Shinhan Financial Group Co Ltd (SHG) 2013 Q1 法說會逐字稿

Good afternoon ladies and gentlemen. My name is Ryu Seung Heon, Head of the IR Team at Shinhan Financial Group. I would like to thank the investors and analysts for joining us despite their busy schedules.

We'll now begin the earnings call for the Q1 of 2013 for Shinhan Financial Group. We have our Vice President Choi Beom Su who's responsible for the strategies and we also have Vice President Min Jung Kee responsible for the financials, and we also have Mr. [Tang Gong Gi], the Head of the Financial Management Team, with us. Vice President Min Jung Kee is going to give us a description and explanation on the results of Q1 and then we will have questions and answers session. We'll now invite Vice President Min to give us the report on the earnings of Q1.

Good afternoon. I am Jung Kee Min, the CFO of Shinhan Financial Group. First of all, I would like to extend my gratitude to the investors, analysts and journalists in and out of Korea for listening in to the 2013 Q1 Shinhan Financial Group earnings release. I would now like to cover the major highlights of Shinhan Financial Group's Q1 business performance.

Let me elaborate on the Group's income on page six. Shinhan Financial Group's 2013 Q1 net income posted KRW481.3b. The Group's major income-generating interest income due to the NIM drop and a sluggish loan growth went down 9.3% YOY and 5% QOQ, respectively. Non-interest income fell 13% year on year with decrease in gains on securities sales. Compared to the previous quarters, with the absence of one-off loss factors including losses from NPL sales and derivative CVA, there was a 94.7% increase in non-interest income QOQ.

SG&A went up 3.6% YOY, showing appropriate growth trend compared to the previous quarter. With the overall cost falling following the absence of efforts to save costs, including the voluntary retirement plans, SG&A went down 6.2% QOQ. Credit cost in Q1 due to one-off factors showed a different trend compared to the previous quarters and went up 50.1% and 20.2% YOY and QOQ respectively, going against the previous quarterly trends.

With the [Shiksa] quarter collective loan delinquency prolongation, KRW71.5b of additional provisioning was fully recognized. Additional provisioning took place for certain companies under court receivership, including Sun Star and also regarding the STX Shipbuilding voluntary agreement. In the case of card, additional credit costs went up due to a decrease in recovery from written-off assets and additional provisioning for recognition for long-term delinquent loans.

Q1 business performance was different from the previous first quarter results in the past because of the drop in the interest income influenced by the policy rate cut as well as the push-down in income caused by the one-off credit cost factors. This caused the net income to stop at KRW481.3b. From Q2 we forecast a stable income flow with the NIM margin drop slow down and the reduction of one-off credit cost factors.

Next page seven, Group subsidiaries income. In Q1 net income, taking into consideration the ownership of banking and non-banking, posted KRW341.5b and KRW248.2b respectively. The Bank's net income contribution and non-banking contribution recorded 58% and 42% respectively. Despite the drop in the income for non-banking subsidiaries including Shinhan Card and Shinhan Life, with the Shinhan Investment and Shinhan Capital's income recovery, the non-banking income contribution slightly grew year on year.

Page eight, Group subsidiary income in Q1. 2013 Q1 Shinhan Bank income due to the margin squeeze and credit cost hike went down 48.6% year on year. SG&A decrease and gains from sale of securities led to a 54% increase QOQ for Bank income. The non-banking side, due to the business environment deterioration including the tightened regulation, base rate cuts and market contraction, went down 12.8% year on year, and went up 50.6% QOQ thanks to the income recovery of Shinhan Investment and Shinhan Capital.

Due to the drop in the credit card income following the merchant fee revisions and increased credit costs, income went down 13.9% year on year. Thanks to the rise in interest income, SG&A contraction and sale of Visa Card shares, income went up 2.5% QOQ.

Shinhan Investment, despite the drop in the stock brokerage fees resulting from the lower continuous daily stock market volume QOQ and YOY, with the proprietary trading increase and CLN impairment losses write-back, saw a great recovery in net income.

