KB Financial Group Inc (KB) 2020 Q4 法說會逐字稿

Greetings, I am Peter Kwon, the Head of IR at KBFG. We will now begin the 2020 Q4 Business Results Presentation. I would like to express my deepest gratitude to you for participating in our call. We have here with us our group CFO and SEVP, Ki-Hwan Joo as well as other members from our group management.

We will first hear the 2020 major financial highlights from our CFO and SEVP, Ki-Hwan Joo , and then engage in an Q&A session.

I would like to invite our CFO and SEVP to elaborate on our 2020 business results highlights.

Good afternoon. I am Ki-Hwan Joo , CFO of KB Financial Group. Thank you for joining, KBFG's earnings presentation for Q4 2020. Before moving on to our earnings results, let's briefly look back on last year's operational environment and KBFG's key business results.

Due to the COVID-19 pandemic, global real economy fell into steep contraction and 2020 was an unprecedented year with high volatilities for the financial market as well. For the banking industry, since the 75 basis point cut in the rate by BOK, policy rate continued to be at its historical low, and with greater possibility of asset quality deteriorations with prolonging COVID-19 impact, there were concerns over fall in profitability which lead to share price declines. Notwithstanding such internal and external challenges surrounding the company, KBFG was able to bring meaningful results in 2020.

Last August, once Prudential Life, industry's top-tier life insurer became our subsidiary. We completed our business portfolio, ranging from bank, securities, non life insurance, credit card; and finally, life insurance, which enabled us to gain solid competitiveness. We also completed acquisition of Cambodia's biggest micro financing institution, Prasac and Bukopin Bank, which will be a foothold into the Indonesian market. As such, we made significant progress in our global business and further enhanced the group towards sustainability.

In terms of financial performance, despite NIM contraction following the rate cut and continuation of macro uncertainties, driven by solid loan growth, which drove sustained increase in interest income, as well as sizable increases in net fees and commission income from nonbank subsidiaries, we saw a balanced earnings improvement across bank and non banking business. Also, our inorganic growth through M&As brought tangible results leading to around KRW 3.4 trillion of net profit as we continue to sustain solid fundamentals.

Today, the BOD meeting has decided on payout ratio of 20% and 1,771 DPS for this year. As we are mindful of possible economic depression against prolonged COVID-19 impact and macro uncertainties at home and abroad, we believe conservative capital management and supportive measures for the real economy are required. Hence, payout has been slimmed somewhat compared to last year. However, underpinned by solid earnings resilience and industry's top capital adequacy, we will continue to abide by progressive dividend policy as we've done so far. And commit yet again that we will be at the forefront of implementing various shareholder return policies that live up to the global standard.

As you are aware, Korean economy is entering new normal, characterized by ultra-low rate and low growth. Also, financial market paradigm is changing fast. To respond to changing financial environment preemptively, KB Financial Group will upgrade group's business portfolio. And based on KB's distinct all around financial services capabilities, superior customer base and channel competitiveness, we will rise to become a #1 financial platform company.

To this end, we named this year's strategic direction as RENEW 2021. Renew stand for R, reinforced core; E, expansion of global and new business; N, #1 platform; E, ESG leadership; and W, world-class talent and culture.

In 2021, we will strengthen competitiveness of core businesses of each of our business lines of the group. And on top of our traditional financial business, we'll bolster nonfinancial businesses, i.e., auto, real estate and health care so as to secure growth engine for the future. At the same time, we will become a #1 financial platform company that offers differentiated and comprehensive financial solutions via customized financial products and services that have the underpinning of data.

With that, I will now move on to financial highlights for 2020. KBFG's full year net profit for 2020 was KRW 3,455.2 billion. Despite challenging business environment at home and abroad, driven by robust core earnings growth and tangible results from inorganic growth through M&As, there was 4.3% growth year-on-year as we maintained solid earnings fundamentals. However, Q4 net profit was down significantly Q-on-Q to KRW 577.3 billion. On the back of ERP expenses and additional provisionings related to COVID-19. And the base effect from booking of negative goodwill benefit from Prudential Life previous quarter.

Excluding these one-off factors, on a recurring basis, Q4 net profit was flat on quarter.

Moving on to more details by breakdown. Group's 2020 net interest income was KRW 9,722.3 billion, up 5.7% on year. Continuing a stable growth trend despite falling rates. This is due to bank's solid loan growth, which helped to secure stable earnings base and the result of inorganic growth through M&As.

