KB Financial Group Inc (KB) 2008 Q2 法說會逐字稿

(Interpreted). Good afternoon, ladies and gentlemen, my name is [Kusa Choi] of the KB Kookmin Bank IR Team. First of all, I sincerely thank you for attending our first half earnings conference despite your busy schedule. This conference is being provided live, both in Korea and overseas, through the conference call lines and the Internet webcast. We will also receive your questions directly during the Q&A session.

We have our CEO Chung-won Kang and the members of the executive team present today. KB Kookmin Bank, in order to save energy, has currently been not wearing ties since the start of July. And first, the program of the conference will start with a presentation by Mr. Ho Chang Kim of our first half results. Following his presentation, we will receive your questions through the telephone line. If you have any questions, please be prepared to ask them during the Q&A session.

Now, I would like to give the floor to Mr. Ho Chang Kim, who will give us a presentation on our first half results.

(Interpreted). Good afternoon, ladies and gentlemen. My name is Ho Chang Kim of KB Kookmin Bank's financial management team and I would like to give you a presentation on our first half results. Please turn to page three, titled Financial Highlights One.

Our first half net income was KRW1,275.9b, which is a year-on-year 10% decrease. And this is mainly due to the increase of provisioning expenses during the first quarter of this year. Our pre-provision operating income was KRW2,189.3b, which is a decrease by about 21% year on year. But if you take out the LG card sales gain, which was a one-off factor last year, actually, on a pre-provision basis, our operating income is similar to the previous year.

Our provisioning expenses have increased mainly due to increase of our assets and provisioning against our normal loans, and also some one-off provisioning factors. It increased year on year by KRW215.1b and was KRW507b.

Our NPL ratio was 0.66%, which is a 14bp year-on-year and 13bp quarter-on-quarter improvement, at a very low level, and is the result of KB Kookmin Bank's continuous efforts to enhance its asset quality. Our annualized ROA and ROE were 1.1% and 15.86% respectively. And even though those are tentative figures, our BIS ratio was 12.52%, tier one 10.73%.

Next page, please. The major items on our P&L. If you combine the interest and non-interest income to the gross operating income, as you can see, on a quarterly basis, we have been maintaining a stable range of between KRW1.9 trillion to KRW2 trillion.

Our G&A expense has increased related with IT system investment increases and other operational infrastructure projects, but, in the second quarter, our G&A increased by KRW81.8b, recording KRW965.7b. But considering our enterprise [bank-wide] levels to reduce our expenses, I do not expect there to be a major expense increase on a recurring basis. Our provisioning expense, despite the increase of our assets, actually, on a quarter-on-quarter basis, decreased by 12.6% compared to the first quarter and recorded KRW236.4b in the second quarter provisioning expense.

Our net income in the second quarter was KRW644.4b, which is a quarter-on-quarter KRW12.9b increase. Every quarter, if you consider the one-off factors, as you can see on the graph on the lower right-hand corner, we have been maintaining on a quarter basis about KRW600b level of net income.

Our major highlights of our P&L interest income wise, interest income on a year-on-year basis grew by 1.6%, recording KRW3,460.4b. On a quarter-on-quarter basis, our interest income increased by KRW18b. Our non-interest income in the first half of this year was KRW578.5b. And if you consider some one-off factors that existed last year first half, actually, on a year-on basis, it increased by KRW120.8b. And on a quarterly basis, it has grown by 12.4% quarter on quarter and recorded KRW306.1b.

Our G&A did increase, mainly due to increased IT system investments. On a year on year, it increased by 3.8%, quarter on quarter 9.3%.

Our pre-provision operating income, if you consider the one-off factors that existed in 2007, is still at a level similar to the previous year, around KRW2,189.3b. Quarter-on-quarter basis, it decreased slightly, KRW1,79.5b.

Our provisioning expense did increase due to provisioning against normal loans due to overall increase in our assets and some one-off provisioning factors in the first quarter. It did increase, therefore, by KRW315.1b year on year. However on a quarter-on-quarter basis, it has decreased by KRW34.2b.

Our non-operating income increased by 18% year on year and 84.3% quarter on quarter, mainly due to increases on our gains on equity methods. Our second quarter net income for 2008 increased by KRW12.9b and recorded KRW644.4b. For the entire first half, our net income was KRW1,275.9b.

Next, we'll look at the different business lines. First, in the interest income side, the Bank's assets have grown and, on a year-on-year basis, our interest income did grow by 20.6%. However, interest expenses have increased by 41.8% due to increase of our funding size and increase of costs. This has resulted in a squeeze of our net interest margin.