Shinhan Life, despite the rise in premium income and gains on bond trading, saw the income fall 38.9% year on year because of the low base interest rate and the rise in policy reserves for single-premium policies. However, with the decrease in policy reserves for the single-premium policies because of tax benefits have been abolished, compared to the previous quarter Shinhan Life income increased 47.6% QOQ.

Shinhan Capital had a stabilized credit cost due to the absence of additional yearly provisioning for ship-financing assets, which took place the previous year, leading to an income recovery year on year and QOQ.

Next page nine, Shinhan Bank performance. 2013 Q1 Shinhan Bank net income recorded KRW338.3b, a 48.7% drop year on year and 54.6% increase QOQ. Interest income continued to grow with the loans in Korean won increasing by 3.7% year on year and 0.6% on a quarterly basis. However, the quarterly NIM dropped 31 bp year on year and 7 bp QOQ. It went down 13.3% year on year and 6.9% QOQ, respectively.

Non-interest income showed gains from sales with the partial sale of SK Hynix and Visa Card shares in Q1. However, the gains from sales contracted compared to the one-off gains from sale of securities, including gains from sale of SK Hynix shares, and went down 31.3% year on year. It went up 155.5% QOQ with the absence in one-off loss factors including losses from NPL sales and adjustments of CVA or credit value adjustments.

SG&A went up 2.2% year on year, showing appropriate growth trends. And thanks to the strategic cost-cutting efforts including costs related to employees such as voluntary ERP and the cost containment of administrative costs, SG&A went down 8.7% QOQ.

There was additional provisioning, including the KRW71.5b conservatively provisioned against [Shiksa] quarter collective loan delinquencies, KRW37.3b against the Sun Star company undergoing court receivership, KRW22.1b regarding the asset quality reclassification of STX Shipbuilding. With these one-off factors there was a 44.1% increase year on year and 34.9% increase QOQ.

As with aforementioned, unlike in the conventional Q1 credit cost trends, when Q1 credit costs tend to be lower than the other quarters, the CI ratio was higher than the past in 2013 Q1 due to the one-off credit cost factors including collective loan delinquencies. From Q2 a more stable CI ratio is expected with absence of one-off factors.

The NIM trend on the bottom shows the continuous falling of the Bank NIM with the interest rate cut and heated competition. From Q2, however, the NIM decline is expected to slow down, leading to a downturn in the interest income drop. The quarterly NIM including the card went down to 2.33% (sic -- see presentation "2.09%") and posted 24 bp year on year and 7 bp decrease respectively.

Next page 10, Shinhan Bank's non-interest income and SG&A. Shinhan Bank's Q1 non-interest income posted KRW250.3b. Fee income including sales of fund and bancassurance went down 7.4% year on year. Gains from sale of securities went down 28.2% YOY. FX trading and derivative related income was reduced by 47.4%, with a decrease in valuation gains from equity method securities which led to a 31.3% drop YOY.

The reason why gains from sale of securities went down was because compared to the first quarter of last year with KRW143.3b one-off gain from the sale of SK Hynix shares in 2012 Q1, in 2013 Q1 selling of part of the remaining shares took place and this led to KRW41.7b of gains from sale of securities, a downward trend. KRW21.7b of impairment losses related to Hyundai Merchant Marine was also recognized. On the other hand, compared to the last quarter, due to the gains from SK Hynix shares and drop in derivative related CVA, there was a 155.5% increase in non-interest gains QOQ.

Bank SG&A increased 2.2% year on year and is showing an appropriate cost growth trend. Compared to the previous year's fourth quarter it went down 8.7% with the assets and costs related to ERP and overall cost reduction efforts. For reference, the retirement pension provisioning actuarial valuation costs have been reclassified in 2012 as comprehensive income and does not affect the gains or losses. Group and Bank CI ratio are respectively 49% and 49.9%, and appropriate cost efficiency is being maintained.

