Shinhan Financial Group Co Ltd (SHG) 2009 Q3 法說會逐字稿

Good afternoon ladies and gentlemen. My name is Yu Sung. I'm from the IR team of Shinhan Financial Group. I would like to sincerely thank all of the attendees for attending the third quarter 2009 earnings conference call of Shinhan Financial Group. Today we have present our CEO, Sang-hoon Shin, our CFO Choi Buhmsoo, as well as Cho Hu Yeong, who is our Executive Vice President in charge of Finance. First we will have our CEO Shin deliver a short welcoming remark followed by Mr. Cho's presentation on details of our third quarter results, and then we will open the line to receive your questions.

Now I would like to give the floor to our CEO Shin Sang-hoon.

Investors, analysts and members of the press, good afternoon. First of all, I sincerely thank all of you for listening in to our third quarter earnings conference despite your busy schedules.

I was given the CEO position of Shinhan Financial Group last March under very challenging internal and external conditions. I did feel that it was a huge responsibility placed on my shoulder. But as I had promised to you during our first quarter earnings conference call, we have focused on the basic competitiveness and fundamentals of the financial group. And we can now show you improved NIM of the bank and improved asset quality. And also in the non-bank subsidiaries such as Shinhan Card, Shinhan Securities, Life Insurance, Capital and Asset management, they have all shown good performances and have increased in their contributions to the overall Group's profitability.

Based on our tight cost control the Financial Group has been showing stable signs of recovery from the third quarter. Also we have at the same time worked on developing new sources of growth and focused on globalizing our businesses. We have successfully launched the SBJ which is our local company in Japan. These are all moves that we are making to prepare actively to the changes in the financial paradigm post-crisis. I would like to say that we will continue, amidst the market crisis and shifts, to maintain a consistent strategy to deliver on your trust and expectations placed on the Shinhan Financial Group.

Now with that remark I would like to briefly go over the highlights of our third quarter business results. During the first three quarters of 2009, Shinhan Financial Group has recorded a net income of KRW1,049.1b. During the third quarter alone our net income was KRW491.3b, which is a 11.7% growth quarter-on-quarter from the second quarter's net income of KRW439.7b. This continuous improvement in our profitability quarter-on-quarter can be explained by, number one, the improvement in the net interest margins since the third quarter and also the decrease in provisioning expenses due to greatly improved asset soundness.

Our net income during the first three quarters on the banks' side was cumulative net income of KRW572.5b, which is a year-on-year 47.8% decrease but a quarter-on-quarter 42.5%. So the banks have been maintaining two consecutive quarters of net income improvements.

The net income from the non-bank side was cumulative KRW921.7b, which is a year-on-year 16.1% increase and quarter-on-quarter 2.4% decrease. However, the non-bank subsidiaries' contribution to the net income of the Financial Group from cards, securities, insurance, capital and asset management has been maintaining a stable 61.7%.

The Group's total assets was KRW311 trillion which is a 3.1% decrease year to date or a decrease, 3.1% year-to-date decrease. Shinhan Bank's Korean won loans increased only by 1.3% year-to-date and therefore our asset growth pace has decreased greatly.

On the other hand the Bank's net interest margin during the third quarter was 1.74%. This excludes credit cards. The net interest margin on the bank excluding credit cards increased by 28 basis points mainly due to loan re-pricing and the increase of low cost deposits. If we include the credit card our net interest margin for the entire Group was 3.05% which is a quarter-on-quarter 28bp increase. The Group's net interest margin has recovered the 3% range and is the highest in the industry.

The details of our asset quality and capital adequacy and other details of our third quarter results will be explained our Executive Vice President Cho.

Dear investors, it seems that the international and Korean finance markets have now somewhat stabilized. However, given many uncertainties at home and abroad, it is too early to declare full economic recovery. Therefore Shinhan Financial Group will concentrate on completing its risk management capacity improvement initiative by the end of this year, which it has been conducting since the first half of this year. This is to instill proactive risk management capabilities at the Group level, in preparation of future potential risk. The Group will also continue to prepare for economic fluctuations at home and abroad through continued asset quality management and conservative provisioning policies.

