Han Kook Capital

Hankook Capital is a specialized credit finance company established in 1989 that was acquired by the Military Mutual Aid Association in June 2001, forming its current group structure.

The largest shareholder, the Military Mutual Aid Association, holds an 80.4% stake, and the company's credit rating incorporates a one-notch uplift reflecting potential group support based on credit standing and strategic importance.

The business is organized around four pillars—corporate finance, consumer finance, installment/lease finance, and investment finance—with asset weights diversified at roughly a 3:3:3:1 ratio.

Corporate finance includes real estate project financing (PF) and real estate-backed loans, while consumer finance centers on personal credit loans and used-car financing.

The installment/lease segment, historically the company's core business, has seen stagnant growth and profitability amid intensifying industry competition, leading the company to focus on small-ticket, high-volume origination for profitability.

Investment finance remains a relatively small portion of assets but serves as a platform for expansion into new areas such as new-technology business finance.

Competitively, Hankook Capital differs from automaker- or financial-holding-affiliated capital firms such as Hyundai Capital, KB Capital, and Hana Capital by operating an independent business model under a mutual aid association affiliation, characterized by a diversified asset portfolio not concentrated in auto finance.

As of end-September 2024, total assets stood at roughly KRW 4.1458 trillion, with a market share of about 1.7% on a total-asset basis.

Hankook Capital's controlling-interest net profit rose for four consecutive years: KRW 65.09 billion in 2022, KRW 66.19 billion in 2023, KRW 81.14 billion in 2024, and KRW 100.52 billion in 2025.

Operating profit over the same period expanded from KRW 88.88 billion (2022) to KRW 82.14 billion (2023), KRW 96.87 billion (2024), and KRW 127.92 billion (2025), reflecting a broader profitability improvement.

On a quarterly basis, controlling-interest net profit rose from KRW 24.17 billion in Q2 2025 to KRW 26.43 billion in Q3 2025 and KRW 27.86 billion in Q4 2025, before dipping to KRW 23.42 billion in Q1 2026 and recovering to KRW 25.98 billion in Q2 2026.

As a result, the trailing four quarters (Q3 2025 through Q2 2026) show combined controlling-interest net profit of KRW 103.69 billion.

However, operating cash flow (CFO) turned increasingly negative each year—from minus KRW 77.02 billion in 2022 to minus KRW 279.78 billion in 2023, minus KRW 502.47 billion in 2024, and minus KRW 529.30 billion in 2025—indicating that continued expansion of loan and lease assets has required ongoing cash outlays even as reported profit grew.

The debt ratio fell from 659.5% in 2022 to 537.3% in 2023, then rose again to 562.1% in 2024 and 583.7% in 2025, showing leverage building back up alongside asset growth.

Shareholders' equity increased from KRW 456.6 billion in 2022 to KRW 754.1 billion in 2025 through profit accumulation, but total liabilities also grew from KRW 3.01 trillion to KRW 4.40 trillion over the same period, reflecting simultaneous expansion of both assets and capital.

Overall, while profit has grown steadily, cash flow and leverage metrics reveal the other side of that asset growth.

Auto lease origination peaked at KRW 12.9 trillion in 2023 before falling 3% year-on-year to KRW 12.5 trillion in 2024, and is expected to decline roughly another 1% to about KRW 12.4 trillion in 2025.

Growth in capital firms' auto installment loan balances also slowed from 7.1% in 2023 to 2.3% in 2024, and is estimated to have turned negative at -0.7% in 2025.

Deteriorating asset quality among capital firms has driven up yields on corporate bonds issued by these firms, which in turn feeds through to higher installment and merchant fees.

Against this backdrop, financial regulators have called on capital firms to move away from expanding market share in traditional areas like auto finance and instead pursue new growth drivers such as equipment financing for emerging industries.

Unlike peer capital firms that have curtailed new originations since 2022, Hankook Capital has continued expanding assets centered on personal and small-business credit loans, used-car finance, and investment finance, resulting in relatively high asset growth within the industry.

However, this expansion into higher-yield assets also carries funding cost and credit cost burdens, with the potential for delinquency among lower-credit borrowers in real estate PF loans and personal finance cited industry-wide as a common risk factor.

Korea Ratings has assessed that the recovery prospects of mid- and junior-tranche real estate loans are declining amid a weaker property market, and has stated that ongoing monitoring of asset quality trends is necessary given the possibility that delayed sales or disposals could prevent repayment of existing loans.

In its June 2026 assessment, Korea Investors Service (KIS) noted that expanded origination of higher-yield assets has boosted profit-generating capacity, while funding and credit cost burdens remain embedded, and explained that a change in project-feasibility assessment standards in June 2024 caused some precautionary loans to be reclassified as substandard, affecting the substandard-or-below loan ratio.

The largest shareholder, the Military Mutual Aid Association, subscribed to KRW 100 billion of Hankook Capital's perpetual bonds in 2023 and expanded its guarantee limit from KRW 500 billion to KRW 700 billion, with the outstanding guarantee amount at KRW 335 billion as of end-March 2026.

This demonstrates the group's capacity for contingent support, which rating agencies factor into their credit assessments.

Key items to watch going forward include the trajectory of asset quality indicators in personal and small-business credit loans and real estate finance, as well as whether profitability can be sustained through credit cost management.

Rating agencies expect the company to maintain its balanced four-segment structure across corporate finance, consumer finance, installment/lease, and investment finance while continuing to outpace industry-wide growth rates.