KB Financial Group Inc (KB) 2007 Q1 法說會逐字稿

[Interpreted]. Good afternoon, ladies and gentlemen. My name is [inaudible]. I'm in charge of IR at Kookmin Bank. I would like to thank all of you for attending our 2007 first quarter earnings conference call despite your busy schedules. Thank you for attending.

As you all know, Kookmin Bank has been trying to leverage its online technology and also reflect the trends of other leading banks in the world. And the quarterly earnings releases have been provided over webcasts and conference calls. However, as we did in the last February annual earnings conference call, we plan to hold offline earnings conferences annually and whenever we have major issues that require offline presence. We will therefore continue to have face-to-face opportunities when necessary.

In today's earnings conference call, we have our CEO Chung Won Kang and the management team of Kookmin Bank. First of all, I would like to briefly introduce today's program. First we'll hear from our CFO, Jung Kap Shin on the performances of the first quarter. And then we will take your questions both through the conference call as well as the webcast. Now we will give the floor to our CFO Jung Kap Shin, who will introduce our first quarter 2007 earnings as well as the major issues. Thank you.

[Interpreted]. Good afternoon. My name is Jung Kap Shin, CFO of KB. We will now begin the earnings presentation for Q1 2007. Let me first begin with the financial highlights and then move on to the quarterly asset and liability and asset class and also profitability and asset liability analysis.

Let me begin with the financial highlights. If you look at the net income for Q1 2007, was KRW1,182.5b, which was KRW379.5b increase year-on-year. And it was mainly because of the sale of LG Card shares, which led to the gain on the disposal of marketable securities. Therefore, the operating income before provisioning went up 43% year-on-year, reaching KRW1,741.5b. Our NPL ratio thanks to our increasing efforts on asset quality on a year-on-year basis, reduced by 0.62% reaching 1% NPL ratio. Our annualized ROA was 2.42%, ROE 32.43%. And although this is a tentative figure our BIS ratio was 13.93% of which Tier I was 10.62%. We had the gain from the disposal of LG Cards and if you exclude such one off factors, our annualized ROA then it becomes 1.53%, ROE 20.56%.

We may now move on to the P&L details. If you look at the gross profit which includes the interest and non-interest income, it was affected by the LG card factor. But even if we exclude the LG Card effect it is still quite stable. And according to the accrual basis accounting changes, the year-end special bonus seems a little bit higher than the previous year. But overall, we were able to maintain quite stable SG&A rates.

If you look at the provisioning expenses, because of the provisioning guideline changes we had additional provisioning. But if we exclude that change factor it is quite stable quarter-on-quarter. And also for net income, if you exclude -- even if you exclude the one off factors, it is quite stable as compared to the previous year and previous quarter.

Let me now move on to the item-by-item profitability overview. The net interest income was KRW1,689.9b, which was close to last year's figure same period. But considering how the number of working days for the first quarter were slightly shorter than that of Q4, it is actually an increase quarter-on-quarter. Because we had a reflection of LG Card [disposition] gains, it showed an increase year --on-year, quarter-on-quarter for SG&A. Because of the special bonuses and because of the increase in labor cost ratio, because of that on a quarter-on-quarter basis, it increased. But I will go into the details on later pages.

If you look at the operating income before provisioning on a quarter-on-quarter basis, it increased by 64%. On a quarter-on-quarter basis, 43% increase.

Provisioning expenses, because we no longer have the one off factors of the previous quarter and because of the improving asset quality on a quarter-on-quarter basis, it reduced quite a bit. And also it showed a reduction on a year-on-year basis as well. As a result the net income for the quarter was KRW1,182.5b. Therefore even if you exclude the LG Card one off factor, it reached KRW750.8b, which was a stable result on a quarter-on-quarter and on a year-on-year basis.

Let me now move on to the details of net interest income. Because of the less number of working days and despite the fact that we had a small reduction on NIM, we showed very stable figures on a quarter-on-quarter basis for interest income. On the bottom graph it shows the NIM trend. As you can see last year we showed a steady downward trend on NIM. During the last quarter we had intensified competition and because of the rising funding cost during the previous quarter, in other words, between Q3 and Q4 of last year, it showed a 3bp increase. But during Q1 of '07 on a quarter-on-quarter basis it reduced only by 2bps, which showed a very stable reduction ratio.

