KB Financial Group Inc (KB) 2012 Q1 法說會逐字稿

[Interpreted] Good afternoon, my name is Jong-Kyoo Yoon, the CFO of KB Financial Group. Let me present KB Financial Group's Q1 earning results for 2012. Let me begin with the financial highlights.

The profit of KB Financial Group for Q1 2012 reached KRW603.2 billion. This was a drop by 20% year on year. It was mainly due to the one-off gain of KRW137.6 billion from winning a lawsuit regarding NHF Commission. On a quarter on quarter basis however, our profit jumped 175% and the main reasons include the following -- the Q4 results recognize the KRW242.7 billion losses on the exposure to Sungdong Shipbuilding, as well as our efforts to meet the regulator's NPL ratio guideline of 1.5%, which led to about KRW93 billion in additional provisioning.

Growth operating income, which represents the group's profit creation capacity, recorded KRW2.176 trillion in Q1 2012. While the net interest income was weaker due to the narrowing NIM, the expanded non-interest income boosted the growth operating income above KRW2 trillion per quarter, maintaining a stable profitability trend. Next page please.

The provision for credit losses for Q1 2012 came in at KRW389.6 billion, improving 6% year on year and 23% quarter on quarter. As mentioned earlier, needing as the NPL ratio guideline of 1.5% during Q4 required some non-recurring provisioning expenses. However if you exclude such one-off factors, years of our risk management efforts are paying off with continuously stabilizing quarterly trend of provision for credit losses.

The Group's Q1 ROA and ROE recorded 0.86% and 10.48% respectively. If you look at the capital adequacy on the bottom, efforts including the introduction of (inaudible) increased the risk rated asset by around KRW5 trillion. Despite such increase, the stable profitability in Q1 led to slightly higher Tier 1 and Core Tier 1 ratios for the Group. The Bank's numbers were on par with the end of last year. In the case of the Bank BIS ratio, the reduced recognition of the subordinated bond under Tier 2 category resulted in a 0.29 percentage point reduction year to date to 13.26%.

On page 5, we have the highlights of the Group Profitability. Page 5 please. The Group net interest income for Q1 2012 rose 6.9% year on year, while decreasing 3.3% compared to the previous quarter. If I may explain the quarter on quarter reduction. The NIM, which consistently trended positively throughout 2011, narrowed slightly during Q1 due to the tightening loan spread as well as the slower loan growth extending from the stagnant household loan growth.

Net gains on SVTPL and net other operating income posted lackluster results during Q4 last year, affected by the extra provisioning for the forward exchange exposure to Sungdong Shipbuilding and Engineering. However the Q1 number has rebounded to the normal levels. I will elaborate on the details in the latter part of my presentation.

The Group's employee benefits and G&A expenses for Q1 marked KRW974.8 billion. The adjustment of allowance for severance liability amounting to KRW47.6 billion and other seasonal factors led to the G&A expense of KRW1084.2 trillion in the previous quarter. The quarter on quarter decrease was 10.1%. So although on a year on year basis the Group net operating income before provision for credit losses, after deducting expenses, posted KRW1201.2 trillion for the first quarter, down 15% year on year and up 27.5% quarter on quarter. As mentioned earlier, it was because of the high base effect regarding the NHF commission related lawsuit and Sungdong Shipbuilding related provisioning.

First let me move on to the interest income. The Bank's net interest income for Q1 went up 3.8% year on year and decreased 4% quarter on quarter to KRW1501.8 trillion. The credit card net interest income marked KRW240.7 billion. As you are well aware, the net interest income for credit cards prior to the spin off in March 2011 is attributed to the Bank, while the post spin off numbers are reflected under the separate credit card results on the bottom of the page.

I'm sure this is a little confusing, but up to this quarter we will separate it this way and from the next quarter on the comparison will be easier. If you look at the net interest income graph on the Group on the top right, the combined net interest income for the Bank and the credit card business is showing a stable trend.

The Q1 Group NIM, combining both the Bank and credit card, edged down 13 basis points quarter on quarter to 2.97%. As mentioned earlier, the narrowing loan spread from the Bank, together with the deposit growth led by the time deposits led to such results. Actually the increasing demand and a funding demand increase actually affected our overall results by 3 basis points.

KB Financial Group going forward will secure higher share of settlement accounts to expand our low cost deposit base, while tightening the funding management to minimize excess funds on hand as part of our efforts to manage margins efficiently. As I have mentioned many times before, we will do our utmost to maintain our 2012 annual NIM at around 3%. Next page please.

