KB Financial Group Inc (KB) 2007 Q2 法說會逐字稿

(Interpreted). Good afternoon, ladies and gentlemen. My name is (inaudible) Choi in charge of the IR department at KB Kookmin Bank. I sincerely first thank all of you for attending the first half earnings conference call despite your busy schedules. Today's conference call is being provided not only through the telephone lines but also through the Internet connections. During the Q&A session we will be taking your questions over the telephone lines.

In today's earnings conference call, we have our CEO, Chung Won Kang, as well as the executives of Kookmin Bank. Now first of all, we will ask our CFO, Jung Kap Shin, to present a brief presentation about our first half performance. Following the presentation we will take your questions over the telephone lines. So if you have any questions please take advantage of this Q&A session following the presentation. I would like to give the floor then to our CFO Shin who'll be giving us a presentation of our first half earnings as well as the major issues.

(Interpreted). Good afternoon. My name is Jung Kap Shin. I am the CFO of KB Kookmin Bank. I would like to go over our 2007 first half performance. The 2007 first half earnings, if you look at the financial highlights, we also have then the P&L, the assets, BIS and the various assets being analyzed by division.

First, our financial highlights. In 2007 first half our net income was KRW1,418b which is compared on a year-on-year basis a 10% decrease. This is because during the first quarter there was gains on the sales of LG Card, which had about KRW432b impact. Also there was additional pay of corporate taxes during the second quarter of KRW482b. Also during the first half of 2006 there was a reversal of losses on [Hyundai] Construction. And if we exclude these one off factors actually the first half net income would have been similar to that of the previous year.

Our pre-provision income was KRW2,764b which is an year-on-year 17% increase. Our provisioning expense during the first half was KRW190b which is 26% decrease year-on-year. Our NPL ratio has continuously decreased thanks to our efforts to improve our asset soundness. It decreased by 0.59 percentage points and came in at 0.80%. Our annualized ROA and ROE was 1.42% and 19.55% respectively. And even though it is tentative our BIS ratio is expected to be 13.42 with a Tier I ratio of 10.34%.

This is the major highlights of our P&L and the trends during the first half. As you can see, if we exclude the one off factors, most of our earnings indicators are quite stable quarter to quarter. Our gross profit has maintained a very steady pace. And then our G&A expense has slightly increased. But our provisioning expenses have continued to decrease and have offset the G&A expense increase. Our net income has been maintaining around -- above, slightly above the KRW700b mark quarterly.

And then the interest income was similar to the previous quarter of around KRW3,406b. Quarter to quarter there was a slight increase because of the increased number of operating business days during the second quarter.

The non-interest income, there was the LG Card sales income and this had a year-on-year 97% increase effect. The details of this non-interest income will be explained in more detail.

The general and administrative expense was KRW1,782b. There was an increase and our administrative expenses also increased by about 8%. The G&A expense details will be explained later on as well.

The pre-provision income increased by 17% year-on-year due to one off factors such as the gains on the sales of LG Card. We have continued to improve our asset soundness. And our provisioning expense decreased by 34% q-on-q and 26% on a year-on-year basis.

Our non-operating income as I previously mentioned before recorded a loss of KRW412.5b due to the one off factor related with the additional tax payments.

At the end, the net income of our first half, due to various one off factors decreased by about 10% year-on-year.

Our interest income slightly increased year-on-year. As you can see on the bottom, our NIM during the second quarter contracted slightly, mainly because there was an increase of corporate loans increasing more than what we had expected. And corporate loans have a relatively low margin. On the other hand the higher margin credit card asset growth was a bit slower than what we had expected.

Our fee income of the first half was similar to the previous year's first half. It increased quarter-on-quarter by 2.4%. Our NHF management fee slightly decreased year-on-year. This is because the Korean government has pursued to stabilize the real estate market. And this has decreased the volume of the housing bond transactions. Thus there was a decrease of individual loans in new volume.

Also the trust fees have decreased by about 5% year-on-year because of the decrease of the fund trust fees. But on the other hand, q-on-q there was a slight increase.

Bancassurance and trust product sales have continued to grow and they've respectively grown by 8% and 15% respectively quarter-on-quarter. Year-on-year wise they have grown by 25% and 66% respectively.

On the other item, there was a decrease of foreign exchange and derivatives leading to losses. Also there was an increase on the trust guarantee fee and overall we have decreased on the other items quarter-on-quarter.

