Shinhan Financial Group Co Ltd (SHG) 2011 Q3 法說會逐字稿

Good afternoon. My name is Ryu Seung Heon and I'm the head of the IR team. I would like to thank everybody for participating in our earnings release. Now we're going to begin the earnings report for Q3.

We have here with us Chairman and CEO Han Dong Woo; Deputy President Choi Buhmsoo who's in charge of Strategy; CFO Min Jung-Kee; and also Head of Finance Management team, Mr. Tan Dung-Gee. We are going to first listen to opening remarks from Chairman Han Dong and CFO Min Jung-Kee will give us a presentation on 3Q results. And last but not least we're going to have a Q&A session with you.

Let me introduce to you Chairman Han Dong Woo.

Good afternoon and good morning. I am Han Dong Woo, Chairman and CEO of Shinhan Financial Group.

First of all, I would like to thank the investors, analysts and journalists from Korea and overseas for joining our Q3 2011 earnings call.

This quarter experienced a most severe volatility in the Korean and global financial markets since the Lehman collapse in 2008 and thus posed very difficult challenges. I am aware that deepening fiscal crisis in Europe and signs of potential economic slowdown, not just in the US but also in China, has heightened your insecurities about uncertain future of financial institutions in Korea, as well. However, unlike three years ago when Lehman kneeled down, I believe Shinhan is now capable of responding to such crisis more proactively. More than anything else, during the past two years we posted a stable 3% level asset growth on average, reduced problem assets proactively and, as a result, pushed down our credit cost ratio to 50 bps level.

Maintaining foreign currency assets at a stable level, we also improved our foreign currency liquidity by expanding funding sources. As a result, we posted KRW704.2b in net income in Q3 and KRW2.59 trillion for Q3 YTD. In this quarter, despite the absence of extraordinary factors such as gains on sale of securities, we were able to post earnings at an ordinary level thanks to continued asset quality improvement on Shinhan Bank and Shinhan Card and improved earnings of non-banking subs such as Shinhan Life Insurance and Shinhan Capital.

Respected shareholders and investors, we are now operating in the age of new normal, which is characterized by low growth, stricter regulatory environment and greater expectations for corporate social responsibility. We are now incorporating such changes in our business planning for next year. We plan to launch a new operating system for CIB and Wealth Management business by early next year to improve synergy generation among group companies. And even amid the stagnant growth in profitability expected to become a general trend in the Korean financial market, we will secure a foundation for sustainable growth.

Furthermore, as I have recently emphasized, for next year we will place a priority on attaining sound organic growth of our insurance business, while continuously concentrating on enhancing competitiveness of other non-banking subsidiaries such as securities and asset management companies.

Investors, as we have earned the trust of yours and the market by successfully overcoming a number of crises in the past, we will once again turn the current difficulties into new opportunities for Shinhan and deepen your trust in us. I give you my word on that. I sincerely wish for your continued support, going forward, during our journey to overcome the current challenges facing us.

Thank you very much.

Now I'm going to introduce to you CFO Min Jung-kee, who will give us a presentation on the Q3 results.

Good afternoon. I'm Min Jung-kee, the CFO of Shinhan Financial Group. I will now deliver the presentation on Shinhan Financial Group's Q3 earnings results. Please turn to page six for Shinhan Financial Group's income.

The net income in Q3 for Shinhan Financial Group stood at KRW704b. Annual accumulated income came in at KRW2.5933 trillion, which is an increase of 23.5% year on year. In Q3, increase in loans and stable net interest margin has contributed to stable growth in interest income and, thanks to continued improvement of asset soundness indicators, provision in costs decreased resulting in a robust net income.

Due to stable NIM and stable increase in loans, interest income grew 9.6% YoY and 1.3% QoQ. As the profit from the one-off sale of securities have been absent, non-interest income decreased and due to loss from stock trading we saw a decrease of 9.3% YoY and 64.4% QoQ. G&A increased 4.8% YoY but thanks to the subsidiaries' efforts to improve cost efficiency, G&A decreased 9.6% QoQ and cost is still tightly controlled.