On a quarterly basis, our margins have decreased quarter on quarter by 10bp due to increase of market rated deposits and increase of funding costs. At the second quarter, we were 2.98% net interest margin. We will continue to defend our margins and we expect our margins to improve as we move in the second half.

On page seven, we have the non-interest income explained. First, the fee income. Despite the fluctuation in the stock market, the ITC fee income has increased year on year and the fee income from any -- National Housing Fund and other [warrant] fees have decreased. Overall, our fee income has decreased by 4.2% year on year and increased 4.4% quarter on quarter.

In detail, our ITC sales commissions and fees have increased by 8.2% year on year and 13% quarter on quarter, mainly due to increases of fees from equity and hybrid-type fund sales. The Bancassurance fee income has decreased by 6.2% year on year. In the second half, we will concentrate our marketing capabilities in the Bancassurance side to enhance our fee income. The National Housing Fund management fee has decreased by 35.5% year on year and 30.3% quarter on quarter, due to decrease of the fee rate itself at the end of last year and the [suspense] of handling new business since the second quarter.

On the securities side, there was a decrease of a bond valuation gain due to increase of interest rates. And if we consider the factor of the Visa card sales gain that occurred in the first quarter, there was, on a quarter-on-quarter basis, minus 51% of our securities side profit and loss gain. And on the other side, there was an increase of exchange and derivative-related gains and increase of loan [for] asset sales. And overall, there was a large decrease in the losses of our others.

Now our G&A. Our labor cost has increased by 11.6%, mainly due to increases of our severance pay reserves being increased. Administrative expenses have increased quarter on quarter by 7.7%, mainly due to increase on our welfare cost. In our depreciation, there was an increase of leased branch facility depreciation and there was a slight increase quarter on quarter on our overall depreciation. Our cost income ratio is being maintained at an appropriate level of 45.6% due to our IT system related expenses and investments. KB Kookmin Bank will continue to control its expenses.

On page nine is the non-operating side explained. There was an increase on the equity method gains from our subsidiaries. Our equity method gains have, on a year-on-year basis, increased by 1.8%. Quarter on quarter increased largely. And there was a decrease of dormant deposit payment expenses. And overall, our non-operating profits have increased by 18% and 84.3% year on year and quarter on quarter respectively.

On page 10, we have our assets and liabilities, the balance sheet. Our assets during the second quarter, as you can see on the graph, have grown mainly around the household and corporate loans side. On the household side, there was an increase in demand for housing-related funding as well as other general household loans. And year to date, our household loans have grown by 6.3%, recording KRW94.5 trillion. Our corporate loans have increased mainly around SMEs and large corporate. As of end of June 2008, it was at KRW74.6 trillion. Our credit card assets have continued to grow despite the increase of competition mainly around card loans.

In the first half of 2008, our balance sheet highlights would be the following. As of end of June 2008, our total assets have increased by KRW26.1 trillion year to date, recording KRW245 trillion. The largest portion of this asset growth was won loans, which increased by KRW16.6 trillion. On the funding side, our won deposits have grown by KRW17.6 trillion, which is a 12.7% year-to-date growth rate.

And on page 12, this is the won loan and credit card assets explained in more detail. The household funds have increased mainly due to new demand for housing, home equity related loans and also other general-purpose consumer loans. Compared to the end of last year, it has grown by 6.3% overall. Corporate loans have also increased year to date 17.3%, due to increased, for example, demand for operating funds. On the credit card side, there was an increase on the card loan side and our credit card assets have grown by 1.9% year to date.

Next on our funding side. Our won deposits have grown by 12.3% year to date, mainly around market marked deposits such as CDs and other savings deposits. In more detail, on-demand deposits have grown slightly year to date, due to launching of new products and stronger management of our payroll customers. Also, quarter-on-quarter basis, on-demand deposits have grown by 4.9%. On the savings deposits, there is more competition in the market and, mainly around the time deposit side, it has grown by 12% year to date. CD, RP and other market marked -- market-rated deposits have grown by 36.3% year to date.

Next, we will go into our asset quality for the first half. Please refer to page 15. First, let us look at the delinquency ratio. As you can see on the top-left graph, the delinquency rate for all the loans is maintaining a very low level. Notably, as of the end of June '08, the total delinquencies fell eight basis points to 0.57%, recording the lowest ever delinquency rate. If you look at the breakdown, the household and corporate came down by 9bp and 8bp respectively to 0.61% and 0.45%. The credit card delinquency edged up six basis points, but is still considered quite low.