SG&A in details, it increased by 8% q-on-q and 11% y-on-y. On the labor side, there was a recognition of some special bonuses and decrease of the stock compensation expense. So q-on-q wise labor costs decreased by 8%. But on the administrative costs there was an increase q-on-q by 35%. Also depreciation, there was some increase in the depreciation for business purpose movable assets, machinery and intangible fixed assets. And that is why the depreciation y-on-y increased by 36%.

The cost income ratio if we exclude the LG Card sales gain portion, it increased slightly by 2 percentage points and recorded 45% excluding the LG Card effect.

If we look at the non-operating side, there was some changes on the first quarter in the accounting methods. There were some changes, for example for the available for sale securities now being classified into non-interest income. And if we exclude these factors they were not major factors affecting our non-operating income.

But if you look at equity method gains, there was an increase of our equity method gains from our subsidiaries. And that is why our equity method gains has increased by 57% q-on-q and 15% y-on-y.

On the others there was the additional taxes that we had to pay this quarter. And that is why on a non-operating basis our income has decreased considerably on both q-on-q and y-on-y basis.

If you look at our asset growth, our corporate loans and credit assets continue to grow throughout the second quarter. Our assets continued to grow throughout the second quarter. Household loans, despite the various changes in the financing of houses, actually during the second quarter our household loans have increased slightly.

Corporate loans have also continued to grow, including growth in SME and SOHO as well as large corporate loans. Our credit card assets actually decreased slightly during the first quarter. But in the second quarter it rebounded and has been continuing to grow especially around revolving services and card loans. On the credit card side we plan to continue this asset growth for various customer services and providing new products that are very competitive and also be very aggressive in our marketing and promotions.

Our BIS very briefly. Our total assets as of end of June 2007, including our Private Placement Bonds, had an increase of our won loans by KRW8.5 trillion. Won securities by KRW1.8 trillion and foreign exchange assets by KRW1 trillion. We were able to close the June with KRW206,900b, which is an increase of KRW11.7 trillion Y to D.

On the funding side, our won financial debentures increased by KRW5.3 trillion, our foreign currency liabilities by KRW1.3 trillion. And overall our funding side liabilities have increased by KRW12 trillion year to D, recording [KRW192] trillion.

On the household loans there were some changes in the financing environment of the real estate market. The housing market is also a bit contracting and so we have been able to maintain housing loans similar to the previous year. Corporate side, both the SMEs and the SOHO sub category has continued to grow. And we are continuing to grow at about 10% growth q-on-q and 17% growth y-on-y. The large corporate side also have grown by 26% due to increase in new loans to corporate as well as project finance loans. The credit card loans is overall growing, as we mentioned. Credit card assets are growing and we expect this growth to continue in the second half of this year. Also if you look at the corporate side as a whole there has been a significant growth as you can see on the bottom line of that table.

On the Korean deposits there was continuous growth on CDs and RPs. Demand deposits saw some decrease because of some funds moving to CMA accounts offered by securities companies. And there was some also seasonal influx of funds at the end of last year. And that is why there was a decrease about, KRW3.8 trillion, on demand deposit compared to the end of last year. Also savings, time and savings deposits have also decreased slightly. We will continue to provide various services and also introduce new products in order to reduce the amount of outflowing demand deposits and savings deposits. Our won debentures have increased by KRW2.1 trillion q-on-q and KRW5.3 trillion y-on-y.

Let me now move on to the 2007 first half asset quality overview. As you can see on the graph, the overall delinquency rate for the total loans after the end of 2004, has improved greatly. As of the end of June 2007 it has recorded 0.67%. Compared to the previous quarter it is a reduction by 19 bps. This was possible because of the continuous improvement of the asset quality as well as the second quarter sale of NPL. And those factors mainly contributed to such reducing delinquency rate

If I may go into the details we have the household, corporate, credit card. In all those categories we have seen a downward adjustment of delinquency ratio. And if you consider the NPL sale effect during Q2, the overall categories improved. For your information as of January 1, 2007 the new classification criteria for delinquency rate was implemented. Therefore the figures after 2007 period is applying such new revision of the regulation.

As you can see the asset quality is improving throughout all categories. So as a result the NPL ratio has come down by 20 bps, recording 0.80%. Especially the NPL coverage ratio was 175.8% which was a whopping increase. This was possible because of the NPL sale conducted during Q2 as well as the fact that we saw a decrease of KRW148.3b worth of new NPL formation during Q2. I have already mentioned sufficiently about the delinquency rate in the previous page. So let me skip over that portion.