Let's now move to page 11, Shinhan Card P&L. Shinhan Card's 2013 Q1 income trend shows that despite the credit card merchant fee revisions, with the interest expense reduction and the KRW40.1b of gains from partial sales of Visa Card led to the pre-provisioning income slightly easing downward year on year by 3.8% and increasing by 7.2% QOQ, showing that stable operational capability is being maintained. In Q1 with the reduction in the recovery from written-off assets and prolonged delinquencies, KRW86.7b of credit cost was recognized. The net income went down 13.9% year on year and went up 2.5% QOQ, resulting in a net income of KRW160.6b.

Q1 seasonally has a reduction in credit sales compared to the other quarters. And in particular credit card income went down 4.6% QOQ with the merchant fee income shrinking caused by the revisions in the merchant fee rate system. We are continuously making efforts to maintain profitability through interest expense reduction through funding cost stabilization and SG&A and marketing cost minimization.

2013 Q1 end balance of written-off loans posted KRW6.6 trillion. There was KRW64.8b of income from the recovery of written-off assets, which went down 3.7% QOQ, but the appropriate recovery performance is being maintained.

Next let's go to page 13, Group asset growth. Total assets as of Q1 for the Group posted KRW351 trillion and recorded KRW314 trillion on a consolidated basis, a 2.6% and 2.9% growth year to date respectively, continuing the asset growth trend. This was a result of Shinhan Bank's 2.1% asset growth following the loans in won growth and Shinhan Investment's 9.2% thanks to the asset growth. And Life Insurance assets grew by 4.8% thanks to loan asset growth for Shinhan Life Insurance. Total assets grew 3.8% year on year, continuing a stable asset growth trend.

Page 14 covers Shinhan Bank's lending and funding activities. Shinhan Bank's Korean won loans continued on a sound growth trend to stand at KRW145 trillion at the end of Q1 2013, up 0.6% from the year end. Retail loans fell by 0.2% while loans to corporates saw an increase of 1.4%. Despite the seasonal factors, general purpose loans grew 3.1% thanks to increase in high-quality credit loans and housing loans or transit loans. On the other hand, mortgage loans declined 2.2% due to securitization of over KRW500b worth of loans such as confirming loans. Corporate loans maintained a healthy growth rate of 1.4% with loans to SMEs, in particular those SOHOs growing 2.2%.

The Korean won deposits also continued on a stable growth path, growing 1.3% from the year end to stand at KRW149 trillion at the end of Q1 2013. Time deposits and low-cost deposits rose 5.5% (sic -- see presentation "0.6%") and 4.5% respectively. LDR was also kept at a stable level, falling to 96.6% at the end of Q1.

Let me now go over Shinhan Card's transaction funding activities on page 15. As you can see on the upper left-hand side, in Q1 Shinhan Card's transaction volume grew 0.9% year on year to record KRW32.9 trillion. Operating assets fell 3.9% from the year end as credit sales declined due to seasonal factors. However, both the transaction volume and operating assets returned to the growth path in March. Selective marketing activities targeted at prime merchants and customers will be implemented to increase credit sales while at the same time efforts will be made to keep appropriate level of growth for credit card loans.

Now moving on to page 17 for asset quality. Shinhan Financial Group's NPL ratio at the end of Q1 rose 0.08% from last year and to 1.42% and precautionary and below loan ratio increased 0.12% to post 3.01% for the same period. Compared to other quarters write-offs for the NPLs in Q1 was smaller, only amounting to KRW52.9b. As for precautionary and loan loss, we also saw an increase from last year due to asset quality reclassification which came about as a result of the voluntary agreement with creditors of STX Shipbuilding. Shinhan Financial Group will continue to conservatively manage its potentially bad debts.

And for your information, asset quality numbers for the Savings Bank are reflected in the Group's asset quality data and as a result the Group's NPL ratio posted a slight increase. However, it is expected that in 2013 we'll see stable NPL ratio for the rest of the year as there will be continued management of the Savings Bank's asset quality.