Also, 2020 net fee and commission income was KRW 2,958.9 billion, up 25.6% year-on-year or KRW 603.9 billion on year, providing a big support to the group's core earnings growth. Such growth in net fees and commission is driven by sizable increase of KRW 347 billion from securities business, mostly comprised of brokerage income and higher credit card fee income on the back of robust marketing and cost savings efforts, which all led to better performances from nonbank subsidiaries.

Meanwhile, Q4 net fee and commission income was KRW 788.4 billion. Although Securities business fee income declined slightly due to lower average trading volume, on year-end increase in credit card transaction volumes and credit card fee income was up, driving the total fee and commission income to be flat Q-on-Q. Size of quarterly net fee commission income used to be around KRW 500 billion, but started to expand to around KRW 800 billion since the beginning of the year and has sustained an up trend ever since.

Next is on other operating profit. In 2020, there was KRW 188.6 billion of other operating loss for the group, mainly from increase in other operating expenses including credit and deposit insurance and depreciation on operating leases. But we've seen meaningful improvements from core businesses, i.e., securities, derivatives, FX, driven by favorable financial market backdrop such as the share price and the rate and increase in invested assets and efforts around portfolio diversification.

Having said that, for Q4, there was seasonality impact of year-end cold weather wave and increase in medical expense claims and deterioration of loss ratio for auto and long-term insurance which constrained insurance performance with other operating income coming in at a level lower than that of the previous quarter.

Next is on the group's G&A expense. Group's 2020 G&A expense was KRW 6,833.2 billion. This year, with ERP size growing for the group, there was approximately KRW 344 billion of ERP expense. And with the consolidation of Prasac, Prudential Life and Bukopin Bank of Indonesia into the financial statement, there was around KRW 243 billion of additional expense recognized, pushing up G&A expense, 9% year-on-year. The rise may seem significant this year. But as I mentioned before, if we exclude one-off special factors like the ERP expense and the M&A impact, on a recurring basis, the increase was around 2.6% on year.

Q4 G&A expense reported KRW 2,187 billion, which was a sizable increase Q-on-Q. And once again, this is due to ERP and other seasonal impact as well as expenses from Bukopin Bank, which was consolidated as a subsidiary as of September.

Next is on PCL, provision for credit loss. Group's PCL for 2020 reported KRW 1,043.4 billion, up KRW 373.1 billion year-on-year. In order to preemptively counter uncertainties arising from COVID-19, we have made KRW 206 billion of provisioning during the second quarter. And we also added KRW 171 billion of provisioning this quarter as well. As such, since we set aside KRW 377 billion of additional provisioning this year, preemptively, if this impact is taken out, the trend is flat year-on-year.

For the fourth quarter, PCL was KRW 289.1 billion. Despite additional provisioning, as explained, as there were sale of bank loans and write-back of -- write-backs related to specialty bonds, the increase was only KRW 74.5 billion Q-on-Q.

Next is on key financial indicators. You can see the group ROA and ROE on the top left-hand side. Before I go further, I would like to mention that in the overall industry, there is increasing issuance of hybrid bonds, which is recognized as supplementary capital, and there is also the global trend of profitability indicators. Taking these factors into consideration, we would like to inform you that from this quarter, our ROE has been based on ROCE, which is return on common equity, which is a profitability indicator centering on common equity, excluding the effects of supplementary capital.

2020, KBFG's ROE posted 8.79%, a slight drop Y-o-Y. However, the recurring ROE excluding one-offs, including preemptive provisioning and ERP costs and the preemptive provisioning related to COVID-19, it stands at a 10.17% level, even in a difficult operating environment with the downturn in the real economy and fall in the interest rate, profitability is being stably maintained as a result of the group's steady core profit increase and inorganic growth.

Next, I would like to comment on the bank's loans in won growth. As of end 2020, bank's loans in won posted KRW 295 trillion and based on balanced qualitative growth of household and corporate it increased by 9.9% YTD and 1.2% compared to end September.

Looking at the breakdown, in the case of household loans, with the sound growth of Jeonse loans and prime unsecured loans, there was a 9.5% growth YTD and 2.6% growth compared to late September. In the case of corporate loans, there was an even growth of SOHO, SME and large corp loans and grew 10.3% YTD. Compared to late September, centering on large corp loans, there was an increase of debt redemption at the end of the year, leading to a 0.5% decrease.

