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- Recently, Bond Express included a new addition – VW 4.250% 09Oct2025 Corp (GBP), which is issued by Volkswagen Financial Services N.V and guaranteed by Volkswagen Financial Services AG. Both the guarantor and the bond have a credit rating of BBB+ (S&P).
- Volkswagen Financial Services is a wholly-owned subsidiary of Volkswagen AG, a well-known global automotive manufacturer, with brands such as Audi, Porsche, and Bentley. In terms of sales in 2021, Volkswagen is the second largest automotive manufacturer in the world after Toyota.
- The major business of Volkswagen Financial Services includes comprehensive financial services such as auto loans, auto leasing, and insurance, in addition to the company's involvement in the banking business.
- In regard to operation performance, In 1H2022, the number of leased vehicles as of June 30, was 3,701,000, a year-on-year increase of 1.7%, largely as a result of growth in Germany, Volkswagen Financial Services delivered rather favorable results, with interest income from leasing transactions rising by 7.6% to EUR 10.6 billion. Operating income amounted to EUR 1.7 billion, up 74.1%, and net income marked a 92.1% year-on-year increase to EUR 1.3 billion.
- Looking ahead, we think the sales performance prospect will be negatively impacted by ongoing geopolitical tension, with the risk arising from the Russia-Ukraine war and the issue of energy supply in Europe, resulting in a downtrend in revenue.
- For credit profile, equipped with strong risk management measures, Volkswagen Financial Services' credit losses currently and historically are at a very low level (0.27% as of 30 June 2022). Meanwhile, the provision ratio stood at 1.74x, suggesting the provision could fully cover its credit losses. It’s noteworthy that cash flow from operating activities saw a remarkable improvement from EUR 18.0 million in 1H2021 to EUR 1.6 billion in 1H2022, buffering the uncertainty of the European economy. In summary, the solvency of Volkswagen Financial Services is expected to be at a decent level in the coming years.
- Investment-wise, the bond yield rises significantly subsequent to the Bank of England's interest rate hikes, as well as the sharp decline in GBP. As of October 5, 2022, this bond has a years to maturity of 3.0 and a yield to maturity of 6.7%, which is quite high among investment-grade peers. Given its decent credit quality, investors seeking stable income or GBP-denominated asset allocation can give consideration.
- Now, this GBP bond VW 4.250% 09Oct2025 Corp (GBP) is already listed on Bond Express, allowing investors to trade with a lower investment amount.
Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) hold a position in VW 4.250% 09Oct2025 Corp (GBP) and the analyst who produced this report hold a NIL position in the abovementioned securities.
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