Let me now move on to the net fee and commission income for the group by sector. The Bank's Q1 net fee income stood at KRW338.3 billion, down 34.7% year on year. It was mainly due to the one-off gains on the winning of the NHF commission related lawsuit during Q1 previous year and the credit card commission income up to the spin off in February.

The details of the Bank's major fee and commission income include the following -- representing security sales, including fund sales commission, continued a downward trend throughout 2011 due to the bearish investment demand from the volatile stock market. However the Q1 results came in at KRW45 billion, remaining on par with the previous quarter.

In the case of Bancassurance fee the proactive marketing led to expanded new business written for the single premium products, resulting in a significant fee growth both quarter on quarter and year on year. KB will continue to lead the market by way of new product development and sales force capability enhancement to further widen the net fee and commission incomes. The Q1 credit card agency fee dropped quarter on quarter due to the lower merchant fees.

I will now touch upon the net gains on FVTPL and net other operating income. Page 8 please. The Bank's Q1 net gains on FVTPL and net other operating income recorded KRW179.3 billion, down slightly year on year and quarter on quarter. However if you consider the offsetting relationship against the gains on FX and hedging derivatives on the bottom of the page, the overall net gains on FVTPL and net other operating income remained rather stable.

The Bank's net other operating income is showing an overall improvement. To be more specific, first of all gains on available for sale and health maturity securities decreased quarter on quarter quite a bit. But it was due to the high base effect from Q4 last year from the KRW72.5 billion gain on the redemption of the Bond Market Stabilization Fund. So if you exclude such one-off factors, the Q1 results actually improved compared to the previous quarter.

The Other item for Q1 incurred KRW126.1 billion in losses narrowing the losses significantly compared to Q4 last year, when the Sungdong Shipbuilding-related extra provisioning led to KRW438.7 billion in losses. The credit card's net other operating income for Q1 marked KRW8.3 billion in losses. For one thing the expenses for the credit card holders loyalty points went up. Also there were no NPL sales during Q1 like Q4 last year when the NPL sales resulted in KRW56.9 billion in sales gain. Next page please.

The Bank's G&A expenses for Q1 came in at KRW835.6 billion, up 5.1% year on year but decreasing 8.7% quarter on quarter. While the Q4 G&A expenses somewhat exceeded the normal level due to the seasonal factors such as the adjustment of the allowance for severance liabilities, the Q1 G&A numbers had no major one-offs trending back to normal. The credit card G&A expenses for Q1 are also quite stable considering the fact that the number reflects only one month period post spin off.

The graph on the right side shows the Group's cumulative cost/income ratio, which posted 44.8% for the first quarter. For your information, if you exclude the major one-offs the cumulative recurring CIR trend has been stabilizing from 49.8% in 2010, 45.5% in 2011 down to 44.8% this quarter, continuing the stabilization trend. Through efficient cost management and revenue expansion we expect to maintain our CIR at mid 40% range and ultimately bring it down to lower 40% range in the mid to long term view.

On page 10 we have provided additional Bank financials for historical comparison, so please make use of that. Next page please, on page 11.

I would now like to talk about the Group's financial standing. As of March end 2012 Group total assets increased 2.6% year to date to KRW285 trillion. Total liabilities driven mostly by deposits increased on a year to date basis by approximately KRW7 trillion. March end Group shareholders' equity is KRW23.4 trillion.

In Q1 there was dividend payout for fiscal year 2011 of KRW280 billion of surplus used, but with KRW600 billion of net profit equity increased KRW300 billion year to date. At end of March, Group total assets, including trust and AUM, is around KRW369 trillion, around KRW8 trillion increase year to date. Next is on the Bank and credit card loan.

The Bank's loan in won as of March end is around KRW184 trillion, only growing 0.2% year to date. Under the principle of stable loan growth, focusing on the fundamentals, for 2012 we set Bank's annual growth target quite conservatively within the scope of nominal economic rates, and we've mentioned this many times, around 5%. But even with that in mind, loan growth in Q1 is not fully satisfactory against the original plans. Looking at different factors, household loans declined 1.5% year to date due to short demand on new loans on the back of sluggish real estate market and for risk management purposes we were conservative on origination of new loans. Corporate loans grew 2.2% year to date. Highly collateralized with good asset quality, the SOHO loans showed robust growth with large corporation and SME loans showing a balanced growth trend.