Thanks to decrease in credit for restructuring companies and increase in good quality loans, provision for credit losses dropped 41.2% QoQ, continuing the stabilization of provision in cost. And in Q3 debt equity swap of Daehan Shipping -- Shipbuilding has come in as reversal in allowance, resulting in a 27.4% decline QoQ.

To sum up the Q3 results, net income has decreased by 27% QoQ due to the absence of the one-off profit generated from sales of securities. However, thanks to increase of 2.2% in loans and stable NIM and also rational cost control and decrease in provision and costs, Shinhan Financial Group has been able to maintain a stable level of net income.

Please turn to page seven for subsidiaries income. Until Q3 the net income for the bank and non-bank subsidiaries stood at KRW1.9008 trillion and KRW951 trillion, respectively. Therefore, the contribution ratio between bank and non-bank subsidiaries recorded 67% to 33%.

Page eight shows the subsidiaries income for Q3 2011. Income from banks increased QoQ thanks to increase in interest income and a decrease in provisions by 30.1% but, as there were no one-off profits from non-interest areas, the total income showed a decrease of 41.1% QoQ. Non-bank subsidiaries are still showing similar numbers YoY and, compared to the previous quarter, an increase of 11.3% has been realized. Shinhan Card, Life and Capital all saw a YoY and QoQ growth, in particular, in the case of Shinhan Card.

Despite fee discount and decrease in recovery of written-off debts, income has increased thanks to improvement of cost effectiveness. In the case of Shinhan Life, thanks to robust growth in premium income, improvement in investment return and decrease in transfer to policy reserve, net income is showing growth QoQ and also YoY.

Moving on to Shinhan Bank income on page nine. In Q3 Shinhan Bank's Korean won loans increased by 2.2% and NIM remained at a stable 2.24%, resulting in a 2.6% growth in interest income. However, in the non-interest income area, due to the fact that one-off sales of Hyundai Construction -- share sales has no longer been reflected, which is KRW352.3b before tax, and also due to the recent downfall in the stock market, loss from securities, trading and equity management, has led to a 91.4% decrease.

G&A decreased 9.2% QoQ due to reduced stock option cost. In the case of allowance for bad debt due to the corporate reorganization of Pumyang Construction Company, an addition of KRW34.7b was required but the reversal of KRW48.9b in Daehan Shipbuilding's debt equity swap led to a 24.2% decrease in allowance for bad debt. Based on the increase of key income items and improvement of soundness, Shinhan Bank realized KRW458b of net income in Q3.

Q3 accumulated net income came in at KRW1.8906 trillion, showing a 30.5% increase year on year. As you can see in the bottom left graph, the bank NIM, including Card, dropped 6 basis points to 3.59%. This is because Shinhan Bank's NIM dropped slightly to 2.24% due to increased loans to blue chip companies, and net interest in FX has decreased. Also due to increase in operating assets, the Card side NIM dropped slightly.

In Q4, due to continued pressure on reduction of interest rate and decrease in net interest on the FX side, a small decline in net interest margin is expected but continued improvement in funding costs and re-pricing of loan assets will allow us to maintain a stable net interest margin.

Next page. Non-interest income at Shinhan Bank decreased as one-off sales of Hyundai Construction Securities has been absent. Also fee income from Fund, Bancassurance decreased by 9.7%. FX trading loss from derivatives and loss from equity management resulting in a 91.4% drop QoQ and 6.3% drop YoY.

G&A of Shinhan Bank increased 6.0% YoY, showing a stable growth trend. Due to decrease in stock option costs, there was a 9.2% decline QoQ. Despite the QoQ decrease in G&A, the cost/income ratio for the Group and the Bank increased slightly, thanks to the expiration of the one-off event in the non-interest area that took place in Q2. The cost/income ratio for the Group and Bank stands at 40.2% and 39%, respectively, maintaining an adequate level of cost effectiveness.

