The Key to Mobility Creating Value with Financial Services Warburg Field Trip Volkswagen Financial Services; December 2014 Frank Fiedler, CFO Volkswagen Financial Services AG
Disclaimer The following presentations contain forward-looking statements and information on the business development of the Volkswagen Group. These statements may be spoken or written and can be recognized by terms such as expects, anticipates, intends, plans, believes, seeks, estimates, will or words with similar meaning. These statements are based on assumptions relating to the development of the economies of individual countries, and in particular of the automotive industry, which we have made on the basis of the information available to us and which we consider to be realistic at the time of going to press. The estimates given involve a degree of risk, and the actual developments may differ from those forecast. Consequently, any unexpected fall in demand or economic stagnation in our key sales markets, such as in Western Europe (and especially Germany) or in the USA, Brazil or China, will have a corresponding impact on the development of our business. The same applies in the event of a significant shift in current exchange rates relative to the US dollar, sterling, yen, Brazilian real, Chinese renminbi and Czech koruna. If any of these or other risks occur, or if the assumptions underlying any of these statements prove incorrect, the actual results may significantly differ from those expressed or implied by such statements. We do not update forward-looking statements retrospectively. Such statements are valid on the date of publication and can be superceded. This information does not constitute an offer to exchange or sell or an offer to exchange or buy any securities. 2
Volkswagen Group leveraging the power of three strong pillars Passenger Cars Automotive Division Commercial Vehicles / Power Engineering Financial Services Division Volkswagen Financial Services Europe / Asia-Pacific / North and South America Financial Services USA / Canada / Spain / Argentina Remaining companies Scania Financial Services Porsche Holding Financial Services Porsche Financial Services 3
Volkswagen Financial Services at a Glance (06/30/2014) Worldwide presence Key company figures Total assets 126.6 bn Equity 14.7 bn Customer deposits 25.3 bn Operating profit 776 m Employees 11,859 Contracts (units) 11.5 m Business Volume* 105.9 bn Leasing 37.4 bn Volkswagen Financial Services conducts business in 50 countries Wholesale 13.9 bn Credit 54.6 bn *Receivables + Leased Assets 4
Strategy of Volkswagen Financial Services VISION? WHAT? HOW? The Best Automotive Financial Services Group in the World. I. Customers II. Employees III. Profitability IV. Volume Most attractive sales supporter for brands Quality leader for customers and dealers Corporate Culture We are a top team Full Entrepreneurial Autonomy of Countries FS-Way FS-Values 20% ROE with 50% CIR Global Collaboration Cover at least every 2nd new car of the VW Group with one or more FS products Market leader in young used car segment Leadership Culture Aligned by a Global Approach 5
Penetration Rates Rising penetration rates 6.6 32.5% 7.2 7.4 32.9% 34.9% 8.2 36.3% 9.6 40.7% 10.7 11.5 43.0% 44.20% Contracts (mn) w/o China 26.4% 25.0% 24.7% 25.4% 27.5% 27.7% 29.70% with China 2008 2009 2010 2011 2012 2013 H1 2014 6
Volkswagen Financial Services offers the whole range of services under one roof BANK LEASING INSURANCE MOBILITY Bank Direct Bank Leasing Insurance Services Rent Retail Finance Dealer Finance Factoring Deposits Instalment Loans Investment Products Finance Lease Operating Leasing Automotive Payment Protection Industry Fleet Management Tyre Wear & Tear Long-term rent Short-term rent Carsharing 7
Strong Benefits for Automotive through Captive Equipment Turnover Brand Loyalty + 3% + 25% + 11% Length of ownership (years) Cash Payer Captive Customer 100% 103% 7.2 5.4 46% 35% 54% 65% Cash Payer Captive Customer Cash Payer Captive Customer Switch to Competitor Stay Loyal Source: NCBS EU5 2013 8
Creating Value Dealers Brands Customers 9
Profitability: Rating History (09/22/2014) Moody s S&P Development S&P of credit ratings (Standard & Poor s) Toyota Aa3 AA- Honda A1 A+ BMW A2 A+ VW AG / VW FS AG A3 A VW Bank GmbH A3 A MAN A3 -- 1) Scania -- A- Daimler A3 A- RCI Banque Baa3 BBB FMCC Baa3 BBB- Banque PSA Ba1 BB 1) Rating withdrawn at company s request as of Dec. 2012 Volkswagen Financial Services AG has a solid and stable rating history Data Source: Reuters 10