Looking at the commissions and fees, because of the credit card co-marketing expense increase, this showed a 3.1% year-on-year reduction. But on a quarter-on-quarter basis, because of the ITC and Bancassurance commission increase, it went up by 3%. Looking into the details, NHF management fees on a quarter-on-quarter has decreased. It is because of the government regulation, which [shrank] the housing transaction reduction and therefore led to less number of NHF loans.

Looking at the trust commissions on a quarter-on-quarter basis, it also showed a reduction on a quarter-on-quarter basis. It was because of the AUM reduction and also because of the retail pension trust commission reduction as well.

The retail pension trust commission for the last quarter was reduced by 0.3%. And also commissions in won went up by 10.7% because of the ITC commission increase. And even on a year-on-year basis, it went up slightly as well. If you look at Bancassurance during Q1, because of the marketing efforts intensifying quarter-on-quarter it went up 10.7%, on a year-on-year basis 23.4%. And also ITC products, because of the increase of the front-loading overseas fund, it showed a 29% quarter-on-quarter increase, 26% year-on-year increase.

We also had the LG Card disposal gain and also the media asset disposal gain as well, the gain on securities went up quite a bit. And also reversal of NPL fund of KRW24b as well as [TBA] impairment loss of KRW17b, led to improvement on a quarter-on-quarter basis under impairment loss category.

If you look at the G&A item that I mentioned before, on a quarter-on-quarter basis it went up by 6%. From the labor cost side if you look at Q1 '06, the special bonus was not reflected. But for Q1 '07, special bonus was reflected. So it went up by 23.5% year-on-year. It includes the labor cost increase at the end of last year as well. At the end of last year, it showed certain special bonus factors. But during Q1, actually there was a reversal of such special bonus. So on a quarter-on-quarter basis, it showed about 33% increase.

If you recall because we specially provisioned in the amount of KRW630b last year, we had a reduction of anticipated net income. So we did not reflect special bonus at the end of last year if you recall. If you look at the administrative expenses, including the welfare expenses and advertising expenses increasing on a year-on-year basis, it increased by 19.7%. If you look at the cost income ratio on the bottom, if you exclude the LG Card one off factor on a quarter-on-quarter basis, it increases by 1.1% reaching 43%.

Let me now move on to the non-operating income. Because of the accounting standard changes, the gain on disposal of AFS and some other line items now are under operating income balance items.

And also looking at the asset growth during Q1, the Corporate loans increased quite a bit, leading to continuous growth of loan assets. Household during year 2006, we had a very robust growth because of the housing loans. And then during Q1 '07, we had not only the seasonal factors but also the real estate environment changes leading to less demand for loans in the financial market, which is leading to sluggish growth. At the same time, Corporate loans including SOHO loans and also SME loans and also private loans have mainly led the drive for growth.

For Credit Card, with regards to credit card purchase and cash advances, they reduced slightly. However, going forward we plan to strengthen our evolving services while upgrading products, therefore conducting very aggressive marketing promotions, which we expect will lead future growth.

Let me briefly summarize the balance sheet items. The total assets as of March of 2007 including Private Placements, the loans, loans in won was KRW136.2 trillion and securities in won KRW29.3 trillion. And also overall the asset size increased by KRW4.2 trillion reaching KRW199.4 trillion. On the funding side, we have the bank debentures KRW3.2 trillion increase, liabilities in foreign currencies KRW0.6 trillion increase, altogether leading to KRW4.8 trillion increase year to date reaching KRW184.9 trillion.

If we go on to the Household, there was a slight increase in the general household. And there was a slight decrease in the first quarter of mortgages. And overall our Household has been maintaining a similar asset size to the previous quarter. If you look at the Corporate side, there has been a continuous increase in the SME including SOHOs. And there was KRW3.1 trillion increase quarter on quarter. Especially there was a slight increase in large corporate loans. And especially if you look at the PPBs, the Private Placement Bonds it increased by KRW0.6 trillion quarter-on-quarter.

For credit card loans, even though credit assets -- even though the credit card loans have increased, overall the credit card assets have actually decreased quarter-on-quarter. But we will continue our aggressive sales and marketing strategy on the Credit Card business side. And we believe that our credit card asset growth will take momentum from the second quarter.

But the overall size of our Corporate assets, as you can see on the last slide, increased by 5.7% quarter-on-quarter. Deposits in won decreased by KRW1 trillion quarter-on-quarter. If you look at the details, there were some seasonal factors increasing the core deposits at the end of the last year. And so based on that there was KRW2.4 trillion decrease quarter-on-quarter of our core deposits. And there was a slight decrease on the time and savings deposits. Debentures in won increased due to the increase in the reserve rate and also due to the increase of our assets. There was a KRW3.2 trillion quarter-on-quarter increase of our debentures in won.