Credit card receivables as of March end is KRW11.8 trillion, a 5.6% decline year to date. This is due to the base effect from the end of the year seasonality factor of increased card transaction value. On card loans and cash advances, who are relatively higher in terms of risk, we limited the target customers and lowered the limit in order to strengthen risk management.

Next is on the funding overview for the Bank. As of March end, deposits in won is KRW193 trillion, 1.8% increase year to date. This is due to customers' continued preference for safer assets and with Bank's active marketing time deposit increased KRW2 trillion year to date and low cost call deposit also grew by KRW1 trillion. Debentures in won, thanks to continued improvement efforts for the funding portfolio, decreased KRW14 trillion as of end of March.

KB Financial Group, rather than large institutional deposit accounts, will focus more on attracting retail deposits that can lead to additional revenue sources through additional transactions. And through new product development and strengthening of products we will continue to attract low cost deposit base in order to solidify our funding source.

On the lower right hand corner graph, the Bank's loan to deposit ratio is 97.4% as of end of March, falling against the 99.6% at the end of the year. We will continue to contain the rate below 100% and expect no difficulties in making gradual improvements going forward. Next page, on page 15, I will talk about the Bank's asset quality.

The Bank's March end NPL ratio is 1.64%, against 1.43% of end of last year it rose by 21 basis points. Bank's March end delinquency ratio is 1.06% against 0.87% at end of last year, it increased by 19 basis points. In Q4 of last year, to meet the NPL ratio of 1.5% guideline, there was around KRW1 trillion of NPL write offs and sales. But in Q1 this year we only wrote off KRW260 billion with no sell offs. At end of March NPL comfort ratio, including the reserve for credit losses, is 143.1%, being maintained at an adequate level.

The slow down in global economy and domestic real estate market and rise in the household debt market is concerned about increased risk for potentially risky customers. KB will conduct segmented analysis and strengthen pre-emptive management to ensure rigorous management of asset quality. On page 16 I will talk about the current asset quality overview.

As of March end, credit card NPL ratio, due to active resolution of NPLs, improved 3 basis points year to date recording 1.07%. NPL coverage ratio, including the reserve for credit losses, is 330.4%. Credit card delinquency, also due to NPL write offs against 1.51% of last year and fell slightly to 1.50% end of March. As mentioned before, KBFG through stronger proactive risk management for multiple holders of debt and to improve the recovery of delinquent receivables, we're fully committed to (inaudible) the quality of credit cards.

Next is provisioning for Bank and credit card company. Bank's Q1 LLP is KRW318.1 billion. Provision for household sector slightly increased compared to last year's quarterly average, but corporate sector showed improvement, falling 6.5% year on year and 27% quarter over quarter. By sector, Q1 provisioning for household is KRW112.7 billion, increasing KRW48.1 billion Q on Q. Although the rate seems high, the amount in absolute terms is not yet high.

Corporate provisioning is KRW205.4 billion on a Q on Q basis. There was a large reduction in Q, provisioning expenses was spent on Sungdong Shipbuilding and other [work out] companies. But in Q1 there aren't any one off factors so provisioning level is close to the recurring level. Due to additional provisioning from write offs, Q1 credit card LLP increased KRW11.6 billion Q on Q to KRW80.6 billion.

Lastly I will talk about the provisioning ratio by each sector for the Group. As shown on the top left hand corner, Group's PCL against the total consolidated asset is 0.55% compared to 2011's 0.56% on [cum.] basis it has improved slightly. By major sector, household Q1 credit cost is 0.44% showing a slight rising trend. But corporate Q1 credit cost, without any one off items, recorded 0.82% compared to last year's 1.04% on a cumulative basis it improved 22 basis points.

The credit card Q1 credit cost is 2.65 %, and is showing a rising trend, but on an absolute basis the situation is not such that it calls for concern. KBFG, since the second half of the last year, has continued to improve the corporate portfolio, and also on high-risk household debts we have been pre-emptive in responding to risk management. Therefore, we were able to minimize creation and addition of non-performing assets, so we expect that we can continue on with this steady trend going forward.

This has been 2012 Q1 earnings presentation. Thank you very much for your attention.

We will now take questions. Mr Koo, from Hyundai Securities. Please go ahead sir.

[Interpreted] Thank you very much. My name is Kyung-hoe Koo from Hyundai Securities. Regarding the household sector, the asset qualities are deteriorating and provisioning has expanded. If you look at other banks' earnings presentations, some of the collective loans are showing higher dividends delinquencies, so I was wondering, is your situation the same at KB Financial Group, or without such collective loan delinquencies, are you still experiencing a certain deterioration in the household debt area?