Let me now move on to the provision for loan losses. Due to continuous improvement of asset quality as well as a recovery improvement we have recorded KRW62b, which was a reduction by 51% quarter-on-quarter. And I will skip over the details.

As you can see on the graph the substandard and below and precautionary and below ratios are continuously decreasing while the NPL coverage ratio is steadily rising.

Let me now move to the new NPL formation. Because of the continuous improvement of asset quality it is on a steady decreasing trend. What used to be at about KRW300b per quarter since 2006, the new NPL formation seemingly increases during Q4 of last year. But this was because of the one off factor from STC related credit enhancement. But if we exclude that one off factor, we have actually recorded a KRW261.6b during Q4 last year. So that was actually a decrease. So beyond 2007 period, the continuous decreasing trend is continuing. And even during this period, all the vectors saw a downward stabilization.

For loan loss provisioning because of the asset quality improvement and sale of NPLs and because of increased recovery rate, the Q2 loan loss provisioning ratio was 0.1% and for the entire first half it was 0.2%. If you look at it per category, as you can see as per each category we have seen an improvement of credit cards.

Let me now move on to other major issues that pertain to the first half of 2007. During the first half of 2007 one of the greatest achievements made by KB Kookmin Bank is the fact that KB has obtained the highest credit rating from all three major international credit rating agencies, which is the top of the rating system in the domestic banking sector.

In the month of March, S&P has allotted the only commercial bank credit rating of A which is the same as the sovereign rating. Moody's has raised our credit rating on May 4 of this year. And following that upgrade on July 25 it was further upgraded from the existing A1 to Aa3, which was one notch higher than the upgrade taken place in the month of May, which now makes KB Kookmin Bank's credit rating higher than that of sovereign rating. So of the commercial banks in Korea, we are the only bank with the credit rating from Moody's of Aa3. On June 13, Fitch has upgraded our rating from existing A to A Plus. So as a result from all major three credit rating agencies internationally we are now awarded the same rating as the sovereign rating.

One of the biggest factors that led to such upgrade was because of the rigorous risk management system which was established based on sound management of assets as well as the securing of the profitability stability through asset growth strategy and also because of our sufficient improvement of capital adequacy.

I will not elaborate on the following page which is the last page. Please refer to the distributed document. As you can see KB Kookmin Bank so far worked on fully establishing the banking infrastructure. We are trying to manage risk management. We are trying to stabilize the profitability while we prepare for the future growth of the future. Going forward, KB Kookmin Bank will continue to exercise more innovative strategy going forward to maintain our top position. Thank you very much for listening.

(Interpreted). Yes, that was the presentation by our CFO. And now we will open the floor for your questions. Those who have questions please use the telephone connections. (OPERATOR INSTRUCTIONS). Those who are watching on the Internet can call the toll number that is being shown on the screen to request opportunities to ask a question.

We have [Chan Young Hwang] of Morgan Stanley waiting for a question.

(Interpreted). Yes, good afternoon. Your NIM was relatively weak it seems this quarter. The CFO mentioned that there was an increase of corporate loans and then slower growth in credit cards assets, which is similar in other banks too. Is there a special reason why compared to other banks, KB's NIM has been weaker? And what are your plans for the second half?

(Interpreted). About our NIM decreasing, the reasons for that could be divided into our asset side and our funding cost side and the corporate loans. There was an increase of new corporate loans, that's one. And for a long time, we had a large amount of group loans, collective loans that have come to maturity during this quarter. And the new group or collective loans are being booked at a smaller spread. And so that was another factor.

The other one that I could mention is on the funding side. We have not been paying a lot of attention on the funding side, but starting from this year, our customers have become I think more sensitive to their deposit rates. And on the other hand, we've also in terms of customer service, have increased our monthly deposit rates. That was another reason why our NIM has decreased.

(Interpreted). Thank you very much for the answer. We will now take the next question. We have no question at the moment waiting. So we will wait a few more minutes.

(Interpreted). Until we receive the next question, let me also address the second part of the question that was raised by Mr. Hwang from Morgan Stanley. There was a second part of the question regarding the prospects for the second half.

