Shinhan Financial Group Co Ltd (SHG) 2014 Q3 法說會逐字稿

Greetings. I am Yu Sung Hun, the Head of IR. Thank you for taking part in Shinhan Financial Group business results presentation for 2014 Q3 despite your busy schedules. Let me now begin the 2014 Q3 Shinhan Financial Group earnings release presentation. We have here with us our CSO, Kim Hyung Jin, our CFO, Min Jung Kee, and our Finance Head, [Chan Young Gyo]. First, the CFO, Jung Kee Min, will walk us through the 2014 Q3 business results presentation and then there will be an interactive Q&A session. Now I'd like to invite CFO Min to begin the 2014 Q3 business presentation.

Good afternoon. This is Jung Kee Min, CFO of Shinhan Financial Group. First, allow me to thank investors, analysts and journalists from home and abroad for taking the time out to listen in on to SFG's Q3 2014 earnings release. I will present on our Q3 results, with a focus on major items.

First, on the Group's income on page 6, SFG's Q3 YTD net income reached KRW1,768b, with Q3-only income standing at KRW632b. This is up 13.4% YOY and 9.4% QOQ. To talk about major features of Q3 earnings, first, continued loan growth provided a stronger foundation for interest income. Second, non-banking subsidiaries income had been more stabilized. And third, a continued improvement in asset quality led to a fall in loan-loss provisions.

First, regarding the Group's interest income, continued loan growth at the Bank and an increase in AUM at Shinhan Investment and Shinhan Life drove the expansion of interest income, which grew by 3.1% YOY and 1.3% QOQ.

Next, on non-interest income, one-off gain at Shinhan Investments from the same quarter last year has disappeared and a change was caused in life insurance industries accounting standards which lead to a reduction in insurance income. As a result, non interest income decreased 5.7% YOY. When compared to the previous quarter, the Bank's gain on disposition of securities available for sales fell by 9.1%. However, a base for recurring non-interest income is being maintained stably.

SG&A increase was controlled to 0.7% on the back of sustained efforts to increase cost efficiency. However, in Q4, when considering a seasonal expense rise, SG&A is likely to increase as well.

Thanks to the Company's consistent asset quality management drive, credit cost is down by 13.5% and 27.9% on a YOY and QOQ basis respectively.

Next, page 7 shows the income performance by subsidiary. Q3 YTD net income after considering equity ownership in the Group's banking and non-banking businesses was recorded at KRW1,273.9b and KRW731.1b each. Non-banking businesses' contribution to the Group's income is slightly down to 37% from last year's end.

Moving on to page 8 concerning each Group company's Q3 2014 earnings, in case of the banking business, Shinhan Bank solid profit growth trend continues throughout the year so far. Its (sic ? see slide 8 "Bank") income grew 15.7% and 2.1% on a YOY and QOQ basis each. In non-banking business in Q3 major subsidiaries including card investment and life insurance companies posted more stable income, which rose 2% and 12% on a YOY and QOQ basis. In particular, Shinhan Investment saw a rise in its income thanks to strong sale of financial products, posting a 98% net income growth from the previous quarter.

Next is page 9 on Shinhan Bank's earnings results. The Bank's Q3 YTD net income reached KRW1,272b up by 16.7% YOY. A steady rise in loans led to an increase in income. Credit card service fees, trust commission and other fee income also rose and this pushed up non-interest income by 3.2%. SG&A slightly fell on a YOY basis due to a decrease in service fees and other general administration expenses.

Now credit cost. This year overall loan asset quality has improved. Construction building, shipping and other high risk sectors' restructuring drive resulted in a substantial decrease in one-off provisioning. As a result, credit cost fell by 26.9% from one year ago. On a quarter-to-quarter basis reduced gain on sale of securities pushed down the size of non-interest income, still, SG&A and credit cost also decreased, leading to a 3.2% growth in quarterly net income.

Next is page 10, illustrating Shinhan Bank's non-interest income and SG&A. Shinhan Bank's Q3 YTD non-interest income stood at KRW707.8b, up by 3.2% from the same period last year. While an increase in impairment loss from available-for-sale securities pushed down securities-related profit, credit card service fees, trust commissions, investment finance fees and other fee income increased. On the other hand, non-interest income declined from the previous quarter by 20.4%. This is attributable to a QOQ decrease in gain on sale of available-for-sale securities and reduced fee income.