The Q3 net income for Shinhan Card came in at KRW198.5b, a 3% increase QoQ, and 3.4% increase YoY, showing a robust growth.

As credit sales increased 1.3% in Q3, operating income increased by 1.2%. And interest expenses decreased 1.2% due to decrease in funding costs. G&A dropped by 5.1% QoQ thanks to cost savings effort in HR and marketing.

Provision for credit losses in 3Q stood at KRW46.6b, resulting in a normal level of provision for credit losses. The balance for bad debts stand at KRW6.3 trillion as at the end of Q3 and income from recovery of written-off debts amounted to KRW60 -- KRW76.7b, showing a sound recovery result.

Next, please look at page 13 for Shinhan Group's asset growth. As of the end of September 2011, the Group's total assets stood at KRW337 trillion, which is a 5.8% growth compared to 2010 year end, and 2.3% growth compared to the end of this year -- June this year. This is mostly due to the growth in loans and operating asset growth in the Card business.

Shinhan Bank's Korean won loans reached KRW136.5 trillion as of Q3 end, up by 6.9% from 2010 end. Loan growth trend that started in Q2 continued during Q3, posting a 2.2% QoQ growth.

By sector, household loans and corporate loans increased by 5.3% and 8.4%, respectively, from the end of 2010. General loans and mortgages grew by 6% and 5% each from the end of last year, contributing to posting an adequate 5.3% growth of the overall household loans. Corporate loan growth was driven by high growth rates of quality assets; 21.4% for large corp and public sector loans and 10.4% for SOHO loans.

As of Q3 end 2011, Korean won deposits reached KRW137.9 trillion. Thanks to steady increases in time deposits, installment savings and low cost deposits during Q3, the Korean won deposits moved up by 9% from 2010 end and 4.9% from Q2. Deposit base expansion and stable asset growth led to a stable LTD ratio of 99.2%. The Bank plans to maintain a stable funding structure based on deposits to keep its LTD ratio below 100%.

Moving on to page 15 regarding Shinhan Card's asset growth. As can be seen on the upper left side of this page, Shinhan Card's transaction volume in Q3 stood at KRW34.8 trillion, up by 1.3% QoQ, while its revenue-earning assets increased by 2.2% mostly driven by credit purchase growth. This is attributable to an increase in the number of business days in Q3 compared to Q2 and seasonality of card use. Both the transaction volume and revenue-earning assets are posting stable growth. Through a selective marketing towards quality merchants and cardholders with a focus on promoting credit purchases, the firm will pursue continued asset growth at an adequate level.

Next on asset quality. As of Q3 end this year, the Group's NPL ratio was at 1.38%, down 0.04 percentage points from Q2 end. Its precautionary and below loan ratio recorded 2.68%, a similar level from Q2. This is due to our consistent efforts to manage problem assets and a fall in NPLs following the KRW450.8b NPL write-offs and sales conducted during Q3.

The Group's NPL coverage ratio increased by 2 percentage points from Q2 to 149% and we are making constant efforts to prepare ourselves against potential future problems.

Next page, please, regarding Shinhan Bank's asset quality. As of Q3 end, Shinhan Bank's NPL ratio was at 1.24%, down by 0.04 percentage points from Q2, and its NPL coverage ratio reached 143%, up 2 percentage points QoQ, illustrating a continued trend of asset quality improvement.

As can be seen on the bottom left side chart, the Bank's SME loan and retail loan delinquency ratios are both stabilizing.

On the household loan front, we dealt with the delinquency of some Group loans in October and expect additional improvement during Q4. Overall, household loan delinquency is being maintained at a very stable level.

The Bank has been focusing on asset quality management since 2009 and this year has not seen any new substantial deterioration from increased delinquency, except for problems associated with companies under legal proceedings and some Group loans.