Profitability: Dynamics of Financial Services business (1/2) Leasing / Credit 2.3 m contracts ending in 2013 6.4 m current contracts + 2.8 m = 6.9 m current contracts Portfolio 31 Dec 2012 New contracts in 2013 Portfolio 31 Dec 2013 11
Interest Rate Profitability: Dynamics of Financial Services business (2/2) Customer Rate Margin Cost of Funds Time 12
Three Growth Dimensions Retail/Corporate Customers Fleet Management Used Cars After Sales & Insurance New Mobility 13
Markets: Volkswagen Financial Services in China A true VOLKSWAGEN company China Banking Regulatory Commission Ministery of Commerce 14
MAN Truck & Bus AG Brands: MAN Finance Holding 72 Employees Countries 100 Employees 1.473 Mio. 21 Employees 270 Mio. 23 Employees 127 Mio. 152 Employees 375 Mio. 44 Employees 387 Mio. 21 Employees 155 Mio. 22 Employees 95 Mio. 4 Employees 30 Mio. 10 Employees 197 Mio. JV 133 Mio. 33 Employees 119 Mio. 25 Employees 189 Mio. Values shown: employees and Total Assets, End of 2013 15
Brands: Fleet Management and Trucks & Bus: Customer focus What the customers have in common Corporate customers focusing on TCO Truck and Fleet is an investment decision, not emotional driven. The vehicle is a tool for the customer. TCO Where the customers differ A truck goes cross-boarder a fleet customer sources cross-boarder, but does not drive cross board Lifecycle costs : 100 T p.a. truck vs 10 T p.a. car Buying holistic TCO solutions and services, not financing only Need for reporting, telematics or comprehensive services (technical and monetary) International tender processes Risk Management principles: Area of use and specs for truck vs Balance Sheet of fleet customer Different services are required: e.g. toll collect, sophisticated fuel solutions 16
Brands: MAN Finance Initial success Foundation for growth Initial success MAN Finance markets Penetration Productportfolio/ TCO Foundation for growth Global expansion GO50 Actual: September Figures 17
Strategic challenges for Volkswagen Financial Services Dynamic Growth Internationalization Brands & Products Regulatory Requirements IT & Process Excellence 18
European Central Bank - Banking Supervision status quo With the publication of the results on 26 October 2014, the one-year Comprehensive Assessment of the ECB has been completed. The VW FS AG has completed the different phases of the CA successfully and passed the stress test. On 4 November 2014, the ECB has formally accepted responsibility for the ongoing supervision of the VW FS AG. The level of bank regulation and bank supervision as well as the demands regarding capital adequacy of banks will continue to rise. 19
Risk Management Operational Risk Earnings Risk Other Risks* Credit Risk Portfolio Structure Retail 75% Corporate 25% Residual Value Risk * Liquidity Risk, Strategic Risk, Reputational Risk, Market Price Risk, Shareholder Risk + Issuer Risk + Counterparty Risk 20
Volkswagen Financial Services Residual Value Residual value risks well covered by provisions 1.538.292 1.410.842 Units 1.102.203 1.204.342 1.279.833 Provision per car in 548 482 517 553 484 Risk per car in 282 386 423 352 352 in m 310 495 465 556 541 569 608 684 496 514 1) 1) 1) Jun 2012 Dec 2012 Jun 2013 Dec 2013 Jun 2014 Residual Value Risk Provision Units 1) retroactive inclusion of contracts from employee/staff car leasing and long-term rentals 21
Profitability in mn. 1800 Self funded with regard to equity 1,711 with regard to debt 1600 1400 1,309 1,414 1200 1000 1,096 Deposits ABS 800 600 673 600 650 650 Profit before tax Increase of Equity Capital Markets 400 200 0 0 2009 2010 2011 2012 2013 0 22
Funding structure Volkswagen Financial Services Total 126.6 bn Strategic Self Funding Sources Deposits ABS Others 8.1 bn (6.4%) Liabilities to affiliated companies 11.5 bn (9%) Equity 14.7 bn (11.6%) Asset Backed Securitization 18.5 bn (14.6%) Bonds issued 33.8 bn (26.7%) Capital Markets Customer Deposits 25.3 bn (20%) Remark: strategic funding allocation Liabilities to financial institutions 10.8 bn (8.6%) Commercial Paper 3.9 bn (3.1%) as of 30 June 2014 23
Volkswagen Financial Services Worldwide Capital Market Activities 24
Volkswagen Financial Services Worldwide ABS Activities 25
Thank You. Volkswagen Financial Services AG Gifhorner Str. 57 38112 Braunschweig Germany