And we would like to go into the asset quality of the first quarter. If you look at the delinquency trends, overall total delinquency rate as -- we actually applied a new asset classification standard from the start of this year. And therefore, according to this new standard, it decreased from 0.95 at the end of last year to 0.86% as of March, which is a 9bp decrease. But if we apply the same previous standards, it would have been the same, 0.95.

Households and Corporates, the delinquency ratio has just slightly gone up quarter-on-quarter. But there were some NPL sales in both Household and Corporate at the end of last year. And if we include that factor, actually the delinquency trends are stable. Especially the Credit Card delinquency rates have been continuously improving since 2005. And if we apply the new delinquency classification standard, it drops dramatically to 1.47%. According to this new classification standard, the grace period is no longer effective. And even in the [in-store] payments, all of the delinquent amounts are to be calculated based on the loan balance. Also it is to calculate one month and older delinquencies. Therefore this new classification standard actually has the effect of decreasing delinquency especially so for credit card assets.

If we look at the asset quality, the Household and Corporates have all been improving. The NPL ratios have decreased by 3 basis points and recorded 1%. Especially we've seen more focused growth in our normal assets and therefore precautionary and substandard assets have slightly decreased quarter-on-quarter.

Also if you look at the coverage ratio, we're at 152.2% as of March 2007. And even though the coverage ratio increased significantly at the end of last year due to the increase of our provisioning requirement. And so we are at the historically highest level of NPL coverage.

And there was a provisioning of KRW127.1b, which is a decrease of 16.8% year-on-year and 75.5% quarter-on-quarter. The main reasons for this decrease is that as you know, in the fourth quarter of 2006, there was an additional provisioning of KRW401.9b. If we exclude that the previous quarter provisioning would have been KRW117.6b, which is similar to the first quarter '07 provisioning.

If we look at the [inaudible] there was actually a decrease of Household and Credit Cards provisioning quarter-on-quarter. Corporate provisioning quarter-on-quarter increases is because during this -- year-on-year has increased because there was a -- first quarter 2006 there were some reversals. For example, with LG Card as well as collections at internal and other accounts during the first quarter of 2006. That is why on a year-on-year basis, the Corporate provisioning has increased.

And regarding our coverage ratio, compared to year-on-year, our coverage ratios have improved quite significantly. This shows the coverage ratios of our NPL that is substandard and below as well as precautionary and below. That is continuously decreasing whereas our NPL ratio coverage ratio has been continuously improving.

This is the new NPL formation trends. As you can see our assets have become sounder and higher quality and therefore the formation has decreased. During the fourth quarter of 2006 there was an increase but mainly related with credit provisioning for SPC. It was a one off. If we exclude that the actual net increase during the fourth quarter of 2006, would have been KRW261.6b. The [inaudible] NPL formation was KRW245b. And therefore if we exclude this SPC one off factor during the fourth quarter '06, our formation is continuously decreasing.

With the continuous improvement of our asset quality as well as the collection of some special NPL, our loan loss provisioning during the first quarter was 0.3%. And if you look at that into different sectors, Household loan loss provisioning was 0.2%, which is significantly lower than the previous year's average of 0.5%. If you look at Corporate it was 0.5%, which is slightly lower than the previous year's average of 0.5%. Especially if you look at the Credit Card, there was an increase of some reversals of NPLs. And therefore compared to the previous year average of 3.1%, our first quarter Credit Card loan loss provisioning decreased significantly to 0.7%.

There were some major issues during the first quarter that I would like to highlight. First is the fact that Kookmin Bank, KB Kookmin Bank has been receiving the highest domestic level credit rating. Especially in March 2007, S&P has upgraded us to an A level, which is pari passu with a sovereign rate. This is also the first such rating from S&P of a Korean commercial bank.

We had already previously received a sovereign rating from Moody's. And therefore we are the only commercial bank to be rated as sovereign by both S&P and Moody's. We believe that this was possible because we have been implementing rigorous risk management systems over several years. And also we have been able to improve our overall credit profile through reasonable asset growth.

Recently there has been strong growth in the SME sector. And some I heard have been concerned about the asset quality related with SMEs. And that is the reason why we have prepared this slide of Kookmin Bank's situation on the SME side. We have been strengthening our competency in the credit analysis and risk management side. And we believe that this has resulted in remarkable improvement in the asset quality. Also we have established an organization that divides the country into 14 regional head offices to enhance our sales capabilities.