In 2020, loans growth was faster than was initially planned with the increase of fund demand and government's financial aid support due to COVID-19. However, from this year, we plan to take into consideration factors such as economic circumstances and household debt situation and focus on profitability and asset quality centered qualitative growth and managed loan growth at an appropriate level.

Next is the NIM. Group and Bank NIM in 2020, Q4, each posted 1.75% and 1.51%, respectively, even in a situation where asset yield contraction continued following the interest rate decline as a result of our strict margin management efforts, it improved 2 bp Q-o-Q. In particular, in case of the bank's NIM from the funding side, with the approximately KRW 9 trillion growth of core deposits in this quarter and sizable decrease of time deposits, the overall funding cost burden was relieved. And as a result of focusing on selective loan growth, centering on profitability, we were able to relatively well safeguard our NIM. However, on a yearly basis, affected by the interest rate cut, there was a great contraction in both the group and bank NIM Y-o-Y. And since we expect that the effect from interest rate decline will continue for a while, we will make all our efforts to manage our NIM by focusing on increasing core deposits based on our superior sales capability and channel competitiveness and operate a profitability based loan portfolio and apply advanced loan pricing.

Let's go to the next page. I will now elaborate on the group's cost-income ratio. 2020 CIR posted 54.7%. And despite the group's ERP expansion and M&A-related one-off cost increase, as a result of improved overall revenue generation, it maintained the previous year's level. In particular, the recurring CIR, excluding one-offs, stood at 49.4% level and has been steadily, downwardly stabilizing for the past 5 years, thanks to our group-wide cost cutting efforts.

Next, I would like to remark on the credit cost ratio. The group credit cost in 2020 posted 0.26%. And as a result of preemptive provisioning related to COVID-19, there was a slight increase Y-o-Y. But the credit costs, excluding this, stands at just 0.20% level and is still being managed at a stable level.

With COVID-19 becoming prolonged, there are increasing concerns about asset quality. However, in order to preemptively prepare for these uncertainties and to improve our capability to respond, we have additionally provisioned conservatively to secure a buffer. And at the same time, we are focusing on risk management by having a sophisticated system for risk management or different industries and borrowers and by strengthening monitoring for vulnerable borrowers and thus, we believe that our asset quality will be managed stably.

Next is the group's BIS ratio. As of end December 2020, the group's BIS ratio posted 15.27%, and CET1 ratio posted 13.29%. Despite the risk-weighted asset increase following the year-end dividend and loan growth, on the back of strategic capital management, including a solid net profit increase and issuance of hybrid bonds, we are still maintaining the highest level of capital adequacy in the Korean financial industry.

Now let's go to the next page. From this page, I would like to cover ESG management leadership, among KBFG's 2021 core management strategies. Around the globe, ESG management has become both a core value of companies and also an essential management strategy to secure sustainability. In particular, due to COVID-19 with a globally heightened sense of crisis regarding environmental change, including climate change and natural disasters, the importance of ESG management is becoming more and more pronounced. KBFG, which has been always 1 step ahead of these changes as for the first time as a Korean financial institution, in March of last year, newly established a ESG committee within the BOD. The ESG committee in May set the ESG's strategic goal to create sustainable value and enhance customer trust by promoting responsible management for environment and society and disseminating healthy corporate governance and establish the KB Green Way 2030, a mid- to long-term ESG strategy road map.

KB Green Way 2030 holds the commitment that KBFG will preemptively respond to the crisis of environmental change and secure green leadership, which will lead the environmentally friendly financial ecosystem. We have the core goal of reducing our group's carbon emissions by 25%, compared to 2030, when we compare 2017 to 2030 and to expand the ESG financial product sales, investment and loan size which stands at about KRW 20 trillion level now to KRW 50 trillion level by 2030.

Keeping in step with this, in August, we have publicly declared our commitment to the Equator Principles, a global guideline for environmentally friendly finance and are focusing our efforts on completing membership this year. And in September, we have announced for the first time as a Korean financial group that we are exiting coal financing, providing and proving that KB's ESG management philosophy is at a level higher than the others and showcased our speedy execution capability.

Going forward, KB Financial Group, following the recommendation of TCFD, Task Force on Climate-Related Financial Disclosures, are managing various climate-related risk factors and are disclosing related information transparently. On the other hand, we are also establishing a advanced climate change response system and we are working hard to faithfully implement the TCFD recommendations step by step.

We were recognized for our differentiated ESG management efforts. And recently, for the first time as a Korean financial company, we achieved great results. By receiving the highest grade of A+ from Korea government -- Korea Corporate Governance Service, or KCGS, in all categories, including environment, society and corporate structure.