On the other hand, as expressed many times by Korean and international investors at our meetings, we will avoid unnecessary competition and sales activities focused only on short term results. We will work on to enhance operations at the Group level, such as enhancing ROA, and through a flexible capital adequacy we will also improve ROE. Measures will also be taken to sufficiently incorporate your expectations in the 2010 business plan which is currently under developments.

Dear shareholders and investors, although much of 2009 is almost over, future market conditions surrounding us are demanding even more difficult changes and efforts from us. Everyone in the Shinhan Financial Group will actively respond to these market changes and will be exerting their utmost efforts to continuously change. Through active communications with our local and international investors, we will pay attention to voices of our shareholders and the market. We will ensure that your views are reflected in the management of the Group so as to increase our shareholder values.

I ask for your continued interest and advices. Thank you.

Next we will be hearing a detailed presentation on our third quarter results.

Good afternoon. My name is Cho Hu Yeong from the financial team of Shinhan Financial Group. You have just heard our CEO give you the highlights of our third quarter results and so I would like to skip the first few slides and go into the details. You may refer to page six of our presentation.

Shinhan Financial Group's third quarter net income was KRW491.3b which is an 11.7% quarter-on-quarter growth. Year-to-date our net income was KRW1,049.1b. The major reasons for the improvement was number one, the improvement on our net interest margins and second the decrease or stabilizing of our provisioning expenses from improved asset quality.

Especially if you look at the NIM including credit cards, the third quarter NIM was 3.05%. We've recovered the 3% ranges and overall the Group's interest income increased by 10.1% quarter-on-quarter. On the other hand provisioning expense decreased by 70.4% quarter-on-quarter once again contributing to improved recurring profitability of the business Group.

On the other hand, the non-interest income decreased by 40.2% quarter-on-quarter due to one-time effects during the second quarter, but still our non-interest income increased by 32.6% year-on-year. And SG&A increased by 26.3% quarter-on-quarter due to seasonal factors but decreased by 3.6% year-on-year. Overall the Group's non-interest profit base and SG&A are all maintaining stable levels.

Thanks to cost cutting efforts including return of wages by employees and executives, 2009 SG&A is expected to decrease 3% to 4% year-on-year and our efforts are continuing to enhance our cost efficiency.

So in other words, the highlights of the third quarter is that number one, the interest income increased from NIM improvements. Also there was an end of one-off provisioning due to restructuring and this has decreased our provisioning expense, which both helped greatly improve the banks' performance. On the other hand the Group's overall recurring performance fundamentals have also shown signs of recovery.

Next on page seven is the subsidiary income. With the banks' profitability greatly improving, we're seeing that the interest -- the net income contributions between Bank's and non-banks' is also returning to the usual balance. As you can see on the top left hand graph, the Bank's contribution improved from 32.9% in the first half to 38.3% during the third quarter, while Shinhan Card and Shinhan Life's contribution was 41.1% and 9.6% respectively. So the non-bank's earnings contributions have been maintaining a stable level.

Next are the details of the performance third quarter-wise of each of our subsidiaries. Third quarter our banks' profit has increased greatly by 42.5% quarter-on-quarter due to increase in interest income and decrease in provisioning. The non-bank net income decreased by 2.4%, but Shinhan Card and Shinhan Life and Shinhan Capital, net income continued quarter-on-quarter growth and helped to maintain non-banks' income contribution at a stable level.

Shinhan Card was the first to recover pre-crisis performance levels and during the third quarter net income increased by 10.2% quarter-on-quarter. Shinhan Capital also increased net income by 54.9% quarter-on-quarter. Shinhan Life recorded sound premium income growth and improvements in investment management performance and decrease in reserve expenses. Therefore its net interest -- the net income has increased by 33.6% year-on-year and 5.7% on a quarter-on-quarter basis.

