Equity Analysis /
South Korea

KR : Hyundai Motor Company - US subprime alert

    Kyung Jae Hwang
    Kyung Jae Hwang

    Head of Regional Offshore & Marine

    Follow
    CGS-CIMB
    8 April 2021
    Published byCGS-CIMB

    Low-credit car owners falling behind car payments for >60 days represented 10.9% of total US subprime borrowers in Feb 21 (vs. 8.7% in Feb 20). Some 90% of new car purchase relied on auto financing in the US last year. Subprime delinquency of mass models could incur provision costs at Hyundai Capital, in addition to potential funding cost pressure expected post rate hike. Structurally, EBIT gain from the finance arm implies higher minority interest and lower net profit for controlling shareholders, meaning static ROE growth.