Hyundai Motor Securities Upgraded to Credit Rating AA- with 'Stable' Outlook

[Asia Economy Reporter Kum Boryeong] Hyundai Motor Securities' credit rating has been upgraded from A+ to AA-.

Hyundai Motor Securities announced on the 23rd that Korea Ratings upgraded its credit rating from A+ to AA-. The rating outlook is 'stable.'

Korea Ratings analyzed that Hyundai Motor Securities' profit-generating capability has improved based on its diversified business foundation. Since 2014, Hyundai Motor Securities has maintained excellent profitability with an average operating net income coverage of 162.9% over the past five years. This year, by diversifying its business foundation through retail, asset management, investment banking (IB) sectors, and proprietary trading focused on bond operations, the operating net income coverage improved to 207.8% as of the end of September, according to Korea Ratings' evaluation.

Furthermore, Korea Ratings explained that Hyundai Motor Securities is expanding its IB sector competitiveness, which was concentrated on real estate project financing (PF), into traditional sectors such as equity capital markets (ECM) and debt capital markets (DCM), and is increasing business divisions by expanding overseas stock services for retail customers, forecasting that its profit-generating capability will steadily improve in the future.

According to the quarterly report disclosed by Hyundai Motor Securities on the 16th of last month, its operating profit for the third quarter of this year recorded a record high of 54.4 billion KRW, an increase of 188.8% compared to the same period last year. The cumulative operating profit for the third quarter was 128.4 billion KRW. This is the first time since its establishment in 2008 that the annual operating profit has exceeded 100 billion KRW.

Korea Ratings also focused on Hyundai Motor Securities' reduction of high-risk assets. As of the end of September, Hyundai Motor Securities' contingent liabilities balance was 650.6 billion KRW, accounting for 60.7% relative to its capital. Since exceeding 1 trillion KRW in 2015, it has been steadily decreasing. The proportion of high-risk asset exposure is 130.5%, which is lower than the industry average of 156.2%, and the scale of proprietary investment (PI) is managed within 100% relative to capital.

Capital adequacy and liquidity also received positive evaluations. Hyundai Motor Securities has maintained sound capital adequacy through issuing 80 billion KRW subordinated bonds in September 2018 and 103.6 billion KRW redeemable convertible preferred stocks (RCPS) in October last year. As of the end of September, Hyundai Motor Securities' net capital ratio (NCR) reached 496.3%, with surplus capital exceeding 600 billion KRW. Additionally, it maintains a liquidity ratio above 120%, managing the balance between assets and liabilities stably.

This content was produced with the assistance of AI translation services.