Issuer Flash: Hyundai Capital Services, Inc.

Report date: 2026-09-03 Event date: 2026-06-30 Event title: 2Q26 Earnings Release and Financial Overview

1. Flash Conclusion

Hyundai Capital Services (HCS) reported 1H26 results that reinforce the stable credit view in the May 2026 issuer summary. Profitability improved, the 30+ delinquency ratio fell to 0.78%, provision coverage strengthened and asset leverage declined to 6.3x. This supports loss-absorption capacity but does not remove market-funding risk or gaps in PF, mortgage, lease/rental and used-car disclosure.

The official IR Presentation page displayed the 2Q26 presentation, but did not display an exact public posting date. This flash therefore uses the 2026-06-30 period end as its Event date; it does not infer a release date. The presentation is unaudited management reporting and should be read as a timely credit indicator rather than a substitute for audited financial statements or individual bond documentation.

2. 1H26 Performance and Portfolio Developments

HCS reported 1H26 operating revenue of KRW 2,527.0bn, up 0.7% year on year. Operating income increased 2.4% to KRW 272.5bn, income before tax rose 5.9% to KRW 376.6bn and net income rose 17.8% to KRW 319.6bn. Lease income increased 1.0% year on year to KRW 1,286.6bn, while the company reported a 14.9% decline in credit cost and lower bad-debt expense. The presentation attributes earnings resilience to lease growth, overseas profitability, funding diversification and improved asset quality; overseas contribution is not sufficiently disaggregated for a separate credit conclusion.

Financial assets rose to KRW 36.2tn at 1H26 from KRW 35.9tn at end-2025. Auto assets remained the core franchise at KRW 29.4tn, or 81.3% of financial assets. New-car assets declined to KRW 15.9tn, whereas lease/rental and used-car assets rose to KRW 9.0tn and KRW 4.6tn, respectively. This remains consistent with HCS's strategic role in Hyundai Motor Group sales finance, while making residual-value performance and used-car recovery values more relevant to future loss severity.

Non-Auto assets increased to KRW 6.8tn, or 18.7% of financial assets, from KRW 6.3tn at end-2025. Mortgage assets reached KRW 3.7tn and PF assets KRW 1.35tn. The absolute PF exposure remains smaller than the auto portfolio, but its rise from KRW 1.22tn at end-2025 means the earlier monitoring focus on project quality, collateral, sponsors and provisioning remains warranted. Aggregate disclosure does not provide the project-level or collateral detail required to conclude that this risk has diminished.

The portfolio mix is therefore credit-positive only in a qualified sense. The captive relationship can support new-car, lease/rental and used-car originations through the HMG sales channel, and the lower 30+ delinquency ratio suggests that the visible aggregate portfolio remained resilient through the first half. At the same time, expansion in lease/rental and used-car assets increases the importance of residual values, repossession outcomes and used-car market liquidity in a stress case. Similarly, the move in Non-Auto assets does not by itself signal deterioration, but it broadens the set of risks that cannot be assessed from the headline delinquency ratio. The presentation's lower credit-cost and provision-release explanation supports current-period earnings, yet it is not a substitute for asset-quality migration, vintage, LTV, sponsor and collateral data. Investors should therefore treat the 1H26 indicators as evidence of stable current performance rather than evidence that tail-risk channels in PF, mortgage and vehicle-finance assets have been resolved.

3. Credit Read-Through: Asset Quality, Capital and Funding

Asset-quality indicators improved modestly. The 30+ delinquency ratio fell from 0.82% at end-2025 to 0.78% at 1H26, the substandard-and-below ratio was 2.00%, and total provisions were 300.9% of 30+ receivables. The higher coverage and lower headline delinquency ratio are constructive for creditor protection, particularly because the company also reports lower credit costs. Still, headline measures do not reveal performance by PF, mortgage, used-car or lease/rental vintage, nor do they establish the adequacy of collateral values under stress.

Capital and management liquidity metrics also remain supportive. Asset leverage declined from 6.4x at end-2025 to 6.3x at 1H26, while total equity increased to KRW 7.8tn. HCS reported a KRW 32.1tn debt balance and a diversified funding mix of domestic bonds (54%), overseas bonds (16%), ABS (14%), bank funding (13%) and CP (3%). Its reported six-month liquidity coverage was 116% and ALM ratio 112%, against internal 100% guidelines. These metrics support normal-market refinancing, but do not replace deposit funding or contractual liquidity protection; credit quality remains sensitive to loss of market access, ABS demand, hedging conditions or bank-line availability.

The company presentation continued to show domestic AA+ Stable ratings from NICE, KIS and Korea Ratings, and Moody's A3 Stable, S&P A- Stable and Fitch A- Stable. The presentation describes HCS as HMG's captive financier and shows almost complete HMG ownership. That franchise and the associated support expectations remain important credit strengths, but this event does not establish a legal parent guarantee for any specific HYUCAP bond. Bondholders should continue to distinguish issuer credit and rating-incorporated support from the contractual terms of the instrument held.

The presentation shows Hyundai Motor at 59.7% and Kia at 40.1%, or 99.9% HMG ownership in aggregate. This close ownership and the captive sales-finance role help explain HCS's franchise strength and the support expectations reflected in its ratings. For creditors, however, the distinction remains material: group ownership can support market confidence and business continuity, but it does not determine the ranking, guarantee status or remedies of a particular bond. The reported liquidity ratios should be read through the same lens. They are useful evidence that management is operating above its internal minimums, but their protection for a specific creditor depends on the quality and availability of cash, credit lines and funding channels under the relevant stress scenario.

4. Key 1H26 Metrics

Unit: KRW bn, except ratios and percentages. Stock and asset-quality measures compare end-2025 with 1H26; income measures compare 1H25 with 1H26.

Source for all table figures: Hyundai Capital Services, 2Q26 Earnings Release and Financial Overview (company-linked presentation).

5. What To Watch Next

The next quarterly package should confirm whether the decline in delinquency and credit costs is sustained across the auto, used-car, mortgage and PF books. Investors should monitor the direction of PF and mortgage balances, asset-quality migration, provisions, used-car values, lease/rental residual-value experience, and any explanation for overseas earnings. Funding monitoring should focus on actual maturity concentration, offshore issuance conditions, ABS execution, bank-line availability and hedging cost rather than only the reported funding mix. Before reaching a bond-specific conclusion, investors should also confirm the relevant guarantee, negative-pledge, cross-default, ranking and event-of-default terms from the applicable offering documentation.

6. Sources

• Hyundai Capital Services, IR Presentation page, accessed 2026-09-03, https://about.hyundaicapital.com/ir/iprnt/IRIRIP0101.hc — confirmed that the official IR page displayed the 2Q26 package; the exact public posting date was not displayed.
• Hyundai Capital Services, 2Q26 Earnings Release and Financial Overview, 2Q26 / 1H26 company-linked presentation, accessed 2026-09-03, https://www.slideshare.net/slideshow/embed_code/key/dqPiss8TxgELQZ — operating, asset-quality, portfolio, funding, liquidity, leverage, ownership and rating figures.
• Hyundai Capital Services, Issuer Summary, 2026-05-16, issuer_summary/issuers/hyundai_capital/current/hyundai_capital_issuer_summary_20260516.md — prior credit view and structural monitoring context.