[Interpreted] Let me answer your question. As mentioned by Mr. Koo, we too - regarding the household loan category in terms of the delinquency ratio and the MPO ratio, they have edged up slightly. But as you have mentioned, they are mainly because of the delinquencies on the collective loans for the interim payments for newly built apartment subscriptions. So if you exclude such collective loans and if you look at other sides of the household debt, I'm sure there are some concerns in the media that there is going to be delinquencies regarding unsecured loans.

But if you look at the delinquency ratio for the household loans for the past quarter, and if you look at the past four-year average of 0.95%, and last quarter, this particular quarter, it was about 0.92% if you exclude all the collective loan related factors. So as you can see, we do not see any major signs that the household debt is deteriorating significantly.

Now, regarding the collective loans for the interim payment for new apartment complexes, we currently have about KRW5 trillion worth of collective loans for the interim payments for the apartment complex subscriptions. We have been tightly managing such loan portfolios, and per construction sites, we are tightly managing such loan profiles as well. As you are well aware, housing pricing is coming down, so in certain newly-built apartment complexes, as people are ready to move in to the newly-built apartments, some of the newly-ready to move in the residents are hesitant to move in because the house value has come down, more so than their subscription prices.

So that's leading to certain concerns. We are conducting analyses on the developers and also the construction companies, and we are tightly managing profiles of such collective loans. So in case there are certain temporary delinquencies of certain portfolios and the collective loans, we will take pre-emptive measures, but we do not anticipate very high peak in terms of delinquency ratio for those loans either, and we are also working closely with the developers and constructors as well as with the borrowers themselves so that these companies may be able to offer more discounts for unsold newly-built apartments in terms of subscriptions.

So we are collaborating with them, offering them advice to alleviate the situation. The newly built apartment complex sites, we are taking different approaches. Things are under control.

Thank you, we will take the next question. Mr Lee from Dongbu Securities.

[Interpreted] Thank you, I am Lee Byung-gun from Dongbu Securities. I would like to ask two questions. First has to do with NIM. You talked about the decline in loans but an increase in the funding cost with increase of the term deposits. Now, I think that it's difficult for us to be optimistic for the future projections. Could you be more specific about the outlook? Because yesterday at National Housing Corporation on the mortgage loans, they reduced the rate by an additional 20 basis points, and I think the deposit rate has to go up at this point.

Despite the fact that there is low demand for loans, you are unable to pass through that difference. So even if you say that the spread has recovered to a certain point, but if you look at the situation in for the second quarter, I don't think one can be too optimistic for the future. So you said that you would try to keep it at 3.0% for NIM, but I'm thinking that that will be quite difficult. What is your view on this?

And my second question has to do with the ING Life, whether -- well, I understand that you are interested in acquiring the ING of Korea branch, and with regards to Woori Financial Holding Group and Woori Securities, I think there is a lot of interest out in the markets. So if you were to acquire ING Life, I would think that there would be a lot of competition for this M&A, and I think that that could have a quite - that could drive up the price significantly. What do you think about that? With regards to Woori Securities, what is your stance?

[Interpreted] I will talk about the NIM and ING and Woori Financial Group. Our CSO will talk about it later on. Let me talk about the NIM first. As you have mentioned, of course the situation is not easy for us at all, especially in the lending market on the fixed rate loans. There is a deferral type, and we are trying to expand for the non-deferral type and also the fixed rated, and there's a lot of direction there. So some of the banks are being quite aggressive in terms of their interest rate policies.

Basically, going back to the basic principles, the household debt - we need to resolve that from a long-term perspective, so the fixed rated loans and also non-interest only, we want to increase that quotient. So from a long-term perspective, in order to maintain the Bank standards and profitability, I believe the first building block for the success of the Bank, so as a leading bank, we're not going to be overly into the competition in terms of pricing, even at the expense of losing market share from a short-term perspective.

So we want to be quite robust on this approach. If we go through this process, I think in terms of deposits we will have quite a bit of space that we could maneuver. In terms of deposit interest, with regards to what the direction is going to be, the market is expecting increase, but on deposit interest we would have to be a little bit cautious and observe the situation before we make an action. Traditionally, we have strengths in terms of the settlement accounts. We have the low-cost accounts, and we will continue - we have continued to increase that portion.

In the last quarter, the amount had increased for the low-cost accounts, so we have seen that steady trend, and so based on these bases, in terms of low-cost accounts, we will continue to expand that base. For instance, last quarter there was an increase of about KRW1 trillion for the low-cost accounts.