Next is about Shinhan Bank's performance in more detail. Funding costs declined since the second quarter and margin widening has helped increase the net interest margin to increase by 28 basis points quarter-on-quarter. And overall we were able to increase our interest income by 13.7% quarter-on-quarter. With no restructuring related one-off provisioning occurring during the third quarter, our loan-loss provisioning expense decreased by 66.8% quarter-on-quarter and third quarter net income was KRW288.8b, which is a 43% quarter-on-quarter increase.

As you can see the Bank's NIM including the cards was 3.05% during the third quarter. And this is because Shinhan Bank's third quarter NIM greatly improved. The NIM of Shinhan Bank during third quarter was 1.74% which is a 28bp quarter-on-quarter increase. Cumulative NIM was 1.62% which is a 6bp quarter-on-quarter increase.

As you can see the net interest spread was 1.77% which is a quarter-on-quarter 12bp improvement. Average deposit rate was 3.67% continuing a declining trend. During the fourth quarter we expect the deposit rate to decrease because many of the high pricing deposits will be coming to maturity and we also are expecting loan asset re-pricing, which both will help improve our NIM further.

Shinhan Bank's non-interest income decreased quarter-on-quarter due to one-time factors during the second quarter but the fund and bancassurance fee income increased by 21.4% and 1.3% respectively.

During third quarter Shinhan Bank's SG&A increased by 27.5% quarter-on-quarter which is due to seasonal factors. Actual increase was minimal. Actually for the whole year 2009 we are going through cost cutting efforts such as wage cuts and expense decreases. So actually on a year-on-year our SG&A for Shinhan Bank decreased by 6.2%.

On the left hand bottom you can see the Group's cost/income ratio which did show increases due to seasonal factors. But actual cost/income ratio excluding goodwill was only 43.6% and maintaining a sound level.

Next is Shinhan Card's performance during the third quarter. Shinhan Card's third quarter net income grew by 10.2% quarter-on-quarter. There were active marketing that started during the third quarter which helped increase transaction volume by 6.4% quarter-on-quarter. Provisioning expense of Shinhan Card also came down from improved asset quality. Shinhan Card's SG&A increased by 18.7% quarter-on-quarter which consists of some seasonal factors and revenue-linked marketing expenses and advertising expenses. Overall Shinhan Card's expense efficiency is still quite sound and strong.

During third quarter, asset quality continued to improve and new provisioning has greatly decreased. And therefore the -- there was a reversal of loan-loss provisioning of KRW37.1b during the third quarter. The third quarter write-off asset recovery was KRW92.2b. So despite the difficult environment, the recovery of write-off assets have maintained above KRW90b each quarter.

Next is the assets of the Group. As of end of September 2009, total assets was KRW311 trillion, which is a decrease by KRW2.7 trillion quarter-on-quarter, a 0.9% decrease quarter-on-quarter, due to deleveraging and asset efficiency management efforts. Shinhan Bank's assets decreased by 0.4% and Asset Management decreased by 7.7%. Shinhan Card and Shinhan Life Insurance increased by 4.1% and 4.3% respectively. The decrease in the Shinhan Bank's assets was due to some decreases, about KRW0.9 trillion decrease on the trust accounts.

Now about the Shinhan Bank's funding and loans. Shinhan Bank's loans in Korean won as of end of September stands at KRW121.4 trillion which is a 0.5% increase q-on-q and 1.3% increase year-to-date. Loan costs continued conservatively in Q3. Retail loan increased 0.8%, a relatively higher increase in loans to the corporate sector. In Q3, as for retail loans, mortgages loan increased by 2.2% thanks to increase of positive presales brought on by housing market recovery in the four metropolitan areas.