On page 19 regarding Shinhan Card's asset quality. As of Q3 end, Shinhan Card's NPL amount decreased by 0.01 percentage point from Q2 end, and its NPL ratio stood at 1.65%. Its NPL coverage ratio remained at the same level of 240% from the previous quarter demonstrating it has sufficient provisions for credit losses to prepare against potential future economic aggravations. While its Q3 end delinquency ratio moved up 8 bps from Q2 to 1.97% showing the trend of a slight increase resulting from operating asset growth, it is being maintained at a sound level. This is thanks to stable asset growth strategy with a focus on credit purchase and strengthened risk management efforts that continued since 2008. Going forward, we will continue with our efforts to keep its asset quality at a sound level.

Next on page 20 concerning credit cards and write-offs. If you look at an upper left side graph, the Group's Q3 YTD credit cost ratio fell from 8. -- 0.85% on a YoY basis to 0.46%, showing a stabilizing trend. In Q4 we expect the ratio to move up slightly due to one-off seasonal factors concerning provisioning. As can be seen on the table at the top, Shinhan Bank's provisioning during Q3 was mostly for corporate loans.

Shinhan Card wrote off KRW114b NPLs, due to an increase in revenue-earning assets. Quarterly recovery from collection of written-off loans was slightly short of the original expectations because of a ban on attaching small sum deposits and the credit recovery support system. The card issuer's credit costs amounted to KRW46.6b.

During Q3 Shinhan Bank wrote off KRW224.3b and sold KRW112b of NPLs, which are similar levels from other quarters.

Despite the quarterly income growth, as of Q3 end the Group's BIS ratio fell by 0.1 percentage point from 2010 end to 13.4%, due to an increase in risk-weighted assets and as the Bank's maturing subordinated debt was no longer counted as Tier 2 capital. Tier 1 ratio is expected to edge up to 9.1%.

As of Q3 end Shinhan Bank's BIS ratio and Tier 1 ratio are estimated at 15.6% and 13%, respectively, while Shinhan Card's adjusted equity capital ratio is estimated at 24.4%, indicating a sound capital adequacy level.

We expect the Group's risk assets to grow gradually in the future and its income generation capability to be maintained, which is why we expect consistent improvement in the capital adequacy ratios.

We have also provided additional information on pages 23 and afterwards, including other Group companies' earnings, KPIs and Shinhan Bank's SME lending status, for your reference.

With this, I would like to conclude my report on Shinhan Financial Group's Q3 earnings results. Thank you.

(Interpreted). We're now going to take questions.

(Operator Instructions). For those of you who will be asking questions in English, we have consecutive interpretations. Those of you who plan to ask questions in English, please wait until your question in consecutively interpreted. We're now going to take questions.

We are ready to take the first question. The first question comes from Mr. Lee Byung-Gun from Dongbu Securities. Please go ahead.

Yes, my name is Lee Byung-Gun from Dongbu Securities. Can you hear me clearly?

Yes.

I would like to thank you for giving us better earnings results than expected. I have a number of questions but due to time constraints I will be asking just two questions. One of the biggest concerns on our part is regarding the additional provisioning expected in Q4. IFRS is currently being implemented and because of that you will not be able to randomly increase the level of provisioning and probably have to find the appropriate level of additional provisioning that's allowed under the IFRS regime. During Q4 maybe you will be additionally provisioning for further aggravation in economic conditions, and how much do you expect will be allowed under the IFRS regime for additional provisioning in Q4? That's my first question.

And, secondly, I have a question regarding Shinhan Life Insurance regarding the earnings results. In fact, I understand that the Company has provisioned for the fines that were imposed by the regulatory authorities; I wonder whether there has been a write-back of such provisioning and I understand that there is a change in the regulatory regime for the life insurance industry, which will pose a challenge to the business environment of life insurance. Given the channel competition, I believe that Shinhan Life is one of the insurers that will be most heavily influenced by the change that's scheduled by the regulatory authorities. So I wonder whether you are planning to have a change in terms of insurance strategy, going forward, because I expect a substantial change in terms of the pay scheme, as well. So can you please provide us an answer to this question?