Shinhan Bank saw its SG&A edge down 0.3% from one year ago mainly due to the decrease in service fees and other general administration expenses. Q3 SG&A is down by 3% from Q2. This is due to the fact that the largest sum of taxes and dues including property tax and composite real estate tax paid in Q2 did not arrive in Q3. Excluding this factor SG&A remained little changed on a QOQ basis.

As of Q3 end, the Bank's total cost/income ratio was down by 0.5% from the previous quarter to 50.6%.

Next moving on to page 11 on Shinhan Card's income, Shinhan Card posted KRW507.8b in Q3 YTD net income. While this is down by 5% from Q2, when excluding one-off factors the card issuer's recurring profit stayed at a stable level. Operating revenue is down by 2.7% on a YOY basis. This is due to the disappearance of last year's gain on sale of NPLs to the National Happiness Fund and a cut in card loan and cash advance rate.

On the cost front, interest expenses decreased 11.2% YOY and other operating expenses decreased 11.2% YOY and other operating expenses by 4.1%. However, as gains on collection of written-off debts fell, credit cost increased by 18.2%.

On a QOQ basis, Shinhan Card's net income this quarter increased by 7.7%, recording KRW190.1b. While increased advertisement expenses pushed up SG&A by 9.2%, an increase in credit purchase pushed up credit cards' revenue by 1.8% and improved asset quality lowered loan-loss provisioning by 16.8%. As such, net income during the quarter posted a solid growth.

Outstanding balance of written-off debt as of Q3 end stood at KRW3.8 trillion, while the collection rate reached 5.9%. For your reference, a KRW1.6 trillion fall in outstanding written-off debt is due to the accounting posting change. Beginning this quarter an outstanding amount of written off debt is captured after excluding receivables from borrowers who are declared bankrupt, which was valued at KRW1.6 trillion this quarter.

Page 13, Group's assets and liabilities. Group's total assets as of September end recorded KRW401 trillion, growing 8% YTD, a 3.6% QOQ growth. Shinhan Bank's assets due to the loan asset growth grew by 6.6% YTD and non-bank recorded 12% asset growth. In particular, AUM grew with the positive sales of Shinhan Financial investment products leading to acceleration of non-bank asset growth in Q3.

Let me go to page 14. Shinhan Bank's loans in won recorded KRW156.2 trillion in end Q3, growing 6.3% YTD. Looking at each quarter, loan assets in Q1, Q2 and Q3 grew 1.7%, 2.5% and 2.1% respectively, showing annual even growth rate.

Mortgage loans after deregulation in August grew in demand leading to further growth initiation, growing 1.8% in Q3. Retail loans, with continuous growth in [transit] loans and unsecuritized loans for high-credit-worthy individuals, grew by 2.6%. Regarding SME loans, SOHO loans and unregistered SME loans maintained growth from the last quarter, leading to 3% growth in Q3. For your reference, the SME loan breakdown consist of 51%, 24%, and 25% respectively for SOHO-registered SMEs and unregistered SMEs.

2014 Q3-end deposits in won posted KRW159.9 trillion, growing 6.3% and 1.8% respectively on a yearly basis and on a quarterly basis respectively, leading to a similar level of growth as our loan growth. In particular, low-cost deposits grew 11.5% YTD, which was because in Q3 there was growth in check card volume, transaction volume following the previous quarter, securing a credit card merchant settlement account, and new funds from institutional customers including universities, a continuing trend from the previous quarter.

2014 Q3-end LDR posted 98.7%, being maintained at a stable level.

Next, page 15, Shinhan Card's funding and lending. As you can see on the upper left hand side, Shinhan Card's Q3 cumulative Shinhan Card transaction volume posted KRW104.7 trillion and Q3 Shinhan Card transaction volume recorded KRW35.9 trillion. Check card and credit card sales volume steadily grew yearly, leading to 3.7% revenue growth compared to the same quarter last year and 2.6% growth QOQ.