As you can see on the right hand, our portfolio on the SMEs has been showing that B and above assets account for more than 90% as of March 2007. Our delinquency rates have continuously decreased since March of 2005. KB Kookmin Bank will continue to pursue stable asset growth and sustain our profitability.

Thank you very much.

[Interpreted]. That was the earnings presentation by our CFO Shin. We will now begin the Q&A session on Q1 2007. Those of you with questions who are connected by phone please press 1 and 4, that is 14 on your phone. And those of you are connected via the Internet, if you have questions, please follow the directions of a phone number which is shown on the website and make a phone call to ask the question.

For your information, we would like to apologize that the phone connection is not as clear as we would like to have. So today we will be receiving questions separately and relay the questions for the rest of the audience. So your actual voice will not be shown on the webcast. But we will relay your questions nevertheless.

The first question, please. There seems to be no phone questions as of yet. We apologize because we tend to have some time lag because of the Internet webcasting. Once again, we apologize. We have made numerous tests in the morning and everything went flawlessly. But in the afternoon, we encountered some technical difficulties. So we had to transfer into a conference call mode.

The first question is from Mr. Song from Prudential. The first question is about the non-bank side growth strategies going forward for KB.

I hope that answers your question regarding the non-bank related issues.

The next question is from Brian Hunsaker.

Thank you. This is Brian Hunsaker from Fox-Pitt, Kelton. I just had a question about the net interest margin. It seems as though the net interest margin for Kookmin Bank has been more resilient than for some of the other banks in the first quarter. Could you just offer some guidance on where you expect the net interest margin to go in the coming quarters?

[Interpreted]. Well, as I mentioned during the previous earnings conference, in 2007 we are expecting the margin pressure to continue. Especially in 2007 we have to take into consideration the fact that many banks grew their assets quite a lot last year and that many banks have larger funding requirements. There will be a continued pressure on the funding side. KB also needs to do funding. We expect not to avoid that funding pressure but relatively Kookmin Bank had grown more stably last year compared to other banks.

And so with our very strong credit rating and full diversification of our funding resources we plan to respond to this increased funding pressure. We think that we will be able to grow with the funding situation without burdening our customers excessively. And by doing that, despite the margin pressure in 2007 we believe that we will be able to defend our margin, not disappoint our investors.

Next question please. The next question is Mr. Kim from Nomura Securities.

[Interpreted]. If I may add a little to what the CEO has said. Earlier you mentioned something about the DDA products, regarding the demand deposits during this quarter we saw a reduction by KRW2.4 trillion, the reasons were the following. Compared to the year-end executions of last year we had a bigger infusion of funds coming in last year but that fund flowed out. That is why we saw a quarter-on-quarter reduction. But if you exclude that extraordinary inflow and outflow between last quarter and this quarter, it's actually quite stable. So compared to our anticipated plans, our demand deposit for Q1 actually is, against our plan, is actually on track. I hope that answered your questions.

Moving on to the next question.

[Interpreted]. It seems that we have no questions waiting in queue. We will wait a couple of moments. We are currently listening to the following questions. Please wait. We have Scott Lee from Deutsche Securities. Please go ahead Sir.

[Interpreted]. I have questions about your SME asset group which was about 7%. Other than SME assets have also grown quite strong, could you comment on that?

As well as the gain on the media assets, sales gain that you've mentioned. Could you give us the details of that gain on the sales of the media asset securities?

My name is [Oh Yong Kook] of the Corporate business division. Well our asset growth on the SME has been slightly higher on average compared to other banks. We have been setting these [limits]. Regarding the SME's we think that, as you've seen, we are focused very much on the high quality SME assets, the SOHO assets. And considering the financial crisis in '97 as well as the credit card crisis in 2002 and 2003, many of the Korean banks have changed their positions more conservatively. I think it's now a time where banks are changing their positioning closer to the middle line. Temporarily there is a move for increase in the volume regarding SME into whole businesses.

Regarding the gain on the disposition of media asset securities, actually we had some stake in media asset securities that we sold and recorded about a KRW40b gain on that transaction.

[Interpreted]. We'll take the next question from [City Securities] please.

