Hyundai Card Corporation presented its 3Q 2014 financial results and forecasts. Key highlights included a 57.4% increase in operating income due to cost reductions and higher revenues. Asset quality remained stable with delinquencies under 1% and adequate reserves. The company emphasized simplifying products and enhancing customer portfolio quality through its "Chapter 2" initiatives. It forecast continued profit growth by optimizing costs, growing high-spending members, and balancing stability with increased financing revenues. Capital and liquidity positions remained strong with leverage decreasing despite asset growth.
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3. 2012 2013 9M 13 9M 14 YoY
Op Revenues* 2,469 2,515 1,862 1,906 2.3%
Op Expenses * 2,232 2,295 1,699 1,644 -3.2%
Product/Service
Expense
560 566 423 379 -10.4%
Operating Income 237 220 171 269 57.4%
Net Income 194 163 127 205 61.3%
Income Statement (KRW Bn)
Special Agenda I – Enhanced Profit
2.6%
2.0% 1.7%
2.8%
2011 2012 2013 9M14
ROA
Increase in operating revenues
- Installment sales volume normalized
- Interest income Increased from finance product
sales increase
Decrease in operating expenses
- Decrease in product/service expenses
Result of Chapter 2 linked to profit enhancement
Continue Optimizing cost efficiency (Chapter 2)
Accrue more members to broaden profit base
3
Key Highlights
Forecast and Strategy
* excl. FX effect
4. *# members with at least one transaction per month / # eligible card holder
**based 3 MOB of new members acquired through the offline channel, excluding no transaction members
74%
83%
Ch 1 Ch 2
38%
51%
Ch 1 Ch 2
+ 9%
+ 13%
Card Usage* Key Highlights
% of New Members with Spending > KRW 500K**
Achieving customer portfolio with actual users
- Differentiate rewards based on loyalty
New members quality enhanced
- High spending customer focused
Expand M-point accepted merchants to expand
customer’s variety of point spending choice
Establish “Farming” customer mgnt. framework to
provide customized offers for generate steady profit
Forecast and Strategy
4
Special Agenda II – Enhanced Customer Portfolio with Chapter2
5. Awarded for Ethical Business Management:
Hyundai Card
HCC (CEO: Ted Chung) has been renounced as the 22nd winner of the
“Most ethically managed company” by the Korean Association of
the business Ethics on October 14th…
HCC has “3 no-tolerance policy” for customer information
protection, clear business transaction, and collusion” that the
company has internal/external auditing system empowered to
investigate the wrong-doings of the personnel as high as CEO.
The company also has more than 10 initiatives, including compliance
training, external hotline, cyber auditing unit and etc…
Executive VP Hwang said, “the company’s core value of business
ethics is closely related to the survival, and our endeavors to keep
such value has been recognized. We’ll continue to reinforce the
ethical business management.”
HCC Media Exposure
Source: 2014-11-14 FN Times
Changing the rule in credit card with ‘Simple’
Ted chung , CEO of HCC, has made a serious statement that
“Simplification is the key targets for the year 2014. I will be leading
the task.” The concept is to eliminate inefficient “extras” to be
able to focus on the core.
Ever since, the company is undergoing the ‘simplification’
companywide. The intranet is flooded with over 13 thousand ideas in
just two months and turned into the new systems. For example, a
customer handling department used to write about 15 thousand
notes to able to access the phone recordings, yet it’s been
simplified by giving multi-level permissions to the limited party of
the employees…
The top result came from the simplification of the product portfolio.
The “Chapter 2” launched in July last year simplifies the benefits of
the card products into either ‘point’ or ‘cashback’… The result is
the 64% increased net income of KRW 137 Bn, compared to the same
period last year…
Source: 2014-10-17 Korea Economy News
5
6. 15.5% 15.5%
14.5% 14.2%
14.3% 14.5%
13.8% 13.8%
2011 2012 2013 9M14
Asset Portfolio (KRWTn)
Asset and Market Share
Market Share
Total (Credit*+ Finance)Credit*
* retail spending only
Source: FISIS
Profitability/Stability balance with credit purchase
centered portfolio
- Lump sum + Installment: 61.8%
Increased proportion of finance to enhance
profitability
- Mainly increased with card loans, for lower risk
Maintained 3rd in market share
Qualitative growth by stronger customer
management based on Chapter 2
Increase finance proportion within total risk
management limit
6
Key Highlights
Forecast and Strategy
4.1 4.4 4.3 4.1
2.4 2.2 2.1 2.2
1.0 0.9 0.8 0.9
2.0 2.3 2.6 3.0
9.6 9.9 9.9 10.2
2011 2012 2013 3Q14
Lump Sum Installment CA CL Others
7. Asset Quality and Reserve
30+ Delinquency Ratio
0.6%
0.7% 0.8%
0.9%
2011 2012 2013 3Q14
2011 2012 2013 3Q14
Total Reserve* 378 544 594 649
FSS Coverage** 199.1% 157.1% 144.0% 138.0%
Delinquency under 1% maintained
- Slight increase with increase of finance
product volume vs. 2013, yet maintained at
0.9% since 1Q14
Increased total reserve
- FSS Coverage about 142%
Maintain stability/profitability balance with total
risk management
Maintain conservative reserve policy
7
Key Highlights
Forecast and Strategy
Reserve (KRW Bn)
* Reserve under IFRS + supplemental reserve
** Total Reserve / FSS Requirement
8. 19.6%
18.7% 19.4%
20.5%
2011 2012 2013 3Q14
Capital Structure
5.4x 5.1x 5.0x 4.8x
2011 2012 2013 3Q14
Capital Adequacy Ratio
Increased capital from retained earning
- Leverage decreased despite the asset increase
- FSS regulation enforced since 2012: under 6X
Manage leverage within FSS regulation
Dividend in compliance with regulation
8
Key Highlights
Forecast and Strategy
Leverage (KRW Bn)
Total Asset / Total Equity*
* FSS guideline: 7%
** Separated Financial Statement
* Since 2013, previous quarter’s equity have been used for calculation.
** Separated Financial Statement
9. • Total Balance: 7.5 Tn
• % Long Term : 72.7%
Funding Portfolio by Product
Funding
Strategic Funding based on the market
condition
- Bond proportion increased to leverage spread
tightening
- Reinforced monthly funding balance with CP
Diversification in currency
- Overseas ABS 290 USD Mn (2Q)
Product mix guidelines : ABS < 20%, CP < 10%
% of Long-term debt guideline > 60%
9
Key Highlights
Forecast and Strategy
Domestic
Bond
85.5%
CP 1.7%
Loan
2.7%
ABS
10.1%
10. 743 690 780 1,015
841 824 866 620
1,584 1,514
1,646 1,635
2011 2012 2013 3Q14
Liquidity Position
79.0%
65.5%
87.5% 80.0%
Liquidity Profile (KRW Bn)
Debt Maturity (KRW Bn)
Reinforced liquidity guideline under new stress
test model
More cash for stronger liquidity position
(replacing Credit Line)
Early warning detection by monitoring daily
market indicators
ALM based funding: Only 27% of total debt
maturing within 1 year
Debt maturity > Asset maturity : maintain ALM
over 100%
Maintain short-term debt coverage over 60%
10
Key Highlights
Forecast and Strategy
Credit LineCash Short-term debt Coverage Ratio*
* Short-term debt Coverage Ratio
= (Cash + Unused credit line)/ short-term debt under 1 yr.
5,400
11,000 9,530
17,000 17,315
14,610
7.2%
14.7% 12.7%
22.7% 23.1%
19.5%
4Q14 1H15 2H15 2016 2017 2018~
