2. 1
Disclaimer
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3. 2
Major Issues in 1H15
Asset growth through Enhanced Business as a Captive Finance despite unfavorable market
conditions
Laid foundations for better profitability through Asset Quality improvement and Bad Debt
Expense decrease, as a result of constant risk management.
Overseas operation expansion through strengthened Global Business capabilities
4. 3
Business Environment
Domestic Economy Domestic Auto Sales
Stagnant captive auto sales
• Strong sales recorded by Import auto makers
• Improvement expected in 2H through full model change of
best-sellers (HMC Avante, KMC K5 etc.)
(unit : *1,000)
Economic recovery delayed
• GDP growth rate lowered (Bank of Korea, ‘15. 7)
Low interest continued
• Competition intensified as funding cost gap narrows
2.0%
2.8%
3.3%
2.4%
2.75%
2.50%
2.00%
1.50%
2012 2013 2014 1H15
GDP growth rate Key rate
668 641 685
336
482 458 465
243
392 441 510
279
1,542 1,540 1,660
857
74.6%
71.4%
69.3%
67.5%
2012 2013 2014 1H15
HMC KMC Others HMG M/S
5. 4
Asset
Asset Portfolio Business Strategies 2015
(unit: KRW bn)
2012 2013 2014 1H15 YTD
New car 11,000 10,510 10,472 10,832 3.4%
Auto lease 3,805 3,976 3,818 3,896 2.0%
Used car 1,410 1,484 1,464 1,418 -3.1%
P-loan 1,959 2,111 2,162 2,075 -4.0%
Mortgage 1,641 1,796 1,745 1,667 -4.5%
Auto-finance
• Competitiveness reinforced through OEM co-marketing
• Specialized products launch to meet customer needs
(PCP, Personal lease)
Personal-finance
• Strengthened marketing to target prime customers
Reference : OEM co-marketing(unit: KRW bn)
Jan Interest lowered by 1% on all KMC vehicles
Mar Interest lowered by 1% on all HMC vehicles
KMC “Morning Coffee” promotion
HMC “KRW 100,000 Miracle – Avante”
promotion
May HMC interest-free on Sonata
16,214 15,970 15,754 16,146
4,070 4,428 4,569 4,590
20,285 20,397 20,323 20,735
79.9% 78.3% 77.5% 77.9%
2012 2013 2014 1H15
Auto asset Non-auto asset % of Auto asset
6. 5
Profitability
① Excluding FX effects
② Including one-off disposal loss
Summary of Income Statement
2013 2014 1H14 1H15 YoY
Operating Rev①
2,915.1 2,745.9 1,355.6 1,328.2 -2.0%
Operating Exp①
2,486.8 2,423.8 1,212.0 1,121.3 -7.5%
Interest expense 800.6 752.6 387.3 336.2 -13.2%
Lease expense 505.9 500.5 250.1 250.3 0.1%
SG & A 671.7 702.3 321.2 360.1 12.1%
Bad debt expense 453.1 418.3 226.6 149.2 -34.2%
Operating Income 429.1 321.9 143.3 207.4 44.8%
Non-operating
Income
3.3 9.1 11.0 21.8 98.2%
Equity method
income
4.5 17.0 -20.9 19.1 TB
Net Income 391.4 237.7 85.1 173.9 104.3%
ROA 1.9% 1.3% 0.8%②
1.7% 0.9%p
Analysis on Income Statement
Operating Revenue
• Product interest lowered due to key rate drop
Operating Expense
• Interest expense decreased due to key rate drop
• Bad debt expense decreased due to asset quality
improvement
Net Income
• Equity method income increased due to stabilized
overseas operation
(unit: KRW bn)
6.8% 6.6% 6.0%
5.0%
2012 2013 2014 1H15
New car finance APR
8. 7
Capital Structure
Capital Adequacy RatioLeverage
① Based on previous quarter’s total capital since 2013
2012 2013 2014 1H15 YTD
Total Asset 21,885 22,369 22,508 22,682 0.8%
Total Capital① 3,031 3,400 3,395 3,502 3.2%
(unit: KRW bn)
2012 2013 2014 1H15 YTD
Adjusted
Total Asset
20,438 20,673 21,793 21,955 0.7%
Adjusted
Total Capital
2,954 3,130 3,346 3,552 6.2%
(Unit: KRW bn)
7.2X
6.6X 6.6X 6.5X
2012 2013 2014 1H15
14.5% 15.1% 15.4% 16.2%
2012 2013 2014 1H15
9. 8
Domestic
bond
56.1%
Overseas
bond
22.0%
Domestic
ABS
9.3%
Overseas
ABS
3.9%
Loans
7.2%
CP
1.5%
Funding
Funding Portfolio by product Asset-Liability Maturity
2014 1H15
Total Funding 5,893 3,317
Bond 3,353 1,957
Domestic 2,510 1,511
Overseas 843 446
ABS 600 400
CP, Bank loan 1,940 960
2014 1H15
(unit: KRW bn)
Funding Guidelines
• Long-term debt : 60% or more
• By Product: ABS <20%, CP <10%
• ALM ratio : 100% or more
2.0yr 2.0yr
1.9yr
2.0yr
148.0%
142.0%
132.0%
139.2%
2012 2013 2014 1H15
Debt maturity ALM ratio
Domestic
bond
52.0%Overseas
bond
26.2%
Domestic
ABS
7.6%
Overseas
ABS
5.3%
Loans
7.8%
CP
1.1%
KRW
17.8tn
KRW
17.8tn
10. 9
Liquidity
Liquidity Position Short-term debt Coverage
Contingency framework
• Early warning and response system in place
• Daily monitoring of key market indicators
(unit: KRW bn) (unit: KRW bn)
Liquidity Management
• Satisfies Basel III Liquidity coverage ratio
• Diversified Credit lines by lender and tenor
1,100 1,304 1,375 1,210
2,480 2,345 2,524 2,894
3,580 3,649 3,899 4,104
2012 2013 2014 1H15
Cash Credit line
5,176 4,953
5,790
4,889
69.2% 73.7%
67.3%
83.9%
2012 2013 2014 1H15
Short-term debt Short-term debt coverage ratio
11. 10
Overseas Business
Overseas Operations
Country
(Corp. name)
Founded
Equity
structure
Financial Asset
(local currency)
(HCA)
1989.9
HMA 80%
KMA 20%
KRW 28.7tn
(USD 25.5bn)
(HCUK)
2012.2
HCS 29.99%
HMUK 10%
KMUK 10%
SCUK 50.01%
KRW 2.2tn
(GBP 1.3mn)
(BHAF)
2012.6
HCS 46%
HMC 14%
BAI 40%
KRW 2.5tn
(CNY 13.7bn)
(HCCA)
2014.4
HMC 60%
KMC 40%
KRW 216bn
(CAD 238mn)
Growth of Overseas Asset
(unit: KRW tn)
CAGR=36%
① FX rate as of 1H15-end
①
5
9
14
19
24
31
34
'09 '10 '11 '12 '13 '14 1H15
12. 11
Appendix
Personal Lease Launch Certified Used Car Center Open
Reinforce Auto-finance Value chain
• Utilize systematically managed Lease-returned vehicles
• Manage Vehicles’ residual value efficiently
Initiate changes on vehicle “possession”
• Boost new car sales and shorten replacement period
• “Use” easy-to-manage cars on lower monthly payment