In the funding aspect, we have competitive edge. Therefore we will continue to strengthen our funding advantage. As I mentioned before, in the previous quarter in terms of managing our lending, we have - we were able to really manage the low-cost accounts. From an overall loans perspective, yes, there would be pressure on the margin side, but corporate loans, especially on unsecured loans from the past two years ago, we have applied a very differentiated approach, meaning on a prime customer, depending on the level of risk, we would give them prime pricing, meaning a low interest rate, of course. But if your creditworthiness is low or depending on the industry sector and we believe that there is risk embedded, then we will continue to differentiate that group of customers.

As you have correctly mentioned, the current situation is not easy at all. If you look at the month of April, it hovered around 3% levels, so though it is difficult and we admit that it is difficult, I think within the year, with continued effort, we will still be around that 3% NIM level for this year.

Our president is going to talk about the ING and Woori Financial Group, and also our CSO will talk about it. With regards to ING Life and privatization of Woori, from KBFG we are focused on balanced growth of banking and non-banking, and we want to create synergies and diversify our profit source. So on the non-banking side, like securities and insurance, we are going to not just look at inorganic - not just organic, but also focus on inorganic growth. So we will continue to review potential M&A possibilities in consideration of the market situation, but at this point it's not very desirable to talk about a specific M&A case, so I would like to ask you for your understanding. Also with regards to Woori Financial Group, there has not been any decision made to date, so at this point we won't be able to provide you with the more specifics as we stand.

[Interpreted] I'm the CSO, I'm the Vice President Dong Chang Park. Always the investors, I understand, are very interested in the M&A possibilities. For the past two years we have been busy trying to [sort in] with the issues that the group has, and tried to strengthen the weak points that our group had, so that has been the effort that we have exerted. We were going to the gym, we were working out, and we were building our muscle. So at this point, we do have the financial might or power, if I may say that.

In the case of KB Financial Group, our double leverage is about 100% and our debt-to-equity ratio is about 4%, so compared to other competitors, we do have the space and we do have this might. I say this repeatedly, but we were focused on strengthening the non-banking business side, and that is our principle and there is no change there. Maximization of shareholder value is a principle that we keep to, and we are committed to that.

Also we will further develop our identity, our legitimacy, as a private bank, and if there are M&A opportunities that can help us go towards that direction, we will of course definitely review it.

I hope that answers your questions. From (inaudible) Securities, Mr (inaudible).

[Interpreted] Good afternoon, my name is (inaudible) from (inaudible) Securities. I looked at your vested expenses, and looking at the household and credit card compared to the previous quarter or from the past figures, they both have went up. Although the delinquency ratios did not really deteriorate quite a bit, but nevertheless, the bad debt expense have gone up, perhaps because of the IFRS scheme, but then again, nevertheless, it seems quite unusual. Are there any changes in terms of the level of losses? What are the reasons? How should we estimate the bad debt expenses going forward? Could you give us some guidance?

Secondly, regarding the household debt growth and also credit card debt growth, you talked about negative 1.5% and negative 5.5%. You talked about earlier, those seem to be big decreases, rather. I was wondering, is the decrease because of the reduced demand, or because of the more stringent loan requirements?

Also regarding household loan growth rates, what is your annual target for both the household loans as well as the credit card growth? What is your annual growth target? And lastly, the corporate side delinquencies have been going up, so any comments on - or going down, actually, so any comments on that?

[Interpreted] Yes, thank you very much for your three questions. First of all, regarding the bad debt expenses on household and credit card, compared to the delinquency ratio increase, you are thinking that the bad debt expenses have gone up rather significantly, you said. As we told you before, there is a collective loan related bad debt expense that has been added. On the credit card side, the way we look at it, from the card loan areas there are some borrowers with multiple number of outstanding loans. So there has been some increase of bad debt expense there a little bit, but from the very beginning of this year, we kept mentioning this. If you look at this year's economic outlook compared to the previous year's, we believe that the credit expenses, credit costs, will be improving somewhat.

But then again, we have been telling you that those will not be increasing too drastically. There are macro factors and also the increasing household debt in general, so we do - we have been anticipating some issues from the borrowers with multiple loans.

I believe that in the corporate side, compared to our expectations, they're actually doing better than we anticipated. However, when it comes to the household and credit card area, the delinquencies are showing signs a little faster. In the case of credit cards, starting from the second half of last year on the margin of borrowers, and borrowers with multiple loans, we have been taking pre-emptive measures, so until January of this year, NPL ratios and NPL formation have been going up somewhat starting from March, especially the first round and second round delinquency ratios.