Let me now move on to the coverage ratio. As you can see on the graph, the NPL ratio and precautionary and below ratio came down 0.13 percentage point and 0.2 percentage point quarter on quarter respectively, showing an extremely stable trend on the asset quality side. As of Q2 '08, the NPL coverage ratio stood at 206.6%, while the precautionary and below coverage ratio was 98.8%. These ratios are maintained at a quite high level.

Please move on to the next page. The NPL ratio as of the end of Q2 2007 improved by 13 basis points quarter on quarter and by eight basis points year to date, reaching 0.66%. This is representative of the systematic and sound risk management capabilities of KB Kookmin Bank. Since delinquency ratios were already mentioned, I will not go into the details.

Now, I will move on to the provisions. The loan loss provisioning for the first half jumped significantly year on year due to bigger provisioning in line with growing assets, along with the one-off asset quality reclassification increase during Q1. On a quarter-on-quarter, however, the strengthened risk management helped improve the asset quality to reduce the provision by 31.4% to KRW171.1b.

If you look at the details, the household provisions came down by 14.9% quarter on quarter due to the asset quality improvement and recovery of written-off assets. On the corporate side, there was a decrease of 39.3% quarter on quarter due to the temporary provisioning increase in Q1. The NPL coverage ratio for household was 234.6%, for corporate 173.6% and for credit card 283.8%, making the total 206.6%.

For your information, KB Kookmin Bank is addressing the current unstable economic environment, both home and abroad, by conducting ongoing monitoring for companies with large outstanding loan amounts and those with growing industry-specific risks. We are doing our very best to fully prepare for asset quality management and we will further enhance our asset quality management in the second half.

Next is our new NPL formation. Despite the asset growth, the total new NPL formation came down by KRW170b quarter on quarter to KRW212b, supported by the continuous asset quality improvement. As you can see on the graph, the new NPL formation, which was rising since Q4 last year, started stabilizing during Q2 of this year.

Next is our credit cost. As was mentioned earlier, with a reduction of the loan loss provision amount, the total credit cost for the second quarter 2008 came down 15 basis points quarter on quarter to 0.29%. If you look at the breakdown, the household credit cost decreased 3bp quarter on quarter to 0.16%. The corporate credit cost dropped significantly by 43 basis points compared to Q1 to 0.53%. The credit card increased 12bp quarter on quarter to 0.69%. As a result, the credit cost is maintained at a quite stable and low level overall.

Next, I would like to comment on the issue of conversion to KB Financial Holding Company structure, which is ongoing. Please move on to page 22. Let me begin with the overall schedule for the conversion into a financial holding company structure, such as extraordinary general shareholders meeting, the appraisal right and the listing date for the holding company.

In order to call an extraordinary shareholders meeting for the share transfer to KB Financial Holding Company, KB Kookmin Bank concluded BoD resolutions on July 17. We also plan to finalize the shareholder register for share transfer on July 30. Under the current plan, the notification for EGM will be sent out around August 8, followed by the actual EGM on August 25. From August 26 to September 4, all the dissenting shareholders may exercise their appraisal right.

The transactions of KB Kookmin Bank shares will be suspended as of September 25. On September 29, the stock transfer from KB Bank and other subsidiaries will be completed and the incorporation registration of KD Financial Holding Company will be completed. Then, on October 10, the shares of KB Financial Holding Company will be newly listed. KB Kookmin Bank is doing its best to successfully convert to KB Financial Holding Company structure.

Let me move on to the next page. Let me now address KB Financial Group's vision. KB Financial Group's vision is to become the global financial group -- the leader in Asian financial market. Under such vision, we hope to achieve the target of achieving Asian top 10 and global top 50.

In order to achieve such objectives, on the banking side, we will base -- utilizing our best of the breed customer base and branch network so that we could strengthen and solidify our standing as the leading bank domestically. On the non-bank side, we will strengthen our capabilities as a total financial service provider so that we could strengthen our competitiveness as a Group.

On the overseas side, we will leverage our domestic sales capabilities, brand power and internal control system, risk management and other such advanced financial techniques so that we could fully establish the foundation for a successful entry into the overseas market.