I will address the first question myself. My name is Tan Dung-Gee. I'm in charge of the finance team. Under the IFRS, as you mentioned, provisioning rules are specifically provided. So preemptive provisioning could be rather restricted under this regime. For individual borrowers we're supposed to evaluate such individual borrowers' cash flows. And there are other portions that we can provision based on the past history of problems that we had with certain loans.

If we decide to additionally provision during Q4, probably for large-sum loans of individual borrowers, we will be evaluating their cash flows before making any decisions. But, as you must be well aware, out of the four financial holding companies, our NPL coverage ratio is at the top level, 149%. So I don't think that there will be much room for us for additional provisioning in Q4.

We haven't done any specific simulations regarding the provisioning figures. But we expect it to be less than KRW100b at the most. And our provisioning is stated at KRW1.3 trillion. But it could go up to KRW1.7 trillion including other factors.

In Q4 we will be making settlements of our numbers. And we'll be taking some preemptive measures to fend off any further aggravation in the economic conditions. However, the amount itself will not be that large.

The second question was regarding Shinhan Life. I would like to address that question myself. Q3 earnings of Shinhan Life improved substantially from those of Q3 because we posted KRW67.8b in net income.

The net investment income was reached above KRW15b in Q3. And due to the fines in Q2 we provisioned KRW6.7b, but the write-back took place in Q3 in the amount of KRW3.4b. As a result we could see some improvement of the earnings figures for Q3.

Regarding the strategy for Shinhan Life recently, if you look at the earnings trend you can find stabilizing trend according to our analysis. In the case of the first month's premiums we are maintaining KRW1b to KRW10b level.

And during the bad months it went down to KRW7b level. But more recently it came back to KRW8b level, which means that the Company has a very stable income foundation.

Next year in order to facilitate its business it will be focusing more on pursuing business initiatives aligned with other Group Companies so that it can grow organically. Thank you very much.

(Interpreted) Hello. Actually, regarding the second question, I actually want to build on that. My question regarding the strategy was as follows. Comparatively speaking, Shinhan Life has done very well in terms of working together with other Group Companies. And you will continue to do so in the future. But once again, relatively speaking, it depended heavily on agency factors. But if there's a change in the regulatory regime next year bank assurance channels or GA channels could be substantially influenced.

So maybe your directions might be right. However, there is going to be impact on the income performance, in my opinion. So my question was more specific to a potential change in the strategy of the Company. If you do not have an answer to my question right now you can give me the reply later on.

(Interpreted) My name is Dong Woo Han. I'm the Chairman and CEO of the Group and I formerly was involved in the management of Shinhan Life. So let me try to address that question to the best of my ability.

In the case of Shinhan Life its operations are quite stable as of now. And in the case of the pay scheme I understand -- excuse me, in the case of the premium payment scheme I understand there is a new scheme that's currently under discussion regarding the reclamation of the amounts in installments. [24] of the new contract expenses or new business expenses could be introduced. Actually, that was already introduced.

And even if additional change is introduced given the extreme complexity of the schemes in the life insurance industry I don't expect much change all in all. And personally I expect stricter regulation regarding the individual or the consumer credit information. And as a result the telemarketing and other marketing efforts that depends on the Group's database could be affected in the future.

And on that point I am trying to think about how better Shinhan Life can prepare itself to increase its business in the future.

Thank you.

The details we will prepare and provide to you later on.

Thank you.

We will now take the second question. The second question is from Hyundai Securities, Koo Kyung Hwe. Mr. Koo Kyung Hwe?

Yes. I have two short questions. In your Japanese office there is the FX loss. And also there is a pressure to reduce ATM and card fees. So I would like to ask a question regarding that, as well.

Yes. As to the first question, let me talk a little bit about the exchange rate in our Japanese office. In Q3 there has been a fluctuation in currency rate. And this is a common issue to all of the financial companies.