As of the end of September our total deposits in Korean won is KRW126.1 trillion which is 8.9% quarter-on-quarter increase and 19.8% year-to-date. Stable funding sources such as time deposits and low cost savings have been expanded. Average funding rates dropped significantly from 5.11% in Q4 of '08 to 2.42% in Q3 of '09. It is a 1.69% drop. Thanks to expanded deposit base and stable asset growth, our LDR visibly stabilized 114% from the end of last year to 96% at the end of Q3 of '09.

And until the first half of the year, Shinhan Card maintained conservative operating policy centering on the risk management due to economic recession and uncertainties in the consumer market. However given the current economic recovery and asset quality improvements we have increased selective marketing activities, targeting on a high performing merchants and cardholders. In Q3, transaction volume reached KRW27.3 trillion which is a 6.4% increase quarter-on-quarter. Assets increased as well by 2.6%.

Now let me move on to asset quality. As of the end of September 2009, substandard and below loan ratio amounted to 1.6%, a drop of 16bp from the end of June. Precautionary loan ratio, a gauge for the NPL trend, stands at 3.23% at the end of September, which is a 22bp decline compared to Q2. NPL coverage ratio for the Group recorded 139.2% which is a 7.5% point increase quarter-on-quarter providing sufficient buffer for temporary economic fluctuation that may occur in the future.

This is asset quality of Shinhan Bank. Shinhan Bank's substandard and below NPL ratio is 1.44%. Precautionary NPL ratio is 2.95%. NPL coverage ratio is 133%. All asset quality indicators as you have seen improved greatly quarter-on-quarter, and in particular Shinhan Bank's substandard and below NPL decreased by KRW237.5b. The Bank's NPL has turned the corner and is on the declining trend.

Delinquency ratio is also improving as can be seen on the left lower hand chart. Retail delinquency ratio stands at a similar level as last year at 0.35% and SOHO delinquency ratio is also maintained at a very stable level of 1.05%. However, SME ratio -- delinquency ratio declined 19bp compared to last year. This is due to increased delinquency ratio of cyclically affected industries such as construction and shipbuilding.

Now our asset quality of Shinhan Card. Shinhan Card saw 12.8% quarter-on-quarter decrease of substandard and below NPLs. The ratio also improved by 47bp quarter-on-quarter to enter 2% level of 2.65. Thanks to (inaudible) substandard and below NPL, NPL coverage ratio improved by 8.4% to reach 192%. We now have sufficient [LLP] in case of potential future economic downturn.

Delinquency ratio at the end of September recorded 2.76%, 62bp improvement quarter-on-quarter. The ratio has been on the continuous decline trend since Q1 of 2009 and this is better than the end of 2008. This has been made possible due to proactive asset management since the second half of 2008 and we continue to ensure Shinhan Card's asset quality at a very healthy level.

Now on page 20, about loan-loss provisioning and write-offs. As mentioned before loan-loss provisioning of Shinhan Bank and Shinhan Card have dropped significantly in Q3 compared to the first half of the year. And the -- on the credit cards for the Group also declined from 1.7% in Q2 to 1% in Q3 as can be seen in the graph. Credit cards which stood at 1.3% in Q1 and 1.2% in Q2, plummeted to 0.4% in Q3.

As can be seen in the upper right graph, Shinhan Bank's loan-loss provisioning in 2009 is mainly for the corporate sector. Loan-loss provisioning increased in the first half of the year due to corporate sector restructuring but it has stabilized since Q3. Shinhan Bank's write-off in Q3 remains at a similar level as Q2. Shinhan Card had [KRW150b] (sic - see presentation) write-off in Q3, a similar level as in the past.

And lastly about capital adequacy. At the end of September 2009, Group BIS ratio is expected to be 13.3% quarter-on-quarter, a 0.2% increase thanks to fast profit recovery and decrease in securities valuation loss thanks to stockmarket rise. In particular the Group Tier 1 ratio recorded 8.2%, well above 8% level since most of the uncertainties concerning the Group's capital adequacy have been cleared.