Lastly, I would like to talk about the mid to long-term growth path for the financial Group of KB in three stages. First of all, the first stage is, up till 2009, we will leverage M&A so that we could strengthen businesses for banks and non-banks. And we will enter into new business area so that we could enhance our value and strengthen our organization and capabilities so that we could successfully establish our subsidiaries and diversify our business portfolio.

The second stage is up to 2011. During this stage, on the securities and insurance side, on the non-bank side, we will secure the leading role. And through M&A and local operation and expansion in Asia, we will establish overseas network as a leading Group so that we could create a balanced business portfolio and global competitive edge.

During the third stage, up to 2013, we hope to achieve the target of becoming Asia top 10 and global top 50 so that we could secure the Asian market leadership, so that we could truly emerge as a global financial Group, the leader in Asian financial market. All the employees and the management at KB would like to reassure you that we will do our very best to become a truly global financial Group so that we could give back to the customer and shareholders of KB Financial Holding Company.

So this concludes the earnings presentation for the first half 2008. Thank you for listening.

(Interpreted). Thank you very much for that presentation and, now, we will take your questions. (OPERATOR INSTRUCTIONS). I will take the first question from Goldman Sachs.

Yes, good afternoon. This is Philippa. I have a question on your SME loan growth, which I believe is 10% quarter on quarter. Given your end characterization of the economy as uncertain, can you give us some guidance on what this lending was for, to whom, and at what pace you expect credit to expand over the next 12 months? Thank you.

(Interpreted). Yes, I'll briefly answer the question. During the first half, [of] our corporate loans grew by about KRW11 trillion. And of that KRW11 trillion, SOHO and self-employed businesses accounted for KRW2.6 trillion out of the KWR11 trillion total growth in the first slide.

Since the second half of 2007, Kookmin Bank has been focusing on a balanced growth between household and corporate loans and that is why we have been focusing on somewhat increasing our SME loans to balance with our household portfolio. And this strategy in the future will depend on the margins that we gain from household versus corporate.

And in the second half we are not expecting the SME loans to grow at the same pace as in the first half. We are doing our study and analysis for the appropriate level of SME loans. Recently, as you've heard, probably, during the press and other media reports, the SMEs are having challenges and we do need to look into the risks that are being posed by the SME segment. Kookmin Bank has been within the SME segment focusing more on the SMEs that have better growth potential. And we will look at the financial soundness of each account as we issue SME loans. I hope that answered your question.

Thank you.

(Interpreted). For your information, because we have limited time allotted for the Q&A session, I would like to advise all of you to contact the IR department for a very detailed figure related question so that we could do our utmost to address all your questions. I guess all the presentations and the materials have been quite complete. So far, we have no questioner in line, so we will wait just a little longer.

(Interpreted). We'll take the next question. From Nomura Securities, we have with us Mr. Jin Sang Kim. Please go ahead, sir.

(Interpreted). Thank you very much for the presentation. Regarding the margin, I believe that the reduction gap quarter on quarter seems to be smaller compared to other banks. And you said that, during Q1, you had one-off factors - that's why it seems like you have a bigger drop - and, during Q2, you are trying to compensate for any other reduction that is taking place.

So I'm wondering, during Q2, did you have any one-off factors? If not, considering the one-off factors in Q1 -- now, if you exclude all the one-off factors in both Q1 and Q2, can you talk about the actual margin reduction quarter on quarter? Now, in the second half, you expected margin improvement going forward, but could you be more specific as to on what grounds you are planning to improve the margin situation?

And lastly, during the second quarter, despite the economic downturn, the new NPL formation was quite lower than expected. So can you share with us the secret or the reasons why that was the case? And can you also make predictions as to how your new NPL formation will proceed going forward?

(Interpreted). Regarding the first quarter margins, yes, there was a big drop in the margin because, as I told you before, between December last year and January of this year, strategically we were trying to deal with the market liquidity issues. And that's why we exercised certain funding strategies.

During Q2, we do not believe we have any particular one-off factors. So during Q2, the margin that is shown on the presentation is about 2.98%, which is a 10bps reduction quarter on quarter. We believe that this is a defendable level. And going forward, we believe that we could gradually improve the margin.

The third question, I don't believe I got the gist of it. So could you repeat the third question, please?

(Interpreted). Yes. If you look at the second quarter, new NPL formation on a quarter-on-quarter basis has come down. That's quite fortunate. But if you consider the bad economic cycle that we were going through, this is quite unexpected, because the reduction in volume is quite significant as well. So I was wondering under what circumstances -- what did KB do well so that you were able to limit such new NPL formation?