To give you a short answer, in the Japanese offices we are not exposed to the economic financial fluctuation. It if more of an accounting issue. So the investment from the bank is considered capital adjustment. But in the foreign offices regarding debt or liability it is appropriated as current net income. So there is a mismatch.

So economically there is no influence. But on one part accounting-wise there is a current net income. And on the other part it is adjusted capital, so there can be confusion.

In the case of our Japanese branches KRW28b has been invested. And there has been about KRW200 increase in exchange rate. So there is KRW56b of influence in the current net income.

So in the non-interest income there is about KRW76b of decrease and this is mostly from our Japanese branches. And the rest comes from trading loss and FX credit borrowing regarding -- losses regarding FX borrowing.

And next is the pressure on reducing fees on banks and ATMs. As you may well know, the non -- the ATM and other fee income reduction will have an impact on our income. And in the case of cards based on the annual sales, the annual sales limit is currently KRW200m. But I think 1.7% to 1.8% range is the currently-considered range.

So currently we do not foresee a specific number for the income on -- the impact on the income. But when everything is all set and decided we will communicate with you through a different route.

Thank you.

We're ready to take the third question. The third question comes from Mr. [Young Soo] from Kiwoom Securities.

Good afternoon. My name is Young Soo from Kiwoom Securities. Thank you for your earnings report. I have two questions. First you talked about the ATM fees and credit card merchant fees. And concerning that aspect do you see the possibility of regulating the loan interest rate? And -- because if there is such a possibility it will impact the margins. So what is your future projection for margins? That's my first question.

And secondly, I would like to ask a question regarding the household debt. Samsung Card and other financial companies had earnings release previously and card loans decreased substantially, but that's not the case with Shinhan. And overall I don't believe that Shinhan's attitude towards the household debt is not that bad. So how do you see the current landscape of household loans? And what is your future plan in dealing with such household loans?

I would like to address the first question first. Regarding the lending rate, we do not see any move to regulate it yet. So it is difficult for us to estimate the potential impact.

Given the current asset liability duration portfolio and assuming no additional interest rate hike, under the current circumstances we believe that it will be very difficult to improve our margins further, going forward. And that phenomenon has already been seen during Q3. Because if you look at our margin performance in Q3, Shinhan Bank's margin dropped by 3 bps. To look at why, on the lending rate increase was very minimal. However, funding rate is steadily rising.

So in terms of the average cost of funding the impact was an increase by 8 bps. Therefore, future margins appear to be very difficult to move up, in my opinion.

Regarding the second question on household debt, as of now Shinhan Card or Shinhan Bank's SOHO business and mortgage and loans are not seeing any significant deterioration in terms of their quality. In the case of Shinhan Card the delinquency ratio has moved up slightly. But this trend of deterioration is not expected to accelerate any significantly, going forward.

You talked about card loans and cash advance and card loans expenses. It's being maintained at 35% level for two years now. And last year we've seen substantial growth in card loans. But, on the contrary, we reduced our exposure to cash-advance services, which was the reason that we were able to maintain 35% level last year as well.

Compared to cash-advance services, card loan as a quality is slightly better, in fact. Therefore, delinquency ratio and NPL ratios are not really deteriorating for us yet.

However, at the same time, in the case of SOHO loans, as the growth rate exceeded 10% already by now. So we feel that it is necessary for us to decelerate the growth rate in SOHO loans.

However, if you think about the year 2007 the growth rate reached 30%. Therefore, compared to back then I believe that our SOHO loan portfolio and asset quality are doing quite well, which is the reason that we believe that there is going to be any new need for additional provisioning due to this during the remainder of this year or next year.

Thank you.

We're still waiting for additional questions. (Operator Instructions). The next question is from Citi, Mr. Kim JingSan. Mr. Kim?