Main subsidiaries, such as Shinhan Bank and Shinhan Card have also witnessed a continued lifting of capital ratio quarter-on-quarter. As of end of September of 2009 Shinhan Bank's BIS ratio stands at 16.1%, with Tier 1 ratio expected to be 12%. Shinhan Card's capital adequacy ratio is at a very high level of 25.9%. In Q4 Gross assets are anticipated to continue growth at around 1% and core profit base is also expected to improve. So for the time being Group's capital ratio is expected to remain at a very high level.

On page 23 and 24 are additional performance results and management indicators, and Shinhan Bank's SME loan status and others. Please refer to them at your leisure. This ends Shinhan Financial Group's business results report for Q3 of 2009. Thank you.

Then we will take questions.

(Operator Instructions). We have got our first question from Ms. Shim Kyu-Sun of Hi Investment Securities.

Yes. My name is Shim Kyu-Sun of Hi Investment Securities. I have a few questions. The first question is regarding the provisioning. The provisioning expense has decreased, but I don't think it's considered a recurring, normal level. What would be, in your mind, an appropriate recurring level provisioning expense?

Your NIMs did improve. What is your NIM outlook for the fourth quarter?

My third question is related with Shinhan Card. On the Card side, provisioning expenses have also been continuously decreasing. How long do you think this decrease in provisioning could go? And, on a recurring basis, what would be a normal provisioning expense for Shinhan Card?

The first question about the provisioning, loan-loss provisioning expenses has been lower than what would be usual because, currently, we think that on a recurring basis about KRW250b would be our quarterly provisioning expense size. And so on the cost, credit cost will be 0.6% of 60bp. And during the third quarter we only had a provisioning expense of KRW157b. There are some special factor that is playing.

There are some reversals or write-backs of provisioning. There were some write-offs that were -- the provisioning for some written-off assets that was written back, which was about KRW40.5b. And GM Daewoo we had already made some extra provisioning so there was a reversal there of KRW21.7b. There's also some real estate project financing related loans that are being repaid, decreasing our actual exposure, and there was a write-back of KRW14.5b there. So there was about a write-back or reversal of KRW91.5b in total. So if you add that to our KRW157b, KRW90b to KRW157b that would reach about the recurring size of KRW250b per quarter of provisioning expense.

Your second question is about the net interest margin. The NIM improved by 28bps this quarter. But the greater factor behind that NIM improvement is, I think, on the funding side, because on the funding side our spread during the third quarter decreased by 31bp on our funding. So the lowering of our funding cost has contributed most to the improvement of our NIM. I think the decrease of our funding will continue in the fourth quarter. However if we look at the -- we think that the majority of the re-pricing has already occurred during the third quarter. So we're only expecting an additional margin widening of around 20bp during the fourth quarter.

I think what you probably want to hear most is the margin of Shinhan Bank alone, excluding the Card business, when we will recover the 2% NIM of the Bank that we had at 2008. We think that we may be able to approach 2% by first half of next year if we maintain the current pace. And if there is an additional weight increase in the market, we could actually achieve that faster.

About credit position on Card, what would be their usual credit cost? It will be about between 0.5% to 1% will be their recurring credit cost, which is between KRW80b to KRW150b on an annual base.

We are recovering written-off assets, which was in the third quarter KRW92b. We think that by the end of this year we would be able to recover KRW380b from already written-off assets. We have not finished 2010 business planning. But we're also thinking another recovery of written-off assets of around KRW300b in 2010 as well.

Yes, we will now take another question.

It seems that there are no further questions. We think we will have to wait a few moments for the next question. We'll now take the next question. The next question is from Byung-Gun Lee of Shinyoung Securities. Mr. Lee please.

Good afternoon. My name is Sung-kwon Lee of Shinyoung Securities. I have two questions. The first one I would like to thank you for the good result.