The Group's NPL coverage ratio posted 164%, dropping 6% from the end of last year. However, sufficient efforts are exerted to counter any potential deterioration of the assets in the future.

Page 18 looks at the Bank's asset quality. As I have mentioned before, due to the decline in the Bank's sales and write-offs in Q1, NPL ratio for the Bank in Q1 stands at 1.18%, up by 0.1% from the year end. NPL coverage ratio dropped 9% from the same period to stand at 162%.

As you can see from the lower left-hand side, Shinhan Bank's retail delinquency ratio went up 9 basis points compared to the end of last year. SME loans including SOHO loans also experienced delinquency ratio increase of 14 bp from the same period. However, this is not an increase to actual delinquency for the debts before sales and write-offs and the delinquency ratio is being kept at an appropriate level.

Now asset quality of Shinhan Card is highlighted on page 19. Shinhan Card saw slight increase in its NPL ratio. The ratio went up to 0.11% from the end of last year to 2.26%. NPL coverage ratio fell 7% from last year to 247%, allowing the Bank to hold sufficient provisions in case of potential economic downturn. The Bank's delinquency ratio at the end of Q1 stood at 2.53%, increasing 18 bp from the year end. Given the decline in the operating assets and the delinquency rate trend, the ratio is expected to be kept at a healthy level.

Page 20 looks at provisions for credit losses and write-offs. The Group's provision for the credit loss in Q1 is shown on the upper left-hand graph. The provisions are on a continued upward trend, increasing 0.11% from 0.67% to 0.78%. As was mentioned during the discussion of the income statement, provisions for the credit loss rose due to the Bank's one-off items and the growth of credit costs for the Shinhan Card. The growth in the provisions is more due to additional credit cost accumulation for potential bad debts coming from the prolonged delinquency of collective loans than actual increase in the bad asset. Therefore, it is forecasted that the credit cost ratio will begin to stabilize beginning from Q2.

During Q1 the Bank has sold and written off a total of KRW127.7b worth of debt. Write-off and sell-off amounts were KRW52.9b and KRW74.8b, respectively. Write-off for Shinhan Card in Q1 was KRW146.5b. Provisioning in Q1 went up to KRW86.7b as a result of drop in recovery of written-off assets.

Now on page 22, Group BIS ratio for the Q1 is expected to see an increase of 0.2% to post 12.7% due to simultaneous growth of income and slight decline in risk-weighted assets in Q1. Tier 1 ratio is expected to grow to 9.8% thanks to income growth and risk-weighted assets decline. Shinhan Bank's BIS ratio for the Q1 is likely to dip a little to 15.7% due to increased credit risk-weighted assets from the increase of corporate exposure. Tier 1 ratio tentatively stands at 12.5%. Shinhan Card's adjusted equity capital ratio is 27.8%, allowing the Card's capital adequacy to be on a sustained healthy trend.

As the Group asset growth is expected to be led by steady assets and its profit-generating capabilities are expected to continue on a solid path, capital ratio for the Group will see continued improvements in its equity capital ratio.

It is also -- and please refer to the remainder of the pages for the additional details on the subsidiaries' business results, major management indicators and loans to the SMEs. With this, I would like to conclude the presentation on the earnings results of Shinhan Financial Group for Q1 of 2013. Thank you.

Now we'll be receiving your questions. (Operator Instructions). First question from Hanwha Investment Securities, Mr. Shim Kyu Sun. Please?

Yes, I'm Shim Kyu Sun from Hanwha Securities. I have a couple of questions. First, your margin this quarter has been squeezed. So can you give us your quarterly margin forecast? And when do you think the margin will be stabilized?

Secondly is for the one-off factors and I couldn't catch what you said. Can you actually categorize it into cost and expenses for income and expenses?

And I think that we have a lot of asset growth this year. So can you give us some background information?