Shinhan Card's earnings assets, as seen on the upper right hand side, rose 1.1% YTD and 2.2% QOQ. Credit purchase balance turned around to a growth trend in Q3. Asset reduction rate compared to late last year is contracting. Credit card loans are showing steady annual growth and grew 4.1% compared to late last year. The reason why installment financing and lease assets grew in 2014 was due to growth in new car installment and lease volumes centering on imported cards.

Page 17, Group asset quality. Group's NPL loan ratio posted 1.19% as of 2014 Q3-end and decreased 0.05% YTD. This was because of the continuous management of NPL loans. The NPL balance compared to the previous quarter declined 2.1% and the overall assets grew 2.1%. Group NPL coverage ratio recorded 169%, a 4 percentage point growth QOQ.

The non-bank's, page 18, Q3-end NPL ratio posted 1.07%, a 0.05 percentage point drop QOQ. NPL coverage ratio went up 4% -- posted 156%, going up 4 percentage points, continuing asset quality improvement. As you can see on the bottom left hand side on the NPL coverage ratio chart, Q3-end Shinhan Bank delinquency ratio posted 0.43%, showing a stable trend.

Let us go to page 19, Shinhan Card's Q3-end NPL ratio. You can see it posted 1.72%, a 0.02 percentage point drop QOQ, and the NPL coverage ratio recorded 300% similar to the previous quarter. Shinhan Card's Q3 end delinquency rate posted 1.93%, being managed within a less than 2% level.

Next, page 20, credit cost and write-offs. As shown in the middle left side graph, the Group's credit cost ratio posted 0.46%, a 0.13 percentage point drop compared to last year's 0.59%. As was mentioned previously, the main reason is because of the Bank's decline of recurring credit costs. We will do our best to stabilize our credit cost going forward based on safe-asset-based loan growth and credit cost stabilization.

Shinhan Card's credit cost due to decrease of gains from collection of written-off debt grew compared to the same period last year. However, we will continue asset quality management through high-risk asset reduction and recovery rate improvement so that credit cost can be maintained at a stable level. Shinhan Bank's write-off and NPL sales posted KRW267.2b and grew KRW13.8b QOQ. Shinhan Card's write off posted KRW131b, going down KRW17.4b QOQ.

Page 22, capital adequacy. Regarding Q3-end Group's BIS ratio, capital end risk-weighted assets, or RWA, is growing at a similar speed and is expected to post 13.3% similar to the previous quarter. Common equity Tier 1 ratio is expected to grow slightly QOQ, with the net income growth in Q3.

Q3-end Shinhan Bank's BIS ratio and common equity Tier 1 ratio is expected to be maintained at 16.1% and 13.1% respectively, similar to the previous quarter. Shinhan Card's adjusted capital adequacy ratio is expected to stand at 29.5%, maintaining healthy capital adequacy. Going forward, appropriate growth focusing on safe assets will be executed and robust profit will be maintained so healthy level of capital adequacy will be continued.

After page 23, please refer to the remainder of the presentation materials for additional details on the subsidiaries' results and major management indicators. This concludes the 2014 Q3 Shinhan Financial Group's earnings report. Thank you very much.

(Conference Instructions). I would also like to inform you that today's presentation materials are downloadable to your tablet PCs and mobile phones via an IR-dedicated application. Android application users can search Shinhan Group IR or SFG IR to download this application. This is the application that you can utilize to download all of the IR presentation materials to your devices. Apple users can enter in your search fields m.shinhangroup.co.kr or com to download IR-dedicated applications. This is an application we developed to maximize your convenience. I hope many of you can make use of this application. Thank you.

(Operator Instructions). Hwang Chan Young, Macquarie Securities.

Good afternoon. Can you hear me?

Yes.

I would like to thank you for your great earnings results. I have two questions. First, compared to our expectations provisioning seems to have been lowered quite significantly when compared to [SFI]. I believe that it's just about 50bp. I wonder whether this is a level that you believe is sustainable or do you believe that this is something that you can go -- that you believe that will go up or go down?

Secondly, Shinhan Financial Group or Shinhan Bank is a leading bank in Korea's financial industry and I believe that a lot of investors have great expectations on the Bank. So what is your policy on dividends going forward? This is a question that is also imposed by global investors. So can you address this question? Thank you.