Now, we are moving into a quite uncertain terrain in the third and fourth quarter. So I believe that it would be difficult for you to maintain the current level of performance, because so far you have such robust asset quality. So going forward, what is your expectations about new NPL formation? Do you have any concerns or do you feel it's quite dependable? Could you comment on that?

(Interpreted). I would like to invite EVP [Oh], in charge of lending, to answer that question.

(Interpreted). Yes, you mentioned that our new NPL formation was reduced quite significantly. The biggest reason is the following. During Q1, the NPL volume was about KRW110b and, in Q2, I believe that we normalized. So Q1 was an extraordinary situation. That's why the new NPL formation seemingly has come down quite significantly. I hope that has answered your question.

(Interpreted). And we'll take the next question from Citi Securities, Mr. (inaudible). Please go ahead, sir.

(Interpreted). Yes, good afternoon. This is (inaudible) from Citi Securities. It's about real estate project finance. I think it's about KRW10 trillion or so and there's ABS and ABCP exposure. Could you give us an assessment on the level of risk you think you're taking? And there were some difficulties in other institutions due to ABS and so how should we look in the future regarding these project finance loans?

(Interpreted). The PF, our balance is KRW11.3 trillion in balance. And our delinquency is KRW19.7b as of end of June, which is 0.17% of our delinquency ratio. So we have differentiated the stronger project finance accounts versus those weaker and focused on extending loans to the stronger ones. And this differentiating strategy has helped us maintain a good performance there.

Regarding (inaudible) securities or (inaudible) construction, there was a default of around KRW76b, which has already been reflected. And we will try to have a substitute construction company selected as soon as possible so that the project continues its constructions on schedule.

The real estate project finance is not causing huge concern. That was the answer. And we'll move on to the next question.

(Interpreted). We'll take the next question. We have Brian Hunsaker from [Fox-Pitt]. Please go ahead, sir.

Yes, thank you. This is Brian Hunsaker from Fox-Pitt Kelton. I just wanted to ask the question again I think that someone previously asked about the -- your guidance on margins going forward. I thought that the -- perhaps the most interesting comment you made was that margins would begin to improve in the second half of this year and I just want to understand why, specifically, do you think that margins will improve. Is it -- are you trying to increase your loan prices? Do you think the asset mix is shifting? Do you think the liability mix is shifting? What are the specific reasons why we should expect the margin to improve in the second half? Thank you.

Thank you for the question. During the second half of the year, compared to the first, we expect to be to an extent shifting the mix of our portfolio to broader margin assets. So we've put in plans -- we're working on plans for both the first quarter, second quarter, which we're now implementing to see that happen. Also, the -- our loan growth, we expect to focus more on wider-margin assets, both retail and corporate, through the remaining part of this year.

And overall, I think the -- we've been able to predict with some reasonable degree of accuracy the direction. [Clearly], the second quarter came in pretty much in line with our expectations. And with the various plans we have in place I just referred to, we do expect to see third quarter maybe stabilize and pick up slightly and perhaps slightly more (inaudible).

As you know, we've done an RMBS recently for EUR400m. We expect to do further securitizations in the future. And also, we're working on a covered bond, although the timing and size has not yet been determined.

(Interpreted). Let me also add slightly, on the SME side, the margin on the newly-extended loans is on a rising trend. As you are well aware, we have to raise the margin even further so that on an average basis we could overall enhance the margin trend. So in that regard, as I also mentioned in the first quarter IR, I believe that by the year end of this year, at least compared to the current stage, our NIM is expected to go up for sure. So that is our forecast up to this point. Thank you very much.

(Interpreted). Thank you very much for those answers and we'll take the next question.

(Interpreted). I think there is an additional follow-up question from Philippa Rogers. Please go ahead ma'am.

Yes, I have a comment about capital. Did you declare an interim dividend? What is your dividend policy going forward? And in respect of the potential share buyback, can you give us any further color or guidance there?

(Interpreted). Well, about the interim dividends, the Kookmin Bank situation and -- considering our timing -- I think executing an interim dividend will be something of a difficult idea for us, considering the situation and timing.

Our dividend policy -- well, first of all, if we convert to a holding company at the end of September, next year's dividend would be based on what the Bank earns in the second half of this year. The net income of the Bank in the second half is what we will be using for dividends next year.

During the past three years, our payout ratio has been maintained at 30%. And assuming that you know our payout ratio has been 30% over the past three years, our payout ratio next year -- well, assuming that in the second half we have no capital need for M&A deals, assuming that, I think that we would need to maintain the past ratio of 30% payout ratio even next year.

