2 q12 hcc_eng
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HCC ENGTRANSCRIPT
Hyundai Card is...Hyundai Card Investor Presentation 1H2012
DisclaimerThese presentation materials have been prepared by Hyundai Card Co., Ltd. (“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 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 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 Company nor any of its affiliates, advisers or representatives make any undertaking to update any such
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Certain information and statements made in this presentation contain “forward-looking statements.” Such forward-looking statements can
be 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 future
events and are subject to a number of factors that could cause actual results to differ materially from those described in the forward-looking
statements. Caution should be taken with respect to such statements and you should not place undue reliance on any such forward-looking
statements.
Certain industry and market data in this presentation was obtained from various trade associations, and the Company have not verified such data with
independent sources. Accordingly, the Company make no representations as to the accuracy or completeness of that data, and such data involves risks
and uncertainties and is subject to change based on various factors.
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or in part, for any purpose.
• Good profitability : Operating profit of KRW 121 billion and ROA of 2.2%
• Effective marketing : Innovative branding increased market share to 14.4%
• Excellent asset quality : 0.6% delinquency rate, the lowest rate among Korean FIs
• Sound capital structure : Leverage of 3.4x and a capital adequacy ratio of 19.9%
• Strong liquidity : Short term debt coverage ratio of 77.0%
3
Key Highlights 1H 2012
4
Resilient GDP Growth and Increasing Credit Card Usage
GDP Growth Rate & Unemployment Rate
2.2%
0.2%
6.1%
3.6%
2.6%
3.2%
3.6% 3.5%
3.0%3.2%
2008 2009 2010 2011 1H12
Source: Bank of Korea
GDP Growth Rate Unemployment Rate
Credit Card Spending & Usage Rate
279.3 303.9
350.7
390.2
106.6
49.7%52.8%
56.8%59.6%
63.3%
2008 2009 2010 2011 1Q12
Credit Card Spending (KRW Tn)
Credit card spending / Total private consumption
Source: Credit Finance Association
5
Balanced-risk Asset Portfolio and Consistent Market Share
Asset Portfolio (KRW Bn) Market Share Trend
5,616
7,136
9,1869,563 9,693
2008 2009 2010 2011 1H12
44.0%
28.9%
12.6%
14.5%
48.5%
25.8%
10.7%
15.0%
40.7%
25.0%
12.6%
21.6%
42.8%
25.4%
10.6%
21.0%
41.3%
25.5%
9.9%
23.0%
Lump Sum Installments Cash Advance
Card Loan Others
13.8%
15.7% 15.7% 15.5% 15.5%
11.2%
13.1%
14.1% 14.3% 14.4%
2008 2009 2010 2011 1Q12
Total Credit Card Market (credit purchase*+ financial products)
Credit Purchase* Market
* Excludes corporate accounts
Source: FISIS
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
6
Good Profitability Underscores Strong Fundamentals
2009 2010 2011 1H11 1H12 YoY
Operating Revenues 1,841 2,336 2,408 1,215 1,235 1.6%
(Excluding FX effect) 1,795 2,259 2,378 1,179 1,218 3.3%
Operating expenses 1,555 1,961 2,084 1,007 1,114 10.6%
(Excluding FX effect) 1,509 1,884 2,054 971 1,097 13.0%
Bad debt expense 113 185 200 94 98 4.3%
Operating income 286 375 324 208 121 -41.9%
Net Income 213 281 239 156 106 -32.4%
Income Statement (KRW Bn)
16.7%15.1%
17.6%
12.6%
10.2%
3.9%3.5% 3.5%
2.6%2.2%
2008 2009 2010 2011 1H12
Return on Equity & Return on Assets
ROE ROA
94114
148 190 200
135 142166