My name is Chan Young Gyo and I am in charge of the finance team. Let me address the question regarding credit cost. As you mentioned, this year Shinhan's credit cost is at a historical low. The reason that we are doing so well on this front is because there was not much that newly arose in terms of bad debt, but at the same time we were able to collect quite significantly from the past written-off debt.

So in terms of future sustainability of this level, given the Group's portfolio, problematic loans have been resolved to a great extent. In construction, shipping and shipbuilding, these were high-risk sectors and we have a much cleaner portfolio in these sectors. So I don't believe that there will be much NPL to be generated from these sectors. And regarding write-backs, although I'm not too confident, this year has seen a great rise in the write-backs and going forward we expect to see the same phenomenon. Regarding the asset quality of credit card business, I believe that there is a slight worsening trend, but this is not something that you should be concerned about too much.

Therefore, down the road the Group's credit cost ratio, we plan to maintain it at this year's level. Thank you.

Next, regarding your dividend policy question, every year Shinhan Financial Group has made a lot of efforts to provide dividends at a level that meets your expectations. Over the past several years we have been maintaining a dividend payout ratio of 15%. As of 2014 it was 14.3% and last year the dividend payout ratio was 16.3%.

As you must be well aware, a bill on income tax, a bill regarding the revision of the income tax is currently pending before the National Assembly. Regarding financial institutions, regarding retained earnings, there is a discussion regarding whether those retained earnings should be taxed as well at financial institutions. In order to drive local economy I believe the financial institutions will probably have to consider a dividend policy that meets our investors' expectations.

Dividend for this fiscal year will be paid out next year and to give you an explanation regarding the policy, at this moment our annual income has not been finalized so it might be too premature but there are certain factors that might contribute positively to dividend payment.

First, regarding the regulatory ratio status of the Group, I believe that our circumstances have become more favorable than before. At the same time next year's business plan and capital efficiency will be the factors that we'll also take into account. And we do not want to see great volatility in terms of the dividend payment level to our investors across different years so we would like to make sure that our dividend policy or dividend level is something that we can sustain going forward. As I mentioned previously, in order to drive local demand in the Korean market the government is making a lot of efforts and this is something that we will consider as well. And we also need to consider ROE.

So, looking at all these different factors, we'll do our best to push up our dividend payout ratio. But on the other hand there are Basel III capital requirements which will become stricter for us so we will have to give consideration to all of these factors to become more flexible in our dividend policy. Thanks.

Lee Byung Gun, Dongbu Securities.

Hello. Yes. (Technical difficulty) costs, but your loan growth was quite (technical difficulty) not that much biased, but it is very balanced growth (technical difficulty). In consideration of conforming loans, what was the breakdown?

And we are hearing news that household sales are quite good in October. So in mortgage loans or in retail loans, I would like to know the trend.

My second question is about credit card. It's also applicable for NIM as well and I think that your credit card business is doing very well so it's contributing to NIM now healthy numbers. And I think that you have also cut down on a lot of SG&A. However, for next year I think that credit card companies' positions may change.

I'm also curious about credit card's SG&A prospects in the future.

Regarding growth, I would like to answer your question. As you mentioned, in Q3 we did not have a big growth in conforming loans so the liquidation of conforming loans until Q3 was KRW860b and new conforming loans in this quarter was about KRW340b.

As you previously said, in creating our growth we haven't increased a great ratio of mortgage loans or conforming loans and we use this strategy for many reasons. First, in terms of profitability, we wanted to grow our own loans and that was a more important factor for us. Second, regarding mortgage loans, our deposit -- our loan strategy is to follow the demand of the market. The second reason is because of the fixed interest rate and for the non-fixed rate loans -- it's about 90.3% for fixed and for non-fixed it's about 21% so for this year we believe that we will easily meet our target. And thus we haven't been very active in our conforming loan sales, it's true.

However, going forward I believe that overall loan demand, as was seen partly that this year will -- had more emphasis on corporate loans and SME's growth was formed this year compared to other companies. I believe that this trend will continue in Q4 as well. For your information, this year in the case of SOHO loans we have grown 7.8% so it has gone up by KRW2.1 trillion. Shinhan's growth strategy was mostly focused on SOHO loans from the past. And, as was mentioned in the introductory remarks, our consistent loan strategy is being continued so I believe maybe that led to better loan growth compared to our competitors.