I have a question related to SG&A. And I understand on an your annual basis you said it's going to be decreased about 3% to 4%. In case of this year, you have been not provided or paid some support and I think that has resulted in decrease in SG&A. And I understand the wage has not been decreased by 5% but it's a return of 5%. So next year, so that means in fact there's going to be increase of wage by 5% and in terms of as you expand your operations I think SG&A is bound to increase.

And so I think SG&A is expected -- I thought would be increasing by 1% to 2%. But it seems, by listening to you I think SG&A will be increased 4% to 5% next year. So the wages have been returned, not cut and there could be some compensation. And I think this could -- there is a lot of factors in SG&A next year. How much of increase do you anticipate for SG&A in 2010? That's question number one.

And question number two, this could be a minor issue. And for the time deposits, I think it's a very good product. I understand you have sold many of that product. And it was a product that was quite unique in the banking sector and I think that could have helped with your overall our liquidity. I think this is a qualitative issue. By following the time deposit products you must have had some benefit. So could you talk to us about that, those benefit?

As related to SG&A as you said in 2009 the pensions have been decreased and there has been return of wages by the employees, and that have contributed to decreased SG&A. However in 2010, besides the welfare pensions with the employees, I think with the new recruits we are expecting the wages to increase by about 3% to 4%. However, we are going to maximize our income and so the costs I think will -- cost/income ratio will decrease.

As for your second question, that time deposit product is called [Mint] product. And you were also asking about some funding. And I think the characteristic of the Mint product is that it's a revolving deposit. And if we increase such product, such revolving deposits, there are some benefits, ones we could enjoy. We could enjoy the funding rate decrease early on. A funding rate it's operated in the short term, that could be less costly. And we think that would decrease the liquidity related risk. And I think we do have very good funding mix at this point in time.

We'll now take the next question.

The next question comes from Mr. [Hung So Kyoo] of [Global Securities]. Please go ahead sir. I think there were some technical problems in that telephone connection. So we will jump to number four in the question queue which is from Daiwa Securities. Mr. Chang Hee Lee.

Yes, good afternoon. I have two simple questions. Number one is that the fourth quarter NPL ratio provided by the government as guidance, how are you going to meet that guidance, NPL level?

And write off and sales, if there was a reversal of your provisioning, due to that there would be some losses that were reported. How much were these losses that were reported related with the reversal?

Our total deposits was KRW149 trillion. And 1% NPL ratio would mean we need KRW1.5 trillion. So we currently have 2.44%. And so we need to decrease it by 1 percentage point. During the fourth quarter there will be some KRW150b of new NPL generation and so we have to decrease all of that. But on a recurring basis, or each quarter we're able to clear about KRW300b. And in order to do that we have KRW500b left. And then about KRW300b of that will be estimated losses which we will write off and KRW200b we will sell.

Which links to your second question. In the past our trend was that, until the third quarter this year our substandard and below sales, our provisioning was 45% or above. And our sales value is more than 80% of the actual asset price -- size. And so, until the third quarter, there was a reversal of our provisioning. And once again if we sell KRW200b, 25% of the provisioning related with that, 25% of KRW200b, there will be a plus and minus. We think actually there will be a plus effect on our profitability by KRW50b.

We'll now take our next question. It's from [Jung Che] of [Daishin Securities].

Good morning. My name is [Jung Che] of [Daishin Securities]. I have three questions. Other banks, they are letting us know the NIM on a monthly basis. So can you tell us your NIM for the months of July, August and September?

And about GM Daewoo, with the lower exchange rate, I think there should have been some assets which is non-recurring. Could you give us the number?

And besides the exchange rate drop, what is the other or are there any other one-off items?

And lastly in Q3 SG&A has increased more than we have anticipated. So I wonder if there are non-recurring reasons or special reasons for such an increase in SG&A.