In our view during the second half of this year we believe that the NIM will contract a little more. However, internally speaking the loan type of the credit card assets are on the increase at the moment. And also the retail unsecured loans related credit rating system is being addressed. In other words, those lower credit rating bracket of the retail unsecured loans are being reviewed at the moment to expand that scope as well. So of course we have the market environment that is prone for further NIM contraction.

But then again, we are trying to increase the business portfolio with regards to the higher margin business. Therefore, rather than the secular trend which is downward trend, I believe that we will not be going down faster than the secular or average market trend.

(Interpreted). Thank you very much for the elaboration. We will now be waiting for the next question.

The next question is from Mr. Lee from Shinyoung Securities.

(Interpreted). Good afternoon, my name is Byong Gun Lee from Shinyoung Securities. I have the following two questions. First of all you talked about the extra tax payment of KRW482b. Could you be more specific in the details?

The second question has to do with the G&A expenses. Earlier you said that the stock compensation reduced and also the special consolation bonus reduced as well. And again that was partially because of the corporate tax factor. And you said that compared to your expectation your labor cost has come down. But despite that your cost income ratio has gone up higher than we anticipated. So during the second half what is your prospects for CI ratio? And how do you plan to control that ratio going forward?

And second big part of the question is the following. Recently there were rumors about whether KB will acquire a securities brokerage house or not. Of course it would be up to the top management issue that I am sure that this is not something that you could decide immediately. But into the future, what is your view about the possibility of conversion into a holding company structure or possible acquisition of a brokerage firm?

(Interpreted). Let me answer the first part of the question regarding the corporate tax payment as well as the reduction of the special consolation bonus which brought down the overall labor cost. And regarding the acquisition of the brokerage firm I believe that another member of the top executive will answer.

First of all regarding the extra payment of the corporate tax, it was KRW481.8b. As you know back in 2003 in the month of September we merged with KB Card. At that time, we did not provision from the KB Card side but rather we purchased the shares on the book value basis. And from the KB Bank side we had provisioned for the merger. And the corporate tax was found to have not been paid accordingly back then. On this particular issue we believe that we do have the logical ground to possibly appeal. So we are preparing for an appeal going forward. So we will pursue that appeal process.

And regarding the special consolation bonus reduction by paying extra corporate tax our profit sharing portion has come down. Because of that particular formula for profit sharing that has brought down the overall labor cost, or the consolation bonus that is.

(Interpreted). Let me answer the second part of the question regarding the acquisition of a brokerage firm. Currently we are working on this issue. I guess at Shinyoung Securities firm, I don't know whether buying a brokerage firm would have any relations with the status of the top management. But from KB's perspective because we believe that this particular company is necessary for the overall management plan going forward, we are pursuing it right now. And I believe that we will pursue it in the future as well.

(Interpreted). I hope that has answered your question and we'll take the next question from Kyobo Securities. Mr. Kim from Kyobo Securities, please.

(Interpreted). Yes good afternoon. I also have about two questions. The first question is about the margin. The funding cost in trend is going up. I guess that's one reason of your NIM. But in terms of delinquency ratio the market is stabilizing. With the increasing funding cost, are your -- is there a way of increasing your lending -- (inaudible) lending income?

And the second question is, even though it's a bit too early, last year there was dividends paid out and recently it seems that you were considering the possible purchase of a securities company. So in terms of shareholders equity, what is your strategy, your capital or shareholders equity strategy, please?

(Interpreted). Regarding the funding costs increase as I have just explained, in the future we are expecting our funding cost, especially because other financial institutions have been so generous to their customers when it comes to deposit rates we have been responding, increasing our funding costs. We think that it's something that we need to do to our customers who've been so loyal to Kookmin Bank for such a long time. But market rates have come up. We expect market rates to increase to a certain extent more.

And, as our CEO mentioned, we have our asset policy being established. Especially on the credit card side, our volume is increasing. And so, considering all of these factors, our NIM, it's difficult to say that our NIM will increase, but we don't think there is a lot of room left for additional contractions on our NIM either.

Our strategies on our shareholders' equity, well first of all as you know well, we are considering a possible acquisition of a securities company. We also have various strategies for overseas expansion of our banking business. So that would also have some funding needs as well. And as the year end approaches, we will be able to get a more detailed plan of how to use our capital. And so I think we'll be able to provide more detailed explanations closer to the end of this year.

I hope that answered your question. We will now take the next question. We have Mr. Phillip [Rogers] from Goldman Sachs. Please go ahead sir.