Thank you for your questions. Regarding your first question, for the NIM, net interest margin, I will speak for the Bank. In Q1 NIM for Shinhan Bank's posted 1.78% compared to the previous quarter, 7 bps went down. The major factors behind this was because of the funding and lending, and I think currently the margin squeeze was affected by the base rate cut last year. So this has been impacting us in the first quarter as well.

Regarding the monthly margin, fortunately 1.79% in January and 1.78% in February, 1.76% in March, so you can see that on a monthly basis the margin decline is not accelerating. If it was accelerating we would have been more concerned with the NIM decline, but I believe that the cost ratio of the funding, if we could actually improve this for the funding cost then the margin could be stabilized going forward.

Regarding our LDR, conventionally it was at 97% to 99%, but as of the end March of Q1 it is 96.6%; it has gone down to the 96 range. And if we push up 1 percentage point of the LDR then our margin will be pushed up by 2 bp. We believe that this will be possible. Accordingly, regarding Q2 and Q3, if we actually slow down the falling margin then we believe that the decline will not be steep. When we made a business plan for this year we believe that the base interest rate will go up by 25 bp at least in the first quarter -- will go down by 25 bp in the first quarter or in the first half of this year, and we believe that if this happens then the margin could be stabilized.

To answer your second question regarding the one-off factors, in Q1 of 2013 we had many non-interest income related one-off factors. Regarding the costs we had some one-off factors regarding provisioning for the non-interest income. What was the most sizeable factor? We had two plus factors. First, the sale of securities SK Hynix was pre-tax KRW34.5b. And for Visa Card 260,000 shares were sold, a partial sum of our total Visa ownership, so it was KRW41b pre-tax. And I talked about KRW34.5b for Hynix, which is also pre-tax.

Regarding the provisioning, we had the collective loan delinquencies leading to more provisioning. The total amount is KRW71.5b provisioning against collective loans. There is a company called Sun Star which is going under court receivership and KRW37.3b was provisions against that. STX Offshore & Shipbuilding, we had KRW10.1b of provisioning. So we have many one-off factors in this quarter, which amounts to KRW118.9b which occurred in Q1. And that was an overview of our one-off factors in Q1.

To continue, regarding the asset growth of our Savings Bank, in Q1 -- in the past there was Shinhan Savings Bank and there was Yehanbyoul Savings Bank, which was a bridge to that and we acquired this. Shinhan Savings Bank had -- now can cover the metropolitan and non-metropolitan areas because we only had coverage in the [Cheonji] area with Shinhan Savings Bank. And we actually acquired the deposits lower than KRW50m by the KDIC -- from the KDIC so I believe that these spontaneous asset growth is not very meaningful. Thank you.

We would now take second question and the second question is from Mr. Lee Byung Gun of Dongbu Securities. Mr. Lee?

Yes, good afternoon. Can you all hear me?

Yes we can.

So I would like to thank you for the good performance. I have two questions. Question number one is this, you just talked about NIM, but I had bit of concerns. Compared to other financial banks that have presented their earnings, in terms of funding Shinhan did quite well, but when it comes to lending rates I think that you have delinquent rates as deep as 5 bp more than other financial groups. But then your assets did not grow that much either. So I have to say there is another reason for decline in the lending rates more than other financial groups. So if you could talk about that.

And second, it seems that for the Shinhan Card in the past you had loss items so we were expecting to see the decrease in the income. But the Shinhan Card compared to other credit card companies, the provisioning increased for them and so the investors are worried about this increase in provisioning for the bad debts or just the increase in bad debts. So could you also give us some forecast about the bad debts, a trend Shinhan Card?

And related to margin, if I may give you additional explanation, yes it's true when it comes to lending there was some pressure in terms of lending rates and there are two reasons. And one is that in Q1 if you look at the Bank, the loan assets increased by [KRW55b] so compared to the end of last year it was an increase of 0.9%. However, if you look at the details of this growth, these would be, lending to the SOHO, which is the corporate sector, has been increasing. In Q1 SOHO lending grew by 2.2%. And this growth, the margin is decreasing because of fierce competition so we got this competition factor.