[Interpreted]. Yes my name is [Choy] from [City Securities]. I have two questions. This is a follow up question on your non-bank operations going forward. Regarding M&A, I understand that you have future plans for a future M&As. In that case I believe that if you hold -- if you position yourself as a holding company structure it would be easier for you to acquire companies. So do you have any plans to convert into a holding company structure? If not, why is it that you do not have such plans in place?

My second question is as following. I believe that the CEO has mentioned about the dividend plans. Do you have any future plans, immediate plans for share buybacks or other shareholder return policies?

[Interpreted]. Regarding the share buyback plans, we currently have no such plan as of now.

And also regarding the non-bank related businesses going forward, you asked about our intention to perhaps convert into a holding company structure. I believe that I have mentioned this before as well. Of course we are studying the options of the holding company structures. However, as you are well aware, because we have to have a larger proportion of the banking business even if we hold such a holding company structure going forward, there are certain constraints as to whether we could convert into a holding company structure. Of course we have to enough time to consider all the options regarding the pros and cons of having a holding company structure. Let me just say that we are constantly reviewing those options. I hope that answered your questions.

Moving on to the next question. Mr. [Lee] from [Sin Yong] Securities. Go ahead, please go ahead Sir.

[Interpreted]. Yes, my name is [inaudible] of [Sin Yong] Securities. I have two questions. During your explanation you said that there were some special gains on the disposal of LG Card as well as the asset securities and as well as the loss on the number seven KB, number eight KB. Are there other special factors that you would like to mention?

Provisioning this quarter was quite small, especially the provisioning for credit cards was significantly low. You said that there were some reversals of NPL. Specifically, could you give us the amount of that reversal?

[Interpreted]. Well in addition to the special one off that I mentioned, excluding those I think there are none worth mentioning. Regarding the reversal of the special NPL's, the reversal itself, we did not have any other reversals that are special enough to mention separately. We think that that is similar to our run rate in terms of reversals.

We'll take our next question from BNP Paribas.

[Interpreted]. Good afternoon, my name is [Keong] from BNP Paribas. I have three questions. First of all it has to do with GNA. Recently you have announced your plans for a mega size IT investment. So going forward, how can we anticipate the future trends of the cost income ratios?

My second question has to do with the Credit Card business. During Q1 and because the increasing rate of card loan is quite pronounced, do you suppose that the current trend will continue going forward?

The third question is the following. Recently the Korean government is coming out with a lot of policy support to enable your overseas expansion. So leveraging such added regulatory support, do you have any future plans in the subsidiary establishment overseas or M&A plans going forward overseas?

[Interpreted]. Could you repeat the second question please?

[Interpreted]. The second question has to do with the credit card business, how credit card loan is on a growing trend, which is quite pronounced. I'm wondering whether you anticipate this trend to continue going forward.

[Interpreted]. First of all let me address the third question regarding the -- the first question regarding the cost income ratio. For quite some time as I mentioned before, the cost income ratio is anticipated to grow. As you mentioned just now we are planning to invest in the IT systems to establish a next generation IT system for the Bank. Due to such planned investments we anticipate an increase from the current cost income ratio. It will steadily increase for quite some time. And once we finish expending our expected CapEx expenditure on IT and then I believe that it will gradually stabilize as well.

Regarding the credit card business, I believe that Mr. Kang -- Mr. Won in charge of Credit Card business should answer that.

[Interpreted]. My name is Won Hyo Sung in charge of the Credit Card Business. Looking at the credit cards loans, if you compare the year-on-year comparison as at the end of March, between the two years '06 and '07 the gap is quite big. Unlike in 2005, in 2006 we grew the card loans quite aggressively and going forward -- I believe that the volume, I believe it currently stands at about 240b to 250b. I think that trend will continue and the volume or the payback amount and the -- will continue to grow. So I believe that the outstanding balance will continue to increase, but on a stable basis. If you ask whether the rapid growth trend will continue going forward I think it will be more stabilized.

[Interpreted]. And lastly you asked a question about the global expansion plans. Specifically speaking, we think the next one or two months period we will complete establishing overseas offices in Vietnam and Kazakhstan and in the month of July we will open the branch in [Kwon Jo] in China. So we will be beginning quite modestly at the early stage. But we are reviewing various options for global expansion, so we are conducting preparations and reviews in every angle at the moment. I hope that answers your question.

The next question please.

[Interpreted]. Next question is from Mr. Kim from Global Investment Trust -- from ABN AMRO.