Yes, it's Philippa Rogers from Goldman Sachs. I have two questions for you. The first question is pertaining to the non-bank financial services that you plan to offer. How intent are you on manufacturing of these products versus distribution, and where do you think the profitability lies in Korea and the growth?

And my second question is can management make some public comments on the progression of the potential renewal of the CEO's term at the end of October and/or replacement, if that's the strategy?

(Interpreted). We have with us the head of the Board of Directors of KB, Dong Soo Chung, and I believe that portion could also be addressed by him.

And let me talk briefly about the non-bank-income portion. As you are well aware, our distribution network in Korea is the best among the peers. Currently, investment trust and bancassurance related fee income speak for themselves. So when it comes to the manufacturing side, we have the insurance company as well as the asset management company as the affiliated companies. And we want to complement the structure even further by acquiring additional securities company going forward as well.

If I may elaborate just a little bit more on that point. The P&C insurer we do not have under our overall umbrella. In the long term we believe that -- I guess one could say that we do require a P&C company under our umbrella. Therefore, when it comes to the manufacturing platform, currently we are trying to make sure that we have the securities arm. And when it comes to the distribution network we have the largest such network among all banks in Korea. We want to make sure that this distribution network becomes more efficient. And, to that end, we have been working very hard to improve that efficiency and we will continue to do so in the future as well.

Let me also add a little bit on the non-bank financial institution related products. According to our expectation, starting from next year in our bancassurance portfolio the P&C products will also be allowed to be sold within our branches. That's an area that we have high expectations for.

And regarding the corporate pension side, although we are in an infant stage at the moment, in the future we anticipate this sector to grow quite a bit. Currently KB has the largest market share, therefore I believe that KB will become the most beneficiary bank in terms of the corporate pension sector developing.

(Interpreted). Good afternoon. I am the head of the BOD of KB Kookmin Bank. I am attending today's earnings conference because I would like to listen to the shareholders' and analysts' voices more. The current CEO's term is due within the next 33 years -- three months, excuse me, and according to the regulation the BOD's recommendation committee has to recommend the CEO. As you are well aware we have the outside directors and inside directors deciding on this matter. We believe that the KB Bank's leadership should not be shaken up at all. With that in mind we will make the necessary recommendations in the near future.

(Interpreted). I hope that has answered your question and we will move on to the next question from Templeton Asset Management. Mr. [Chong] from Templeton. Please go ahead sir.

(Interpreted). Yes, good afternoon. My name is [Chong Wei] from Templeton Asset Management. This is the question going to the CEO about the management. Looking at the first half performance, I have lost some of the trust I had in the KB management because I am not sure what your strategy actually is because, number one, last year you said that you will try to hold back loan growth. But then this year your assets have been growing quite significantly. I guess it means that you're eating into your own profitability by doing that.

And regarding the buying of a securities company, you personally said a couple of years ago that you are not at all interested. But now, as prices have gone up so much, now you seem to be interested in buying a securities company. So what exactly is your management strategy? I think it's quite confusing for some of the investors.

And one last word that I would like to leave is that you're claiming to be a leading bank and many investors are expecting you to play a role as a leading bank, and please do something to build some confidence in the investors. Why do we need to hold or buy Kookmin Bank? Do you have any clear messages to persuade us?

(Interpreted). Thank you very much for that question. Well actually my answer to that question will be that first of all our NPL ratio, if you could turn to the page that shows our NPL ratio. I think that's on page 18 of the presentation, our NPL ratio. So I came in, in 2004 December. At that time our substandard and below ratio was highest amongst all banks in Korea and the red line, which is precautionary and below, that was also at 7%, the highest in December 2004 when I joined KB. Our net interest margin, on the other hand, so that would be including the credit cards, was in 2003, which was a minus in 2003.

I am sure Templeton, which has been a very long term holder of Kookmin Bank will recall our situation before I came to Kookmin Bank. During the past two and a half years our management's mandate was to in a sense turnaround the system so that it could take care of its own equity respectively. And after that is created, we will be using that as a platform to move up to the next level. That was our plan two and a half years ago when we came in as the new management. And that is exactly our strategy for the past two and a half years.

And frankly speaking, in terms of the improvement of our asset soundness and the improvement of our loan management systems, frankly speaking the amount of improvement that we had achieved is actually have -- the achievements have been accelerated than what I had originally expected when I first came to Kookmin Bank. All of our management and employees during the past two and a half years have been focusing on recreating the key systems of a banking business.

