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Hyundai Card Hyundai Card is...Investor Presentation Hyundai Card 2013
DisclaimerThese presentation materials have been prepared by Hyundai Card Co., Ltd. (“HCC or the Company”), solely for the use atthis presentation and have not been independently verified. No representations or warranties, express or implied, are madeas to, and no reliance should be placed on, the accuracy, fairness or completeness of the information presented or containedin this presentation. Neither the Company nor any of its affiliates, advisers or representatives accepts any responsibilitywhatsoever for any loss or damage arising from any information presented or contained in this presentation. The informationpresented 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 information subsequent to thedate 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 can beidentified 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’scurrent expectation of future events and are subject to a number of factors that could cause actual results to differ materially from those described inthe forward-looking statements. Caution should be taken with respect to such statements and you should not place undue reliance on any suchforward-looking statements.
Certain industry and market data in this presentation was obtained from various trade associations, and the Company’s have not verified such datawith independent sources. Accordingly, the Company’s make no representations as to the accuracy or completeness of that data, and such datainvolves risks and uncertainties and is subject to change based on various factors.
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Key Highlights 2013
• Stable profitability : Operating profit of KRW 220 billion and ROA of 1.7%
• Effective marketing : Highest average monthly spending (KRW 800k/month)
among peers as a result of unique marketing efforts
• Excellent asset quality : 0.8% delinquency rate (30 days +)
• Sound capital structure : Leverage of 4.9x and a capital adequacy ratio of 19.4%
• Strong liquidity : Short term debt coverage ratio of 87.5%
• Chapter 2, turn the page : Simplified brand portfolio, M and X card
Shareholder Financial & Operational Support
Relationship with Shareholders GE Capital’s Financial Support
2
2013201320132013 - Total Investment to date : U$650mm(As of 2013 end)
- Innovative “Point Programs”
- Stable & solid operational base
- Extensive sales network 54.0% - GE Capital provides U$200mm back-up
credit-line 2010201020102010
- 2006 ~ 2008 Exercising of Warrants(Additional equity investment)
2008200820082008
- GE Capital increases paid in capital by KRW 165bn
2006200620062006
- Extensive sales network
- Powerful financing arm
- Effective marketing tool
- Most successful joint venture
- Sole consumer finance window in Korea
43.3%
- GE Capital acquires KRW 313bn equity interest in HCC
- Establishment of joint venturewith GE Capital
2005200520052005
- GE Capital purchases KRW 200bn subordinated bond
- Advanced knowledge of risk management
- Financial support
- Active involvement in management and daily operations
3
GDP Growth Rate & Unemployment Rate
2010 2011 2012 2013
GDP Growth Rate 6.1% 3.6% 2.0% 2.8%
Resilient GDP Growth and Increasing Credit Card Usage
Key Highlights
� GDP growth remains near 2% for two consecutive yearsGDP growth remains near 2% for two consecutive yearsGDP growth remains near 2% for two consecutive yearsGDP growth remains near 2% for two consecutive years
- Slow recovery, albeit government expenditure increase
451.2
56.8% 59.6%66.3%
61.0%
Source: Bank of Korea
GDP Growth Rate 6.1% 3.6% 2.0% 2.8%
Unemployment (yr.) 3.7% 3.4% 3.2% 3.1%
Credit Card Spending* & Usage Rate
Credit Card Spending (KRW Tn) Credit card spending/Total private consumption
� VolumeVolumeVolumeVolume growth stagnantgrowth stagnantgrowth stagnantgrowth stagnant
- Matured market and regulation leads to stagnant
market growth
� Continuous GDP growth backed by the strong government Continuous GDP growth backed by the strong government Continuous GDP growth backed by the strong government Continuous GDP growth backed by the strong government
stimulationstimulationstimulationstimulation350.7
390.2 451.2
405.0
2010 2011 2012 3Q13
* Excludes cash advance and corporate purchase cards
Source: Credit Finance Association
stimulationstimulationstimulationstimulation
- Monitor the impact of weak JPY and household debt
� Countermeasure against regulation on credit card Countermeasure against regulation on credit card Countermeasure against regulation on credit card Countermeasure against regulation on credit card
companiescompaniescompaniescompanies
- Minimize the impact via enhanced products and
channels
4
Receivables Breakdown by Product
Balanced-risk Asset Portfolio and Consistent Market Share
Card Loan
Others 0.6%
Key Highlights and Strategy
� Balance between profitability and stability
by maintaining credit purchase account over 60%
Lump Sum 42.8%
Installments 21.5%
Cash Advance 8.5%
Card Loan 26.6%
Market Share
• Total Financial Receivables :KRW 9.9 Tn
•% credit purchase : 64.3%
Credit Purchase* Market
� Marginal M/S decrease, as refrained from volume
growth
- Reduce benefits for Cherry Picking customers
- Increase benefits for Loyal customers
15.7% 15.5% 15.5%14.9%
14.1% 14.3% 14.5%13.9%
2010 2011 2012 9M13
Total Credit Card Market (credit purchase*+ financial products)
* Excludes corporate accountsSource: FISIS
� Qualitative growth based on loyal customers
- Reform product service/card plates to simplify
and reinforce card portfolio
� Increase finance volume without deteriorating
asset quality
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2010 2011 2012 2013 YoY
Operating Revenue* 2,260 2,370 2,460 2,503 1.8%
Operating Expenses* 1,890 2,045 2,223 2,283 2.7%
Income Statement (KRW Bn)
Good Profitability, albeit Slow Economy
Key Highlights and Strategy
� Weaker operating revenue growth
- Decrease in card income : MDR regulation impacts etc.