Have I answered all of the --? The share buyback. As we have disclosed, acquiring treasury stock, well, on July 15 the BoD was held and we had resolved to present to our general meeting of shareholders a conditional transfer of stock. And one of that item does include the active consideration of a stock buyback. We have not yet determined finally the timing and the amount. We will go through a more prudent deliberation before finalizing our plans.

(Interpreted). Thank you very much for the answer.

(Interpreted). We will take the next question. From UBS, we have Mr. John (inaudible). Please go ahead, sir.

Yes, my questions have already been answered. Thank you.

(Interpreted). I think we're covering a wide area of topics through the presentation and the question and answer session. We have some of the questions already been answered and we will wait for the next question. Since we had numerous questions that were raised already, I believe that most of your questions have been answered. So we have no person waiting in line for a question.

(Interpreted). Excuse me, we have one more question waiting in line. From Daiwa Securities, Mr. Chang E. Lee. Please go ahead, sir.

(Interpreted). I apologize for delaying the process. I have a very short brief question for Q3 and Q4 and beyond that period. The fundamental trend, I believe, would be in line with what you have predicted, but we have to think about one-off factors, such as, in Q3, the [II] Indonesia sales allowance might be coming in. In Q4, you might have some other one-off factors. So can you share with us beforehand what one-off factors we could expect for Q3 and Q4?

(Interpreted). Actually, the II sale item has been already disclosed and we are still waiting for a concrete result. So we believe that that's an item that is one of the possible one-off items that might materialize in Q3.

(Interpreted). We'll take the next question. Mr. Shaun Cochran of CLSA. Please go ahead, sir.

Hi, yes. We've talked about capital management. It's -- one of the key parts of the capital management equation is how you execute on the acquisition side. Can you just talk through are you actively looking at anything in terms of offshore and what the strategy between bank and non-bank is, and be specific as possible?

(Interpreted). Well, overseas, we have no active opportunities that we are currently studying. But a meaningful-size overseas acquisition, we are not considering any under that characteristic currently. About bank and non-bank relationships, we'll first need to convert to a holding company structure and take some time to talk about our non-bank strategy. I hope that answered your question.

(Interpreted). We'll take the next question. From JP Morgan Securities, Mr. Gil Hyung Kim. Please go ahead, sir.

(Interpreted). Thank you very much for the opportunity to raise the question. Now, asset growth rate is about 12% range. But regarding Basel II, I believe that there has been a delinquency ratio reduction of 3%. And I'm wondering whether it had anything to do with the BIS ratio related preparations?

Not directly. We've factored it in modestly in our risk weighted asset calculation. But as far as the overall BIS ratio, [there's very little impact].

(Interpreted). I hope that has answered your question. Of course, further details could be provided through the IR team.

(Interpreted). I will take one more question. From Goldman Sachs, Philippa Rogers. Would you like to go ahead, ma'am?

Yes. Sorry to keep taking your time up. On the SME, once again, can I ask this another way around? Have you increased the number of customers that you have lent to in the last quarter or expanded the debt per customer? And secondly, was this working capital related or CapEx facilities, the expansion of debt? Thank you.

(Interpreted). Well, during the first half, our SME loan increase were mainly from new loans, rather than increases of existing loans. And there were loans within a certain limit or a credit [line]. And SOHO loans to those who we believe have more growth potential were the major focuses of our SME loan growth in the first half.

And rather than capital expenditure, about 70% was for operating capital. CapEx-related loans were relatively a smaller portion of our SME exposure. And as I have mentioned, in the second half, Kookmin Bank's loan policy would be to maintain an appropriate balanced portfolio of household and corporate loans. And that will be the determining factor in our SME loan policy in the second half as well.

I hope that answered your question.

Sorry, to clarify, could you give me some examples of what type of companies would be seeing growth in this environment?

(Interpreted). Thank you very much for raising questions while other questions were being answered. Now, currently, we have no questioner waiting in line. I believe that most of your questions have been addressed so far, so we would now like to conclude the earnings conference for the first half of 2008 for KB Kookmin Bank.

The presentation materials and the video will be available at our official KB Kookmin Bank website, so that you could access them any time at your convenience. And those of you who did not have an opportunity to raise questions during the conference, I would like to ask you to contact our IR department. We will do our best to address all your questions. Once again, thank you for taking part.

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.