Last but not least, we are actively participating in the government's Korean new deal projects and have strengthened core area support in ESG, including innovative growth companies, green smart schools and green energy to create social values. We promise that we will exert ESG management leadership and do our utmost fulfilling our responsibility and roles that befit our status as a leading financial institution.

Please refer to the following pages for details regarding the business results that I have just covered.

With this, I will conclude KBFG's 2020 business results presentation. Thank you all for listening.

(Operator Instructions) Yes. We will take the first question, Mr. Kim Jin-Sang from Hyundai Motor Securities.

Well, thank you very much for good performance. I would like to ask you 2 questions. The first has to do with your dividend payout ratio. As the CFO has mentioned, the payout ratio has declined. And I would think that this is based on the recommendation that you got from the supervisors on limiting the payout ratio to a certain level. So this recommendation is valid up until the first half of the year. And in the second half of the year, when COVID situation actually improves, for 2021 as a full year, to what extent can we expect improvement in the payout ratio for the year? And also do -- are you thinking of or can we expect additional measures like share buyback or cancellation of treasury shares?

And second, you've actually made additional provisioning related to COVID in Q2 as well as in Q4. can you provide some more detail and more color regarding that provisioning? And in terms of the credit cost, what is your projection going forward for the group?

Thank you, Mr. Kim, for your questions. Just give us 1 minute as we prepare to answer those questions.

Thank you, Mr. Jin-Sang Kim for your question. Regarding the payout ratio, we understand that we underperformed the market expectation, and we do feel that regrets. As you know, over the past year due to COVID pandemic, there were a lot of challenges ahead of us, but thanks to preemptive risk management and by managing our earnings resilience, we did our utmost to make sure that we could actually pay out and meet that payout ratio of the previous year. But as you know, COVID-19 situation has not yet improved, which is leading to potential macroeconomic uncertainties. There are concerns around heightened uncertainties.

So since we are in a situation where COVID-19 issue has not completely gone away, we need to be able to counter potential economic uncertainties. And also, we do need resources to provide support if need be. We understand that, that is the -- that is what the supervisor has in mind. And hence, we've made the decision of payout ratio at 20%.

But let me just remind you that this is an interim measure. Meaning, when it comes to our dividend payout policy and our policy stance on payout is going to stay valid based on what we've communicated before. Although we are still in the middle of COVID pandemic, the GDP growth rate was actually above 1% in Q4, following that of Q3. So we are seeing some signs of recovery.

So in the first half of the year, with the vaccination for COVID-19 and that helping to curb COVID-19 spread in a phased manner, we believe that come second half of the year, Korean economy may be able to regain the economic vitality that it had shown and displayed in the past.

As you mentioned and cited, in your question, the supervisor's recommendation on the payout is up until end of June, is valid up until June. If the economic recovery continues and if we see recovery in the second half of the year, we can very quickly shift to increasing the payout ratio.

When it comes to treasury share buyback cancellation or interim dividend payout, there are other measures and ways for us to enhance shareholder value, we are -- when we can consider those options, and we can decide to actually implement them at an appropriate time. And since this quarter's payout ratio decision has been made for this for now only, we believe that we will be able to adhere to our basic dividend payout policy, which we've communicated previously.

Just 1 more thing, if I may note, is that the government has instituted a COVID-19 scenario analysis. And we believe that, that had actually helped us in certain respects. According to that scenario analysis, this year, GDP minus 5.8% for this year and next year will be the GDP of 0% and 2 years from now, 0.9%. Now this is a long-term economic depression scenario. Even under this scenario, KB CET1 and our capital adequacy still is at an appropriate level. What this tells us is that even under extreme event and situation, our asset quality capabilities as well as our earnings resilience is quite strong. So I think the result of the scenario analysis were quite positive.

KB, as we've done so far, will continue when it comes to capital management and returning back to shareholders, we will really think hard about what would be the best way forward. And we will always take that 1 more step. We've been doing that over the years, and we will do our best to live up to that expectation in the future as well.

Now moving on to your next question on the provisioning amount for Q4 and the credit cost related question. As you know, second quarter of last year, we applied that FLC criteria, and we have preemptively set aside KRW 206 billion of provisioning. And in Q4, with COVID-19 being prolonged, in order to counter deterioration of asset quality, we've made additional provisioning of KRW 170 billion.