And, starting from end of last year, we are starting to see the effects of this management system. Last year, in 2006, we almost spent the whole year looking at the Korea Exchange Bank acquisition. And you did mention that question of whether I was interested in buying a securities company, I also remember receiving that question, but the reason why I responded that way that time was because at the time we were focused on buying KEB. I didn't want us looking at several targets at the same time. I'm sure that would have been a concern of the investors if I had said that that time.

Also, last year we were intending not to increase our assets. That I think was a show of our tremendous amount of patience last year because last year large banks took turns increasing their assets and KB Kookmin Bank was, I'm sure, tempted to join. But if we had succumbed to that temptation, I am sure that the investors who have, I think, shares of not only KB Bank but also other banks, I think the hit on the entire industry would have been more severe.

On the other hand, starting from the end of last year we changed our direction, becoming a bit more aggressive on the assets side. The reason why we changed our approach is shown very clearly in these numbers. Our substandard and below ratio is down to 0.8% and our BIS ratio is above 13%, our Tier 1 is above 10%. So given that situation on our equities side we, at the end of last year, thought that we already had a very strong foundation that enabled us to take a bit more risk. And so that was the logic behind the shift of our asset strategy.

And so the focus of our business has shifted, that would be what I would like to say to explain that changes that you've pointed out. During the past two and a half years we did have a change of direction and we had good reasons for changing those directions. And that is my thoughts, very frankly.

(Interpreted). Yes, we will now go on to the next question from Prudential Securities, [Mr. Song Dong Soo]. Please go ahead sir.

(Interpreted). Good afternoon, my name is Song from Prudential Securities. I have the following two questions. First of all the SG&A, especially administrative expenses side, is increased KRW100b, increase quarter-on-quarter and you said it's because of the welfare expenses. Now was this a one-off factor or will this be a continuing trend into the second half?

And second question has to do with the corporate banking. Considering the asset quality aspect of it, you said you increased the asset. Now during the second half, what is your target for the corporate loan asset size?

(Interpreted). On the labor cost side you asked a question about the administrative expense. Especially during Q2, we saw an increase because about KRW60b contribution to the KB internal welfare fund was made by the Bank. But we do not believe any additional funding will be made throughout this year. If there is any further contribution, I believe it should be beyond next year.

Regarding the corporate loan asset size, for second half we anticipate this asset size to grow but we do not anticipate the speed of growth to be as accelerated as the previous quarter.

(Interpreted). We will take the next question. [Mr. Terence Loh], Mr. Terence Loh of --

Hello yes. Hi. I have two questions. My first question is on the deposits side. There has been a decline in your core deposits and the trend has continued in the second quarter. And right now when the CFO commented on the NIM, I think you mentioned you are doing something about the funding, but I am not sure whether, how you can contain the decline in core deposits.

My second question is about your asset growth strategy. After hearing what you said about your asset growth, I keep on wondering whether the asset growth strategy is going to generate incremental ROE for shareholders. So in that case, wouldn't it be more prudent for you to increase the payout rather than growing into assets which does not generate as much return as currently? Thank you.

(Interpreted). EVP Lee will be explaining the question about the core deposits.

(Interpreted). I'm in charge of the marketing products. My name is Dal Soo Lee, EVP. As of end of June year-on-year, our demand deposits have decreased by about KRW3.9 trillion year-on-year. The major reason is there was some temporary influx of funds at the end of last year. So that was one factor behind this decrease.

If you look at our actual average balance, average balance of December and average balance of end of first half, it's similar. Of course there was some efflux of funds to the CMA account, but what we plan to do is that, first of all, we will maintain the banking account used for settlements, but we will also try to use other services to enhance the competitiveness of our deposit offering. Also we will use the KBS ERP and other niche markets to generate more low-cost deposits coming into KB. We will also try to attract low-cost deposits by providing services that only banks can provide.

And regarding your question about our asset-build strategy, well your comments are correct. Incremental, additional ROE will be returned to our shareholders through M&A.

(Interpreted). We will now invite the next question. Well, there were numerous questions and answers which were quite productive. It seems we have entertained all the questions that were posted, so this concludes the 2007 first half earning release conference call for KB, Kookmin Bank.

The VOD and the presentation materials will be posted at KB website so you could download these materials anytime. And those of you who have other questions, other than those given already, please contact the IR department and we will support your questions to our best ability. Thank you very much for taking part in today's conference call.

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.