And the second reason is this, as we grow we have been growing centering on rather higher risk of customers. So that could bring still improvement in margins, but now, we are now focused on the SOHO customers with the lower risks and so that would be leading the increase in our assets. But if you look at the risks, for the mortgage it's decreasing, the mortgage loans that's decreasing. However, the high quality individuals, the loans to these individuals, we have a continued increase. But because of competition we've seen the squeezed margins. So the margin despite the growth has not been able to improve significantly. So that is the different circumstances.

And as for your second question, I think that was related to the Shinhan credit card; that was the bad debt cost. It was about KRW86.7b in Q1. That was an increase from the previous quarter, but I think we have to look at two things here. And that is the delinquency rate. For Q1, the delinquency rate is about 2.53%. And as for the NPL ratio, compared to Q4 of last year there was a growth about 11 basis points. So the asset quality did not deteriorate by much.

But the provisioning increased however. As I mentioned in the previous earnings report, the recovery from the written-off assets, there is going to be a decline of 10% as compared to last year. It's going to be about KRW250b. So the collection or the recovery from the written-off assets is going to decline and that is going to impact the provisioning amount despite the fact that our asset quality did not get worse by much. And in Q1 we had a very conservative provisioning policy for the Shinhan credit card in Q1 so compared to other quarters we had more than average provisioning accumulation.

So in terms of credit cost on an annual basis we are expecting 150 basis points. And because of KRW86.7b in Q1, whether it's going to increase or not for the remainder of the year it's not very clear. But in Q2 and Q3, if we could maintain the current asset quality then the provisioning would not increase by much as you have expressed some concerns about.

Next question from Standard Chartered Securities, [Lim Gae-Hun]. Mr. Lim?

I am actually [Kim Jun-Zhang], sorry. I have two questions. First, regarding SME loans, you have seen some growth comparatively. Is it because of reclassifications or is it just 2.2% increase? I know that although you target SMEs that are quite sound, on a long-term basis if SME loans increase and if collateral loans decrease then maybe the margins will improve so it would -- should have helped the margin. But I haven't seen those movements. Is this a one-off phenomenon or do you think this will continue?

Secondly is for the collective loans. Many other banks had issues and they were collateralized or securitized so they did not have a lot of provisioning but I see that for Shinhan, I know that you have a conservative position, but your amount of provisioning is quite sizeable. So can you give us background information regarding this? Do you have any possibilities of this being written back?

And can you give us some forecast for the delinquencies, what will happen going forward?

Regarding the SME loans, as was mentioned by Mr. Kim, for SMEs strategically we are continuing to extend SME loans so this is a part of our strategy going forward. For your information, last year in the SOHO category there was 9.7% growth last year and the year before last year, in 2011, there was 14% growth for SOHOs. Accordingly in Q1 in the case of SOHO it's 2.2% growth. So if we just calculate this on a yearly basis, this is a 9% growth trend on an annualized basis. This year we haven't had any major changes in our strategy to extend more loans to SOHOs, but we are trying to maintain our asset quality and for those borrowers who we believe will have more demand for our loans we will provide the loans to them.

You also asked about this helping the margin, but regarding the mortgage loans, if we compare this to the mortgage loans, it does not help the margins much. However, in the corporate side, as was mentioned before, it has the highest margin in this category.

As was mentioned in my statements in the beginning, because of heated competition and in the cast of Shinhan, when we look at the industry standards we have a high concentration in several sectors, including real estate lease or real estate rental. Secondly is wholesale and retail and manufacturing, and next is lodging and restaurants. So we have seen growth in these four categories. When we look into these categories in more detail other banks are accelerating growth in these categories as well so that is why we are seeing the margin squeeze down slightly.