174 178
23
204 216
143.3%123.9% 127.7%
199.1% 197.0%
7
Excellent Asset Quality and Conservative Reserve Policy
30+ Day Delinquency Rate (%) Total Reserve VS Regulatory Requirement (KRW Bn)
0.7%
0.3% 0.4%
0.6% 0.6%
2008 2009 2010 2011 1H12 2009 2010 2011 1H12
189
378394
2008
Regulatory Requirement Reserve under Accounting Principles
Supplemental Reserve Total Reserve/ Regulatory Requirement
4.6x
4.9x
6.0x
5.4x 5.3x
3.2x
3.5x
4.4x
3.5x 3.4x
2008 2009 2010 2011 1H12
Dividend policy: Maximum leverage limit of 4x(on managed borrowings basis)
8
Leverage and Capital Adequacy Soundly Managed
Leverage Trend Capital Adequacy Ratio (KRW Bn)
Total Assets / Total Shareholders' Equity
Managed Borrowings / Total Shareholders' Equity
1,406 1,699
1,843 1,845 1,903
23.5% 22.5%18.7% 19.6% 19.9%
2008 2009 2010 2011 1H12
Adjusted Capital CAR
• Funding Balance : KRW 7,185Bn
• Long-term funding : 71.1%
• Maintain the proportions of ABS and CP
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%
• Contingency plans under regular review
9
Well Diversified, Stable Funding Portfolio
Bonds
80.7%
Loans
2.4%
CP
4.5%
ABS
12.5%
Funding Portfolio by Product Funding Principles
10
Strong Liquidity Position and Well-Spread Debt Maturity
Liquidity Profile (Unit: KRW Bn) Debt Maturity Profile (Unit: KRW Bn)
360 391
650 743 760120 20
498
841 841
480 411
1,148
1,584 1,601
2008 2009 2010 2011 1H12
* Short-term Debt Coverage Ratio= (Cash + Unused committed credit line)/ Short-term debt balance
32.7%
18.6%
36.7%
79.0% 77.0%
Credit LineCash Short-term Debt Coverage Ratio*
Source: Company
840
1,577
1,250 1,233
650
248
320
30
40
100
149
298 450
16.6%
24.6%
22.9% 23.4%
9.0%
3.5%
1,190
1,766
1,648 1,683
650
248
2H12 2013 2014 2015 2016 2017~
CP LoanBond ABS
Hyundai Card Company OverviewHyundai Card Investor Presentation 1H 2012
I. Who is Hyundai Card?
13
The Premier Korean Credit Card Company
• Industry leader across key quality metrics
- Excellent asset quality with the industry’s lowest delinquency rate of only 0.6%
- 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
- Joint promotions with Hyundai Motor Group
• Strong credit profile based on robust fundamentals
- International – Fitch: BBB / S&P: BBB
- Domestic – AA+
- GE Capital acquires KRW 313bn equity interest in HCC
- Establishment of joint venturewith GE Capital
- 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%
43.3%
- Innovative “Point Programs”
- Stable & solid operational base
- Extensive sales network
- Powerful financing arm
- Effective marketing tool
- Most successful joint venture
- Sole consumer finance window in Korea
- Advanced knowledge of risk management
- Financial support
- Active involvement in management and daily operations
2010
2008
2006
2005
Shareholder Financial & Operational Support
Relationship with Shareholders GE Capital’s Financial Support
2012 - Total Investment to date : U$642mm(As of 2Q12)
14
- GE Capital purchases KRW 200bn subordinated bond
15
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
16
Committed to Transparent Corporate Governance
Board of Directors
• HMC 5 : GECC 4 : Outside directors 3
• GECC has veto rights
Risk Control Committee
• Member : 5 from HMC, 5 from GECC
• Frequency : Monthly
• Function
-Determination of risk indicator levels and appropriate course of actions in respect thereof
Executive Finance Committee
• Member : 4 from HMC, 3 from GECC
• Frequency : Monthly
• Function
-Approval of various operating expenses, Capex, business and funding plans
Compliance Review Board
• Member : 9 from HMC, 7 from GECC