Just to provide some more color on provisioning, based on forward-looking criteria, we have set aside 70 -- excuse me, KRW 95 billion in provisioning. And on top of that, for sectors and borrowers who are exposed to COVID-19, on top of FLC, we have applied much larger stress, and we've made a recalculation by applying the overlay. So the overlay aspect of that additional provisioning accounts for KRW 76 billion.

So for 2020, the total provisioning made was KRW 377 billion, this is on a preemptive basis. And as I've mentioned in my presentation, last year's credit cost was around the 26 basis point, which we think is quite positive. And with the preemptive provisioning, and if you are to take that out and if you take out all the reversals, on a recurring basis, the credit cost level is at around 20 basis points. So we can tell you that we are very stably and managing the credit cost of the group.

And also, one more thing that we would like to add is that I think it's important how we manage the assets that we own. That's quite important. So by borrowers, by sectors, we have segmented. And also depending on the severity of those borrowers and sectors, we have applied risk management on a preemptive basis as well as post monitoring and follow-up. So we've been quite steady and stably managing the assets that we own. So we feel that there is very low possibility that credit costs will rise in a steep manner in the future.

For 2021, in terms of the credit cost, we do not believe that there's going to be any sudden rise. But if we think about a situation where COVID-19 doesn't get well managed, from some marginal borrowers, there could be some nonperforming loans that may be incurred. Accordingly, as I said before, last year based on the conservative economic forecast, we have made additional provisioning. And because we are experiencing unprecedented low environment -- low-rate environment and also in light of the possibility of COVID vaccination for this year for the group, we believe that we will be able to manage the credit cost at around 30 basis points level. That is our outlook for credit cost.

And just for your information, internally, we've conducted stress testing. And if you look at the outcome of that stress test, if COVID-19 continues to be a burden. And if we assume that U.S. and China trade war is going to intensify. And now this scenario is the most conservative scenario, even under the most conservative scenario, group's credit cost will still maintain around 40 basis points. It will not depart too far from that level.

We will take the next question from Samsung Securities, Mr. Kim Jaewoo.

I also have 2 questions. This year's margin and loan growth will be my first question. In the market. We saw -- we thought that in Q4, your margin will fall, but actually, there was a 2 bp increase. And you mentioned one of the reasons was a low-cost core deposit growth. So is that expected for this year as well?

And regarding loan growth, it was a little high. And what is your growth outlook for this year for loan growth? And another question I would like to ask is, where will you see that type of loan growth?

Another question is about your business plan or management plan for this year. And for last year, there was Prasac and other M&A deals. And we are wondering about how it can actually boost up your earnings growth. So if you can answer those questions, it will be greatly appreciated.

Thank you for your questions, and we will soon answer your questions.

Thank you very much Kim Jaewoo for your questions. You asked 2 large questions. First was about NIM and growth. So let me answer that question first. As I aforementioned, in Q4, in the bank, there was a 2 bp push up of the NIM. And last year, 75 bp big cut happened in the key interest rate, it went down. And we expect that to a certain extent, that trend will continue.

In addition, regarding our LDR regulations, there was relief from 100 to 105 but we expect this to continue until late June. So we believe that our funding burden will increase because of that. However, I explained that with our superior sales capability and operational capability, we have increased our core deposits. And we have had loan growth centering on profitability, and we have a very sophisticated loan pricing program. So if we concern our efforts on margin management, then as I mentioned, we will minimize downward pressure and on a yearly basis, be able to safeguard the NIM.

Next, to answer your question about loan growth. Last year, there was 9.9% of loan growth approximately. And for this year, we had government policies and government regulations and the market environment. So for household and corporate loans, we are expecting about 5% growth. That is our plan. And we believe that this year, the low interest rate regime will continue for the time being. And taking into account COVID-19, we also believe that the government's aid measures or policy measures will continue. So we believe that to a certain extent, there will be loan demand.

However, excessive leverage usage or excessive demand or overheated demand in the market exists in the market for assets. So we need to keep an eye on this, and the government also has been showing signs of strengthening DSR. So KB this year aims to have a conservative loan policy based on asset quality and manage our growth at a stable speed and have selective growth based on prime assets to achieve an appropriate level of loan growth.

In the case of household loans, since there is -- in the case of corporate loans because there is a possibility of economic deterioration, we put our utmost goal or asset capability or asset quality. And we plan to focus on SOHO growth and continue preemptive management on COVID-19 exposed industries. We believe that with the government's strengthened regulations, there will be gradual growth and there is Jeonsae loans and other prime loans for household loans. So we have ROA high asset centered appropriate growth that we will engineer.