And about the collective loans, as for the collective loans to the [Shiksa] zone, with the introduction of IFRS the calculation method for the bad debts have changed -- actually has become more rigid. In the past we could proactively accumulate provisions for the bad debt in anticipation of the bad debt. However, at the point of 10th month of delinquency is when we start to accumulate the provisioning so that is why we are accumulate a provision of about KRW30b per quarter.

And as for the loans for the [Shiksa] zone I think now there is some sort of preservation of these loans with the bond. So that does not [really help] it's collateralized. And so for the [Shiksa] zone, it's about, the cumulative provisioning is about KRW71.5b. And we are trying to sell off step by step this year, but maybe in Q1 we -- so we expect to see about 40% to 50% of the provisioning we accumulate in Q1 to be written back or returned. And as for the Shinhan Bank the collective loan is about KRW5.6 trillion and the delinquency rates, most of the delinquency rate comes from the [Shiksa] zone. So excluding that the delinquency for the Shinhan Bank is not that large.

So for Shinhan Financial Group in Q1 the credit cost is about 78 basis points. And one-off is the KRW71.5b of --- [bp] from the [Shiksa] zone and the remaining is about 65bps. So but that is similar to our average for the past five or six years. Of course we'd like to see lower numbers but large corporates, many large companies are experiencing some difficulties. So for this year we may have the same numbers as the average for the past five to six years. And so I don't see much improvements being made in terms of collective loans.

Next question from KB Investment, Mr. Shim Hyun Soo. Mr. Shin?

Yes. Regarding the conforming loans, after Q2 what is the limit that you have remaining? I'm also curious about the conforming loans that probably have been securitized and taken off your books, but taking into account the limitations and the securitization, can you give us the growth forecast for conforming loans?

And secondly, could you give us some background information about your asset growth strategy going three years into the future, some guidance?

And we had the impairment characteristics for Q1 and it seems that the profit for credit cards should be on a climax for this quarter. So can you give us some background information regarding this?

Regarding the conforming loans, currently as of end March conforming loans balance stand at KRW690.1b. Securitized portion is KRW276.1b. Accordingly, for the [handle] balance as of end March 2013 it's KRW218.5b. The limit for this year that we've received is KRW1.3 trillion. We haven't been very active in growing our conforming loans because even if -- and if there is loan demand then we will try to have stable growth in conforming loans.

Regarding the total securitized amount for this year, it may reach KRW1 trillion at the maximum. That was our forecast. With this background when we look at the current growth trend seen from our total loans, 2% to 3% growth for conforming loans probably is expected.

Regarding corporate loans that you mentioned, it includes large corporations and SMEs and in the case of corporate loans 3% to 4% of growth we believe will be possible. We had a comprehensive business plan for 2013 and regarding our loans at won, Korean won growth, we believe that it will fall along the same lines.

Regarding credit card, you are right. It is true that there was the merchant fee revision and cut. So it is true that our -- that income will be squeezed and on an annualized basis the merchant fees, if it is a 1.85% fee ratio then on an annualized basis we thought that it would amount to KRW100b to KRW120b. But in Q1 it is actually surpassing KRW30b on a pre-tax basis. So after taxes we believe that our burden for each year will be about KRW100b.

Regarding our P&L, as was mentioned, in Q1 for Shinhan Card we will -- we had very conservative provisioning and the business days in Q1 were not numerous. So on a revenue basis, KRW32 trillion. So in Q1 if we take into consideration those factors, in Q2 and Q3 if we have normal operations then we would not have a lot of impact to our P&L; we will have some improvements. In the case of Shinhan Card we could preserve some of the income because we could sell off our Visa Card shares. As you are well aware, in Q1 we were supposed to -- we were going to sell only -- more than threefold the 250,000 shares we sold off. So if we sell off the remaining Visa shares then Shinhan Card income will be maintained at a more stabilized pace.

And since that there are no further questions waiting for us so with this we would like to conclude the earnings release for Q1 of 2013. Once again I would like to thank you for joining us.

Statements in English on this transcript were spoken by an interpreter present on the live call. The interpreter was provided by the Company sponsoring this Event.