• Frequency : Quarterly
• Function
-Formulation and execution of 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
17
Business Area Features
Credit Purchase
Lump sum• Single-payment purchases
• Repaid on a monthly billing cycle
Installment• Multiple-payment purchases
• Payment period of 2-12 months
Financial Products
Card loan• Unsecured loans to cardholders
• 3 – 36 month maturity
Cash advance• Cash withdrawal
• Lump sum or installment payback
Product Overview & Market Share
Market Share Trend
9.8%
11.8%
12.8%
13.8%
15.7% 15.7% 15.5% 15.5%
7.0%
8.8%
10.1%
11.2%
13.1%
14.1% 14.3% 14.4%
2005 2006 2007 2008 2009 2010 2011 1Q12
Total Credit Card Market (credit purchase*+ financial products)
Credit Purchase* Market
* Excludes corporate accounts
Source: FISIS
II. Premium Brand & Marketing
19
One of Korea’s Most Well Recognized & Respected Brands
Strong Brand Drives Higher Customer Loyalty Innovative Branding Activities
*88.1% (Source: TNS RI Research 2011)
Strategy:
- Liquid metal card plates
- British Rock Sound Identity - Pop-up stores
- Super event series
Emotional Communication
• Customizable card materials & design
• Music platform promoting independent artists
• Restaurant review Smartphone application
• ‘Pop-up stores’ in style-focused locations
Innovative Experience
Classic Dynamic
Result:
- Well respected, trendsetting image with high customer awareness*
- Higher customer loyalty & spending, evidenced through average card usage per customer
20
Effective Market Segmentation & Positioning
Customer Segmentation Product Positioning
• Joint marketing with Hyundai Motor Company- Vehicle price discounts based on reward point programs
• 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
• Premium services- Travel, leisure & luxury brand promotions
• VVIP Community- High-class events, fine culture performances & exclusive
lounges
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III. Macro & Industry Environment
22
Korea’s Macro Environment
GDP Growth Rate & Consumer Price Index
2.2%
0.2%
6.1%
3.6%
2.6%
4.7%
2.8% 3.0%
4.0%
2.7%
2008 2009 2010 2011 1H12
Source: Bank of Korea
GDP Growth Rate Consumer Price Index
Credit Card Spending & Usage Rate
279.3 303.9
350.7
390.2
106.6
49.7%52.8%
56.8%59.6%
63.3%
2008 2009 2010 2011 1Q12
Credit Card Spending (KRW Tn)
Credit card spending / Total private consumption
Source: Credit Finance Association
Korean Credit Card Market Features23
• Conservative lending environment
- Low usage of revolving credit card products, as full monthly balance payment
preferred
• 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
24
Korea Credit Card Industry: Then & Now
Combined Asset portfolio Total Asset Quality (30+ Day Delinquency Rate)
35.1%
64.3%
64.9%35.7%
2003 1Q12
Credit Purchase Financial Products
Combined Capital Adequacy Ratio
Source: FSS
-5.5%
26.2%
2003 1Q12
28.3%
2.1%
2003 1Q12
Regulatory & Infrastructure Changes:
- 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
26
Balanced Asset Portfolio of Credit and Financial Products
Asset Portfolio (Unit: KRW Bn)
2,990
3,508
4,507
5,616
7,136
9,1869,563 9,693
2005 2006 2007 2008 2009 2010 2011 1H12
44.0%
28.9%
12.6%
14.5%
48.5%
25.8%
10.7%
15.0%
40.7%
25.0%
12.6%
21.6%
42.8%
25.4%
10.6%
21.0%
41.3%
25.5%
9.9%
23.0%
Lump Sum Installments Cash Advance
Card Loan Others
50.6%
23.5%
12.3%
13.5%
58.5%
19.0%11.9%
7.9%
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
Cash Advance
Lowered cash advance limits for lower credit quality customers
Card LoanTightened underwriting policy for heavy debtors