Operating Expenses* 1,890 2,045 2,223 2,283 2.7%
Bad debt expense 185 200 203 248 22.1%
Operating income 371 323 237 220 -7.3%
Net Income 278 239 194 163 -16.0%
* Excluding FX effect
ROAROA
- Increase in income from financial products : Card loans
and revolving loans
� Increase in operating expenses
- Increase in bad debt expenses due to the unfavorable economic conditions and regulations
- Transform to efficient cost structure with service reduction
3.5%2.6%
2.0% 1.7%
2010 2011 2012 2013
ROA
� Reinforce profitability to set base for a turnaround
- Diversify product portfolio
- Optimize the cost structure through reducing point expenses, etc.
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Excellent Asset Quality and Conservative Reserve Policy
30+ Day Delinquency Rate (%)
0.4%0.6% 0.7% 0.8%
Key Highlights and Strategy
� Delinquency edged up, but stable since 1Q13
- Impact from macro: slow economy and higher
2010 2011 2012 2013
2010 2011 2012 2013
Total Reserve (KRW Bn)
household debt
- Delinquency rate maintained with conservative
underwriting policy
� Total reserve increased
(over 100% vs. FSS regulatory requirement)
2010 2011 2012 2013
Total Reserve* 189 378 544 594
Regulatory coverage** 128% 199% 157% 144%
% of Asset 2.1% 4.0% 5.5% 5.7%
* Reserve under accounting principles + supplemental reserve** Total Reserve/ Regulatory Requirement
� Maintain tightened underwriting process and Maintain tightened underwriting process and Maintain tightened underwriting process and Maintain tightened underwriting process and
employ more efficient collection strategy to enhance employ more efficient collection strategy to enhance employ more efficient collection strategy to enhance employ more efficient collection strategy to enhance
asset qualityasset qualityasset qualityasset quality
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Leverage and Capital Adequacy Soundly Managed
6.0x
Leverage Trend (KRW Bn)
Total Asset / total Shareholder’s EquityTotal Equity
Leverage Regulation < 6X
Key Highlights and Strategy
�
1,737 2,008
2,197 2,367
6.0x5.4x 5.1x 4.9x
2010 2011 2012 2013
Capital Adequacy Ratio
� Earnings retained for conservative leverage
Capital Adequacy Ratio
2010 2011 2012 2013
Capital Adequacy Ratio 18.7% 19.6% 18.7% 19.4%
* FSS guideline: 8.0%
� Maintain dividend payout policy within 6.0X
in line with FSS guideline
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Funding Portfolio by Product
ABS
Well Diversified, Stable Funding Portfolio
Key Highlights and Strategy
� Strategic Funding based on market condition
- Exploit tightening spread in longer tenor
Bonds 86.7%
Loans 2.9%
10.3% - Exploit tightening spread in longer tenor
- Bond proportion increased to accommodate
low interest environment
• Balance : KRW 7.2 Tn
• Long term : 74.0%
� Establish funding portfolio with
ABS under 20%, CP under 10%
1,584 1,514 1,646
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Strong Liquidity Position and Well-Spread Debt Maturity
36.7%
79.0%65.5%
87.5%Credit LineCash Short-term Debt Coverage Ratio*
Liquidity Profile (Unit: KRW Bn) Key Highlights and Strategy
� More Cash for Liquidity Reinforcement
650 743 690 780
498
841 824866
1,148
1,584 1,514 1,646
2010 2011 2012 2013* Short-term Debt Coverage Ratio
= (Cash + Unused committed credit line)/ Short-term debt balance
Liabilities (Debt) (Unit: KRW Bn)
� ALM based funding: only 26% matures in 1st year
1,111 770
