn Chung, Manager of Investor RelationsPhone +82 2 2167 6507 Phone +82 2 3770 9737mjbae@hyundaicard.com youn.chung@hyundaicapital.comSeo young Cho, Manager of Investor Relations www.hyundaicapital.com/englishPhone +82 2 2167 6327michelle.cho@hyundaicapital.com

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