Regarding credit card, there is SG&A and marketing costs that will probably continue to act as a burden. It seems that the overall income will not grow without limitation, but fortunately for Shinhan card our market share based on credit sales is being maintained quite stably. As of Q3-end market share is being maintained at 22.9%.

Secondly, what is fortunate is that each quarter based on the credit card sales numbers it seems to be growing. In Q3 KRW35.9 trillion went up and in Q2 it went up KRW34.8 trillion so we had KRW900b-plus compared to the previous quarter. If we have a recovery in our domestic economy soon then stable credit card growth is expected to follow. I believe that is a fortunate factor for us.

Sungjin Hwang, HMC Securities.

Good afternoon. My name is Sungjin Hwang from HMC Securities. Thank you for a strong result. A number of questions were related to the Bank so I would like to ask questions related to the Shinhan Financial Group, Investment. Actually the fee income seems to have increased and you have sold a lot of financial products. What was the main products that you sold the most?

Also related to Shinhan Insurance, what is the latest developments? Thank you.

My name is Chan Young Gyo from finance team. This year overall on an annual basis non-banking subsidiaries' performance has been rather sluggish but as we began Q3 Shinhan Investment and Shinhan Life seem to have been performing better.

In the case of Shinhan Investment the biggest contributor to the income growth in Q3 was because of the strong trading business performance. Due to a cut in interest rates it was able to gain much from its fixed-income position. And also on the asset side I believe that its growth rate was one the highest in the industry.

At the Group level and also at the Shinhan Investment level I believe that we are focusing much on driving a greater share of financial product sale. I don't believe that we are performing at a satisfactory level yet. In the case of the products that have been launched by Shinhan Investment, they have been received very well in the market. To summarize, mid-risk, mid-return products are the main products that are being sold by Shinhan Investment. We are combining derivatives in order to increase returns, but we are also trying to moderate the risk level. Actually the details of the financial products are too much to give to you at this moment, but if you request we can give you the details later on.

Now regarding Shinhan Insurance, compared to last year this year seems to be a better year for the Company. On a quarter-to-quarter basis the biggest impact was due to the tax imposition by the tax authorities in the previous quarter. Regarding the operating performances, I don't believe that there has been much change this quarter. Well, I believe that there is room for further increase in the interest income going forward, but when it comes to the other types of yields I believe that we can see a stable trend. Thank you.

[Yi Chen Ho], UBS Securities.

Hello. Can you hear me?

Yes.

I have two questions. My first question is as follows. For low-cost deposit growth I think it has grown a lot, helping you guard the NIM. I'm curious about what kind of promotions you have for low-cost deposits and how long are you going to continue because I don't think that it can go up forever.

Second is connected to the previous question. It's about the recovery of provisioning and I'm curious about where is it coming from. Is it retail, large corporations, SMEs, SOHOs? And if it's large corporations, can you tell us what industry? Please give me further guidance. Thank you.

Regarding low-cost deposits, I would like to give you an answer. We have core liquidity deposits or low-cost deposits that are growing. Last year it grew nearly 12%, about 11.7%, and until Q3 of this year it grew KRW6 trillion -- actually KRW11.5 trillion. And demand deposits went up 6.8% and we also had growth in other deposits as well. It is growing continuously following the previous quarter because of the synergy effect that comes from within our Company.

Also in the case of credit card, check card transaction volume is consistently growing. Also we are providing loans and in the case of credit cards our merchants are using Shinhan Bank's accounts as their main settlement accounts. So SOHO liquidity deposits this year has gone up KRW2.4 trillion among the KRW6 trillion that has gone up this year. For institutional deposits, it is continuously growing, KRW3.2 trillion -- has grown substantially.

Going forward we believe that the synergy will take place because if we best utilize our current customers this year and next year we will have a continuous growth of core low-cost deposits.

Of course regarding the growth rate, it will not be maintained at such a high level as 12% this year, but within our Company, within our Group, we will try to find out other places where we can add to the growth. And I believe that we can enjoy substantial growth going forward as well.

Regarding provisioning and write-back, each quarter we have some write-back and in Q1 for write-back we had KRW53.4b, one big case of write-back. And in Q2 we had some smaller amount of write-back. It was about KRW14.7b. For Q3 overall we had about KRW40b of write-back and most it was, the big lump-size, were about real estate development and within the Group we had more SME loan write-back for corporations.