The second question that you've asked was about our business plan. And regarding this, and regarding the details, there are some questions that are confidential at this point. But I can give you a larger picture of our business plan for this year. Regarding growth and the margin, I have already mentioned this. So I would like to mention top line, our SG&A and our other factors.

As was mentioned for last year, we had Prudential and Prasac consolidation as our subsidiaries, so the group's earnings growth is expected to boost. In the case of interest income, in the case of NIM, as was aforementioned, we believe that it will be maintained at a flat level compared to last year. And for growth, we will focus on prime loans so that we can have robust growth, which is expected.

And in the case of interest income growth, we believe that there is ample room for us to grow. In addition, we have Prudential and Prasac and other subsidiaries that have been consolidated. And if we add their interest income, then we believe that compared to last year, we will have a meaningful addition to our interest income.

For noninterest income, last year, in the bank, we had a slight decrease in fee income. And you can see based on securities, we had a great increase in fee income. And for noninterest income, we had very ample growth, which was actually unprecedented for last year.

In last year, we had many early redemption declines of ELS compared to other years, and we had difficulties in trust sales because of the strengthened regulations. For this year, we believe that because of many factors, we will have better sales in fund and trust.

In the case of securities, we are seeing a very active stock market. And we believe that the level of securities income will also remain. We also have DCM, which was very strengthened for last year, but we also have ECM, which is showing remarkable growth. So we believe that this is quite noteworthy. .

And the medical indemnity insurance is showing signs of slight increase. So we believe that in the insurance industry, we can have better income compared to last year. So a double-digit growth seems to be quite achievable, that is our current stance.

In the case of SG&A in last year, we had -- excluding the great amount of ERP, which took place, there was Prudential life consolidation, which took place in the first half. And we believe that because of that, we will have some cost increase, but the recurring level of group costs will be managed. And we believe that it will be increasing at around just a 2% level. So we believe that the recurring CIR for this year, coupled with top line growth and excluding the sizable ERP costs last year, we will have an improvement of last year's 49.4%, which is our current outlook.

In the case of our provisioning, I already have answered this question for PCL. But for preemptive risk management, the group has made many efforts. So we believe that we will have stable management. Compared to the past, the volume of reversals is expected to go down. And despite the challenging economic environment, we believe that the credit cost will be managed stably at a 30 bp level.

We don't have that much time left, but we still have a lot of people wishing to ask questions from Cape Investment. Kim Do Ha.

I would just like to ask one question. One of the government policies is to provide a deferral program for the interest repayment. Now if you look at end of Q4, out of the total loan in won, what is the amount that is subject to this deferral program? So what is the outstanding balance with the sub 2, the loans that have requested or applied for a deferral program?

Let me answer that question. As of Q3, we said that the amount is KRW 400 billion. There were some repayment, there had not been that many applicants. So as of end of December, the amount is about KRW 360 billion.

Yes. It's already 10 to 5. So I would like to just receive the last and the final question. Please contact us later.

From Citigroup, Yafei Tian.

Yes. My question is around the asset quality. Looking this year versus last year, given that you have already provided for COVID, so I'm just curious, why do you think that loan losses would be higher than 2020 at around 30 bps as opposed to last year's 26 bps?

(foreign language)

Kim, you got disconnected.

Can you hear me?

(foreign language)

Yes. We can hear you, but can you ask the question again, you got disconnected.

So my question is that it looks like economy, it looks like it recover in 2021 so it looks like your 30 bps credit cost guidance is a little bit on the conservative side. So is there any reason why loan losses will be higher this year versus last year? What are the areas of risks that you see in your portfolio?

(foreign language)

Thank you very much. We will respond shortly.

Thank you very much for that question. Now the 30 basis points. Basically, yes, that's a conservative guideline. No, it's not because of we were considering any specific factors leading to high credit cost. We were just being very conservative in consideration of the COVID-19 economic circumstances.

If everything were to be normal, then our credit cost will be around 20 to 25 basis points. But there may be unexpected factors. And so that 30 basis points is just a guideline that we are communicating on a conservative basis. And also just to add, there are reversals and write-backs. And the reversal, the size of that write-back could decline. So that aspect was also considered in coming up with 30 basis point guideline.

Well, thank you very much for your questions, and we will conclude our business results presentation. Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.