1,933 1,450
1,068 911
15.3%10.6%
26.7%
20.0%14.7% 12.6%
1H14 2H14 2015 2016 2017 2018~
Liabilities (Debt) (Unit: KRW Bn)
� Keep duration of liability > asset : ALM over140%
� Maintain short-term debt coverage ratio over 60%
Appendix
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The Premier Korean Credit Card Company
• Strongest brand power in industry
• Strong asset quality and high brand loyalty- Excellent asset quality with the industry’s lowest delinquency rate of only 0.8%- Excellent asset quality with the industry’s lowest delinquency rate of only 0.8%
- Highest monthly average spending in industry per customer : KRW 800k
• Marketing innovations differentiate brand and drive growth- Strategic marketing program with Hyundai Motor Group
- Leadership position in super premium segment
• Successful partnership between 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+
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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
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Product Overview & Market Share
Market Share Trend
Total Credit Card Market (credit purchase*+ financial products)
Credit Purchase* Market*Business Area Features
11.8%
12.8%
13.8%
15.7% 15.7% 15.5% 15.5%14.9%
10.1%
11.2%
13.1%
14.1% 14.3% 14.5%13.9%
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
8.8%
10.1%
2006 2007 2008 2009 2010 2011 2012 3Q13
Financial Products
Card loan• 3 – 36 month maturity
Cash advance• Cash withdrawal
• Lump sum or installment payback
* Excludes corporate accountsSource: FISIS
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One of Korea’s Most Well Recognized & Respected Brands
Strong Brand Drives Higher Customer Loyalty Innovative Branding Activities
Strategy:
InnovativeInnovativeInnovativeInnovative ExperienceExperienceExperienceExperience
- Design Library
- Various culture projects - My Taxi
- Super event series
EmotionalEmotionalEmotionalEmotionalCommunicationCommunicationCommunicationCommunication
• Design library, specializing in design related publications
InnovativeInnovativeInnovativeInnovative ExperienceExperienceExperienceExperience
ClassicClassicClassicClassic DynamicDynamicDynamicDynamic
• Super concert
*88.1% (Source: TNS RI Research 2011)
• My Taxi, concept car, in collaboration with KMC
• Unique culture projects of Hyundai card
Result:
- Well respected, trendsetting image with high customer awareness*
- Higher customer loyalty & spending, evidenced through average card usage per customer
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Chapter 2 : For the Next New 10 years
Two Track Brand Portfolio Two Key Benefit
Point • Simple Card Product- Simplified Product portfolio
Cash Back
- Simplified Product portfolio- Concentrate on saving Point
• Service Differentiation- Selecting card product by usage
amount (M1~M3)
• Discount through cash-back systemCash Back • Discount through cash-back system- Cash-back from every merchandise
• Service Differentiation- Selecting card product by usage
amount (X1~X2)
Key Indicators
(Unit : KRW Bn, %) 2006 2007 2008 2009 2010 2011 2012 2013
MarketShare
Credit Purchase 11.8% 12.8% 13.8% 15.7% 15.7% 15.5% 15.5% 14.5%
Total Market 8.8% 10.1% 11.2% 13.1% 14.1% 14.3% 14.5% 13.8%
Total 3,508 4,507 5,616 7,136 9,186 9,563 9,898 9,947
Credit Purchase 77.6% 74.1% 72.9% 74.3% 65.7% 68.1% 66.7% 64.3%