Hello, this is Michael Cheng. Can you hear me? Okay, basically three questions. First one relates to the flat housing loan growth. I was just wondering whether you're seeing any signs of stress in the housing loan portfolio in terms of delinquency ratios rising in 2007, maybe in the last month or so, and whether you expect a material rise in delinquency ratios from this segment?

The second one relates to the Credit Card strategy. You said that you were planning to grow more aggressively in credit cards. If I look at the quarter-on-quarter credit card growth in the first quarter, on the fourth quarter it looks fairly large, but I assume that's going to be more aggressive going forward. Can you give me some concrete figures in terms of what you are targeting?

You are mentioning that you are intending to increase your [revolving] rate, perhaps you can tell us what's you're [revolving] rate right now and what are you targeting into the future?

Finally, SME expansion was quite strong during the first quarter of '07, can you elaborate a bit more on your SME strategy, whether you're targeting the larger SMEs or the SOHOs? And if so, what particular industries if you're talking about larger SMEs? If you're talking about SOHO, how do you plan to control for initial asset growth quality problems and what's your view on taking more collateral? Because SOHOs, you don't really have much data to go by sometimes. Thank you.

[Interpreted]. Well, regarding the house loans, would you like to answer that question Dal Soo Lee?

[Interpreted]. Yes, I'm in charge of the marketing and product group. First of all during the first quarter household loans have grown a bit stagnantly. If we look at the details, there is a house or home equity loans growth which was close to zero. However, as you have already heard, the Korean government has introduced more strict regulations, such as stricter DTI, and there was a quarter-on-quarter decrease of about KRW300b. But if we look at the individual home equity loans, there was an increase of [KRW300b]. Also if you look at general loans, the general loans have continued to grow and is continuing to grow.

On the other hand, if we look at the SOHO and SME loans, SOHO loans are -- we are trying to identify the higher quality SOHO loans among that category. Also about 90 or over 90% of our loans are high quality, that is B or higher. Especially the share of AA's to BB minus increased by KRW1 trillion and account for 90% or over 90%. Especially for SOHO loans, the collateralized or securitized ratio for SOHO loans are over 90%, even for SOHO loans.

[Interpreted]. Regarding the revolving rate and our targets -- my name is Won Hyo Sung in charge of our Credit Card business. In terms of credit card asset growth, that was our focus but it was not as notable during the first quarter. It seems that first of all the cash advance usage is continuously decreasing. The cash advance market itself is decreasing and our delinquency rates for example are at the bottom ever. And so in a sense, the cash advance services, its usage and volumes are decreasing and that seems to be pulling down some of the asset growth opportunities for our overall Credit Card portfolio. We think that some of that has bottomed out already in the first quarter and that is why we do expect our Credit Card assets to start to grow gradually as the credit cash advance volumes stop decreasing.

Revolving is a very strategical focus for us as you have mentioned. Currently of our customers, that's credit card customers, about 13% or 14% of our credit card customers use revolving facilities and about 33% is the revolving rate. And so what we are targeting is to increase the number of credit card customers that use revolving facilities to above 50%. And also increase the revolving rate versus our balance by about 50% as well, that is our initial target. Of course it's a bit different from the US market, which has been using revolving facilities for quite a long time. We are currently operating off a target about 50% revolving ratios.

And from our loans Mr. Lee, would you like to go into a little bit more detail about the securitized rates?

[Interpreted]. You did also have a question about asset soundness and our outlook. Our asset soundness was -- or delinquency ratios with 1% and so even if our asset grows during the first quarter this trend we expect will continue. Our asset growth continues to actually go down or even if our assets grow, as we mentioned our credit analysis is being strengthened. Also our credit rating system internally will be strengthened. Also our credit analysis as well as our follow up analysis will be strengthened. So that even though that operation is effective we can control our credit risks in advance. In 2007 our asset soundness ratios will continue to increase and in 2006 we will once again maintain our agreed one in this [high] credit analysis rate.

Regarding the securitized ratio for our SOHO loans, in the first quarter our SOHO loan was around -- 90% of that was securitized SOHO loans.

[Interpreted]. We've answered all of the questions and we have not received any additional questions yet. We will wait a few moments to see if there is one last question. It seems there are no further questions, so we will wrap up today's earnings presentation. The presentation materials and the VOD materials will be uploaded on our home page by this evening so that you could always view it and download it at your leisure. For those of you who have not had opportunities to ask the questions, please contact our IR department and we will do our best to address your questions.

Once again we really appreciate your participation. Thank you very much.

Portions of this transcript that are noted "interpreted" were interpreted on the conference call by an Interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.