If you look at those numbers - actually, you are aware that in the case of credit card, it's about 70%, and for the household loan, the second month delinquency is usually about 80%, and things are actually normalizing. So recently we have been witnessing the trend that the deterioration trend has been actually slowing down, but we have to wait and see before we determine that this is a continuing trend or whether there are outstanding issues that we have to be really concerned about.

However, relatively speaking, I don't think that the likelihood of the delinquency ratio on the credit card side deteriorating too rapidly is very low. As we have expressed in the beginning, from the household sector and the credit card sector, we might experience some additional bad debt expenses, however if you look at the entire loan portfolio, perhaps compared to the previous year, on an annualized basis, we believe that a similar level of bad debt expenses will take place.

Secondly, regarding loans, as you have mentioned, the first quarter loan amount outstanding has actually come down slightly, and I'm sure you are aware of this as well. Up to Q4 last year, there were some temporary high demand for mortgage loans right before the suspension of the property acquisition tax exemption, so we have been anticipating lower demand for mortgage loans post Q4 of last year. But then again, the drop has been higher than we anticipated.

Also in the case of unsecured loans, it did not really grow, but rather decreased. Again, as you have mentioned, it is because of our conservative stance in terms of loan origination. So those things have affected the slower loan growth. On the household loan side, I don't think that the demand will disappear overnight. If you look at the regional areas outside of Seoul, pricing is normalizing and I believe that continued demand cover is taking place, so I don't think that the first quarter situation will persist into second quarter and beyond.

Regarding loan growth, as I told you before, we have the guidance of five% growth for the loans. For household and corporate, we told you that we anticipate across-the-board growth. Currently, when it comes to loan growth, we are slightly disappointed about the Q1 results, but I don't think that we need to really revise the annual guidance for that matter.

Mr [Chae] from Daishin Securities.

[Interpreted] When it comes to new NPLs it seems the number is higher compared to the past, but you don't have a breakdown, so I do not know whether this is from household, corporate, or credit card, and I think the corporate NPL increased quite significantly, so I would like to know which industry sector this is attributable to. I think there was a question, but there was not an answer to this. When it comes to the provision on the corporate side it's low. Is there a one-off factor that can explain that?

[Interpreted] Yes, we did miss one question, and you are quite right to say this. Let me talk about the provisions for the corporate side first. I think I would first like to talk about two things. In terms of the corporate provisioning, as you have said, there are some increases in the delinquencies, and on [year to year] basis there is a 33 basis point increase, and you have to break this down into two factors.

First has to do with the fact that from an overall perspective, when it comes to small-medium SME companies and SOHOs, for SOHOs, we are quite stable. If you were to compare with the four-year average, it's about 0.77%, but this year it's 0.51%, so in the SOHO category, we don't seem to have a problem.

The weaknesses lie in the SMEs. In Q1, the delinquencies did increase this year, and the reason is because - I will not name names, but as you know, this was in the press, these are companies related to [Woori], Oriental, Oriental Construction. So these are construction sector-related companies, and although there is delinquencies and NPLs, the reason why this is not linked with provisioning is we have already pre-emptively provisioned for these companies already.

So in terms of delinquencies, we were expecting this to come. It just surfaced, and when it comes to provisioning and to delinquencies and NPLs, despite the fact that delinquencies go up, why the provisioning did not go up it is because we had pre-emptively provisioned for it. There's another company called (inaudible) Construction, so these are a group of companies that were on the watch list. So although it had migrated into the NPL category, it was already reflected in the provisioning as we had implemented pre-emptive approach and for the corporate as a whole.

SOHO once again is quite steady. For SMEs, once again, things that we had expected had played out, and we had already previously provisioned for these companies, and NPLs are being formed based off that understanding, so in terms of NPLs, there are no extraordinary situations that are being played out.

On new NPLs, household, corporate, credit cards, we can have the breakdown as the CFO has mentioned what we had expected. Once again, there was expected migration that took place, so if you were to exclude that, last year's new NPL average was about KRW600 billion per quarter. This year it reduced to about KRW400 billion per quarter. So if you want more details, we would provide that to you at a later timing.

Thank you very much. We have no more questions waiting, so with that, we will now complete the earnings conference of KB Financial Group for its Q1 2012. The presentation material and VOD of this conference will be available for access any time on the IR website of KBFG. Also, if you have more questions, please contact our IR department. We will do our very best to address your questions. Thank you once again for your participation today.