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Asset PortfolioCredit Purchase 77.6% 74.1% 72.9% 74.3% 65.7% 68.1% 66.7% 64.3%
Financial 19.8% 25.8% 27.1% 25.7% 34.3% 31.7% 32.9% 35.1%
Others 2.6% 0.1% 0.0% 0.0% 0.1% 0.2% 0.4% 0.6%
Profit Operating Income 111 73 258 286 371 324 237 220
Asset Quality
30+ Delinquency 2.2% 0.4% 0.7% 0.3% 0.4% 0.6% 0.7% 0.8%
Allowance for Loan Loss 158 104 135 142 189 174 181 205
Total Reserve** 158 104 135 142 189 378 544 594
Capital AdequacyCapital Adequacy Ratio 31.3% 28.4% 23.6% 22.5% 18.7% 19.6% 18.7% 19.4%
Asset Leverage 4.1X 4.1X 4.6X 4.9X 6.0X 5.4X 5.1X 4.9X
Total 2,199 2,933 3,980 5,165 7,197 7,068 7,073 7,243
Funding Portfolio
Total 2,199 2,933 3,980 5,165 7,197 7,068 7,073 7,243
Bond 68.5% 66.8% 64.6% 72.8% 73.6% 85.3% 80.4% 86.7%
Bank Loans 6.3% 4.7% 3.0% 2.0% 10.1% 1.4% 1.0% 2.9%
CP 9.3% 14.8% 14.1% 11.0% 9.1% 6.9% 4.9% -
ABS 15.9% 13.6% 18.3% 14.1% 7.2% 6.3% 12.7% 10.3%
Liquidity
Cash 143 149 360 391 650 743 690 780
Credit Line - 150 120 20 498 841 824 866
S-T Debt coverage 13.1% 27.3% 32.7% 18.6% 36.7% 79.0% 65.5% 87.5%
* Including supplemental reserve
Good Profitability, albeit Slow Economy
2008 2009 2010 2011 2012 2013 YoY
KKKK----IFRSIFRSIFRSIFRSKKKK----GAAPGAAPGAAPGAAP
Income Statement (KRW Bn)
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Operating Revenues 1,594 1,841 2,337 2,408 2,526 2,528 0.1%
(excl. FX effect) 1,444 1,795 2,260 2,370 2,460 2,503 1.8%
Operating Expenses 1,337 1,555 1,966 2,084 2,292 2,308 0.7%
(excl. FX effect) 1,186 1,509 1,890 2,045 2,223 2,283 2.5%
Card expenses 506 730 863 924 1,044 1,028 -1.5%
Interest expenses 187 221 319 357 343 313 -8.9%
SG&A Expenses 367 398 484 538 606 637 5.0%
PPOP 357 441 570 525 440 469 6.5%
Bad Debt expenses 103 113 185 200 203 248 22.0%
Provision for unused Credit Line
-3 42 14 1 0 1 -
Operating Income 258 286 371 324 237 220 -7.3%
Income before Tax 272 295 371 324 236 219 -7.4%
Net Income 202 213 278 239 194 163 -16.0%
ROA 3.9% 3.5% 3.5% 2.6% 2.0% 1.7%
ROE 16.7% 15.1% 17.6% 12.6% 9.2% 7.1%
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 to check credit based transactions
- Credit card company’s own credit scoring system for further credit assessment
• Cash-less society
- Credit card available for the payment in all private sectors, thus accounts 61% of
all private sector expense
• Strict government oversight- Regulations governing new origination practices and customer cash advance limits
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Korea Credit Card Industry: Then & Now
Combined Asset portfolio Total Asset Quality (30+ Day Delinquency Rate)
Credit Purchase Financial Products
Capital Adequacy Ratio Regulatory & Infrastructure Changes:
- Credit bureau system established
35.1%65.2%
64.9%34.8%
2003 3Q13
28.3%
2.0%
2003 3Q13
Source: FSS
- Credit bureau system established
- Reinforced standard on new credit card issuance
- Companies must maintain capital adequacy ratio of above 8% -5.5%
27.9%
2003 3Q13
Investor Relations Contacts
Jungsang Kim, Head of Investor RelationsPhone +82 2 2167 [email protected]
Suh ye Choi, Manager of Investor RelationsPhone +82 2 2167 [email protected]
Justin Lee, Manager of Investor RelationsPhone +82 2 2167 8082
Jay Moon, Assistant Manager of Investor RelationsPhone +82 2 2167 5312
http://ir.hyundaicard.com/
Phone +82 2 2167 [email protected]
Phone +82 2 2167 [email protected]
Hyunyoung Jang, Assistant Manager of Investor RelationsPhone +82 2 2167 [email protected]