Credit Purchase
Tightened underwriting policy for revolving products and new originations
• Risk Control Committee (RCC)
– Decision making for most supreme risk
– Review portfolio risk performance
• 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
• 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
27
4.3%
2.2%
0.4%0.7%
0.3%0.4%
0.6% 0.6%
2005 2006 2007 2008 2009 2010 2011 1H12
Historical Asset Quality
30+ Day Delinquency Rate (%)
28
29
Historical Reserve & FSS Requirement Coverage Ratio
125 89
52 94.1 114
148 190 200
139 158 104
134.8142
166 174 178
23
204 216
2009 2010 2011 1H12
189
378394
2008
111.4%
178.1%200.4%
143.3%123.9% 127.7%
199.1% 197.0%
Total Reserve VS Regulatory Requirement (KRW Bn)
Regulatory Requirement Reserve under Accounting Principles Supplemental Reserve Total Reserve/ Regulatory Requirement
K-GAAP
2005 2006 2007
K-IFRS
Sustainable Growth Based on Strong Fundamentals
2006 2007 2008 2009 2010 2011 1H11 1H12 YoY
Operating Revenues 1.109 1,121 1,594 1,841 2,336 2,408 1,215 1,235 1.6%
(excl. FX effect) 1,109 1,116 1,451 1,795 2,259 2,378 1,179 1,218 3.3%
Operating Expenses 809 1,049 1,337 1,555 1,961 2,084 1,007 1,114 10.6%
(excl. FX effect) 809 1,044 1,193 1,509 1,884 2,054 971 1,097 13.0%
Card expenses 314 380 506 730 863 924 447 530 18.4%
Interest expenses 113 139 187 220 319 357 181 173 -4.5%
SG&A Expenses 245 296 367 398 484 538 236 281 19.3%
PPOP 39 26 36 441 570 525 304 220 -27.5%
Bad Debt expenses 95 42 102 113 185 200 94 98 4.3%
Provision for unused Credit Line
- 142 -3 42 14 1 2 2 -24.4%
Operating Income 300 73 258 286 371 324 208 121 -41.9%
ROA 8.9% 6.0% 3.9% 3.5% 3.5% 2.6% 3.5% 2.2% -
ROE 34.6% 23.9% 16.7% 15.1% 17.6% 12.6% 17.5% 10.2% -
Income before Tax 306 109 272 295 371 324 208 121 -41.9%
Net Income 281 234 202 213 281 239 156 106 -32.4%
K-IFRSK-GAAP
Income Statement (KRW Bn)
30
V. Capitalization, Funding & Liquidity
Capital Adequacy Ratio (Unit: KRW Bn)
32
Strong Capital Structure
383
1,080
1,306 1,406
1,699 1,843 1,865 1,903
12.4%
31.3%28.4%
23.5% 22.5%18.7% 19.6% 19.9%
2005 2006 2007 2008 2009 2010 2011 1H12
Adjusted Capital CAR
12.3x
4.1x4.1x
4.6x 4.9x
6.0x5.4x 5.3x
11.3x
2.6x 2.6x3.2x
3.5x
4.4x
3.5x 3.4x
2005 2006 2007 2008 2009 2010 2011 1H12
Well Controlled Leverage
Dividend policy set: Maximum leverage limit of 4x (on managed borrowings basis)
Leverage Trend
Total Assets / Total Shareholders' Equity Managed Borrowings / Total Shareholders' Equity
33
2,664
2,199
2,933
3,980
5,165
7,197 7,068 7,185
2005 2006 2007 2008 2009 2010 2011 1H12
Bond-domestic Bond-overseas ABS-domestic ABS-overseas Bank loans CP
Diversification of Funding Portfolio over Time
Managed Borrowings (KRW Bn)
% of LT Funding
50.5% 50.5% 62.6% 63.1% 57.3% 56.5% 71.6% 71.1%
34
50.1%
18.8%
22.9%
80.4%
12.5%
4.5%
59.4%
15.9%
9.3%
47.3%
19.5%
14.8%
13.6%
49.6%
10.1%
14.1%
8.3%
15.1%
61.8%
7.7%
11.0%
6.4%
11.0%
73.2%
4.6%
9.2%
10.1%
83.6%
6.9%
6.3%
35
Substantial Improvement in Liquidity Position
Liquidity Profile (KRW Bn)
65 143 149
360 391
650743 760
150
120 20
498
841 841
65143
299
480411
1,148
1,584 1,601
2005 2006 2007 2008 2009 2010 2011 1H12
4.9%13.1%
27.3%32.7%
18.6%
36.7%
79.0% 77.0%
* Short-term Debt Coverage Ratio= (Cash + Unused committed credit line)/ Short-term debt balance
Credit LineCash Short-term Debt Coverage Ratio*
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]
Minchul Seo, Deputy General Manager of Investor RelationsPhone +82 2 2167 [email protected]
Jay Moon, Manager of Investor RelationsPhone + 82 2 2167 [email protected]
http://ir.hyundaicard.com/