Let me answer the question related to SG&A. In Q3 our SG&A related on to Q2, the Bank and the Credit Card, their performance was not as good as we had anticipated. And we thought they would not be able to reach the management -- the goal so we would not be paying the incentives. But since they have been able to reach the goal, so we have paid some of these incentives based on the bonus. And seasonally, after six months we have to do the provisioning for the retirement. So in July we have to have the provisioning of the retirement benefits. And we also have to pay for the Korean thanksgiving and so we have to provision for that. So in Q3 compared to Q2 we had more provisioning.

And for next year and for this labor cost, we would like to distribute the causes for increase in the labor cost on a yearly basis so that we have more distributed numbers around the year.

As for question number one and question number two, the question one, which is a monthly NIM, we do not officially announce a monthly NIM. In July it was about 1.6%. In August it was [1.7%]. And as for September, it's about 1.89%. For October we are still in the process of compiling.

As for the one-time or one-off items and related to provisioning, in Q3, as I mentioned before, we have written off and sold the NPLs and we have recovered about KRW40.5b. And related provisioning for the GM Daewoo, it's about KRW57b and there was a recovery or the return of KRW21b. And as I mentioned, there was a repayment for the real estate PF so our exposure decreased. And so about KRW14.5b have been returned. And besides that, there were no official one-off items in Q3.

Next question comes from Prudential Securities, Mr. Sung Byung-soo. Mr. Sung?

I have one question. There was a media report about commissions and fees, the government wanting some of it to be eliminated or decreased. Shinhan Financial Group has fee income of KRW150b. And how are you going to respond to government pressure to decrease fees and commissions?

Regarding that question, I don't think the government has given us specific decrease target. So right now we cannot assess the exact impact we will be feeling. But one thing that is clear is that number one, for cash advances, we have been continuously decreasing our cash advance asset size. Year on year we will be continuing to decrease our cash advance assets by more than 10%. And so once again the impact from cash advance commissions and fees will be decreased.

And the assets that we are increasing is on the receivables and during the third quarter our receivables increased by more than 2%. And so on a strategical perspective we have been strategically decreasing credit card loans and cash advances. So given that strategy, I don't think the impact by government's policy to decrease the fees will have a major impact.

Also fee income, we want to focus more on the receivables and other core businesses of the credit card side.

And if I may add a few more comments to that point. I think each customer has a different credit rate and therefore has different risks. So we could selectively lower the fees rather than doing a one, fixed rate decrease. We will decrease depending on the credit levels of individual customers. And this, I think, would need to be an industry effort on behalf of the credit card industry. And if we do, I think we will try to do differentiated cuts depending on the credit rate of each of our customers.

So we'll now take our next question. It's from [Mr. Sung Kyoo Han] of (inaudible) Securities.

In your Q3 what is the size of your net sell-off of assets?

In Q4, I wonder how much of impact from the sell-off is incorporated in Q4 P&L?

And number three, how much assets do you anticipate to grow in next year?

Related to your first question, in Q3 we had sold off about KRW153b and the provisioning is about [KRW70.8b]. So that on the book value it's about KRW80b. And so there was a recovery of about KRW41b and so there was a profit of KRW39.1b.

And as for the asset growth for the next year, the number seems to be changing every day. And according to most recent numbers we are -- it's expected to have about 4% growth. And if the inflation is considered, the recurring (inaudible) is expected to grow by about 7% to 8%. So that's the basis for us to use. And we are looking at, of course, several scenarios. People also talk about the double dip. And we also at this point have to work on improving asset quality. So we do not have specific numbers. And if we do have specific numbers, we will not be able to announce them. We currently are looking at many scenarios based on many hypotheses. Thank you.

I don't think there are any further questions waiting in the queue.

And since there are no further questions, I would like to close the 2009 third quarter earnings conference call of Shinhan Financial Group. We would like to once again thank you for attending and the materials will be uploaded to our IR website. Thank you very much.

Speaker statements on this transcript were interpreted on the conference call by an Interpreter present on the live call. The Interpreter was provided by the Company sponsoring this Event.