The two previous people have asked questions that I actually wanted to ask, so there is an overlap. I first want to ask, the margin for Q3 has dropped and the Group NIM has dropped even more. So if you just look at the credit card side, the margin could have dropped even further. So what is your forecast for the credit card margin?

And compared to other banks, Shinhan's loan growth is higher. And if you look at the SOHO and corporate loans they're showing a very stable growth. So this can look like a good sign under normal circumstances. However, because there is high uncertainty in the market you said that you would adjust the speed of growth for SOHO. But given the uncertainties of the market the household is going to be restrained.

And the corporate side there are some credit risk which may be quite difficult for you to create strategies. So what is your projection for growth in loans for next year? And it may be very difficult to find growth drivers. So what drivers have you identified to increase growth rate in the future and next year?

Let me first answer the first question. In the card business side, as you have already mentioned, the margin has not deteriorated greatly. And, as you may well know regarding credit purchase, the merchant fees have not been adjusted in the Q3 results.

However, the margin is declining because the funding cost is creeping up. And regarding the funding cost the margin is not declining very rapidly. And we do not foresee any rapid decline because until recently, in the case of Shinhan Card, the funding structure itself has very long maturity or long tenure.

So we have about 23% that matures in two to three years. And those over three years take up about 24% of the total structure. So for the long-tenuor loans take up a large portion. And if you look at the interest-rate trend it does not look like it is going to go up any time soon. So the overall margin decline is not anticipated any time soon.

And regarding the margin before provisioning, it will be quite difficult for us to improve that. However in -- on the card side income we are going to focus more on cost containment. So sales cost will be controlled more tightly. And also provisioning will be improved.

And, as you may know, in this quarter the written-off debt recovery was about KRW80b. So KRW76.7b was recovered. And in the next quarter be believe about KRW75b of additional debt will be recovered. So overall our provisioning rate will increase starting from next year.

And regarding SOHO, let me give you a short answer for that. Shinhan has begun its SOHO business in 2006, second half. And 16% of KRW loans are made up of SOHO.

Regarding SOHO we have focused a lot on soundness. There was concern on soundness, but Shinhan now has the best soundness and lowest delinquency in the SOHO business.

So we have a very good sector dispersion. And we are not focused or concentrated on a certain sector or certain borrower. So we have been managing this SOHO sector quite well.

And because we were doing well it does not guarantee that it -- we will continue to do well in the future. We are continuously monitoring any potential risk.

And in creating the business plan for next year, in the past loan growth was local GDP plus local best player points were added. But in the next year's business plan we're going to include internal and external market situations.

We're going to maintain it at the nominal growth level. So regarding SOHO we have been doing quite well. And we foresee that trend to continue. And we're going to continuously monitor very closely the situation of the SOHO side.

I'm Choi Buhmsoo. I'm in charge of strategy. In the household area for next year, as you may well know because the economy is quite sluggish the households have reached their highest limits.

At the Seoul National University Economic Research Institute they have released a report. So if the interest rate goes up what will happen to the household. They have done a test on that. And the result shows that the market situation, household situation, can worsen further.

Shinhan is not going to deteriorate the soundness for growth. It is not going to focus more on growth itself unless there is soundness guaranteed. We are currently working on our next year's business plan. And we're not going to compromise soundness for growth. So in that regard there is a possibility that our growth rate may slow down. But I think that is the right way to go.

Then how are we going to compensate for loss when the economy is in a difficult situation and when doing business becomes more difficult? I think we should look more internally and identify areas where we could reduce more cost.

Shinhan is going to look inward to improve efficiency. And we're going to accelerate cost-effectiveness improvement. And the financial service in Korea still has a lot of room to grow because we have not been doing very well regarding CIB and risk management. As you may well know, we're going to focus on the two areas so that we can identify new income sources.

I don't believe there is any more questions currently placed on the queue. With that I would like to wrap up our earnings release for Q3, 2011.

If any of you have additional questions regarding the earnings report that we gave (technical difficulty) are already uploaded to our website. And I would like to thank you for taking part. Thank you.

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.