As was mentioned previously, regarding our provisioning, it is true that we had a very conservative building up of loan-loss reserves so with the recovery of the macro economy we are seeing continuous small-sized write-backs. So because of these factors the absolute amount of our loan-loss reserves or provisioning was quite higher than what the market expected.

[Choi Chu Nuk], [Beijing Securities].

Good afternoon. My name is Choi Chu Nuk from Beijing Securities. I find your growth and income very satisfactory and I believe that your net income -- non-interest income performance was quite favorable. And there was some NPL sales or the gains from sale of securities. And if I look at Q1 and Q2 the recurring net income of quarter seems to be stabilizing. Do you believe that this is going to increase going forward and what do you believe is the recurring level of income?

At the same time I believe the Q3 YTD growth rate was 5.6% and if you include Q4 the annual growth rate seems to be quite high. Although it might be too premature, what is your expectation for growth next year?

And regarding margin, because you've done well this year maybe your margin will suffer a little next year. So what is your take on this front? Thank you.

Regarding securities, I appreciate your question. In Q3, concerning sale of securities, there has been some gains in Q3. As you must be aware, one of the big gain was related to Visa card and MasterCard. In the previous quarter we recorded KRW55b and this quarter this figure was KRW59.4b. And also the Bank received KRW60b gain on securities sale. And also this includes a gain on sale of fixed income, which is KRW12b. So this quarter the gain on sale of these securities was KRW120b.

Actually there's not much difference from the previous quarter. There has been a slight drop in the gain on sale of securities this quarter when compared to the previous quarter. The reason that we were able to post better income this quarter was not really related to the gain on sale of securities. The biggest factor was a drop in the loan-loss provisioning.

For your reference, related to Visa card and MasterCard, last year our gain was about KRW123b throughout the year and this year we also sold about KRW100b. Therefore, we don't believe that there is much more to come in Q4.

Then overall, regarding the recurring level of quarterly income -- that is a question that you asked -- I believe that it will range between KRW510b to KRW520b. There has been a slight increase this quarter from the previous quarter because the overall loan growth was stronger this quarter.

Concerning your third question, actually our growth rate is already 6.3%. According to the business plan for this year loan growth rate was targeted at about 4%. The reason that we were able to outgrow our target may be this is something that is very satisfying for us.

Regarding your question concerning our future projection for next year, we are still in the process of planning for the future, planning for next year, so I believe that the growth rate itself could be slightly decreased next year. As soon as we complete our business planning for next year, we will explain about this later on. Thank you.

My name is Chan Young Gyo from finance team. Your question was very difficult. We are currently working hard to develop a business plan for next year. Regarding growth, I don't believe that -- it's not easy to tell you a clear direction for the future, but I believe that we can probably do the same things based on a continuation of the things that we did in the past.

Until 2012, for about three years until 2012, our growth rate was higher than the industry average growth rate because our focus was mainly on SMEs. But if you look at the year 2013 our operations was rather stable. We underperformed the market. Especially in the case of the household loans, especially in the case of mortgage loans, we were not so aggressive. And at the same time we also tried to rebalance our loan portfolio in 2013.

In the case of this year compared to market I believe that our growth is higher and we are trying to develop new markets these days. Next year I believe that our sales power is very stable and macroeconomically I believe that next year's environment will be more favorable to us. Next year given these factors, based on our competencies and capabilities, we would like to strengthen our market position further. This is a trend that we expect to continue next year. Thank you.

Jung Moo, Franklin Templeton.

Yes, I'm Jung Moo from Templeton. I would like to ask you about your strategic direction and I'd like to give you six words -- big data, [Weibo], electronic currency, (inaudible), Google Wallet and Kakao Pay. So these are all in vogue and three to four years ago I believe we didn't know these words at all. They were newly coined and I believe they are highly relevant to finance.

My question is as follows. Business models that include the aforementioned words, do you think that's an invasion of finance industry or do you think it's a move that can lead to convergence with the financial industry? And in this environment in order for Shinhan Financial Group's value to grow what kind of values can you have for cooperation?

I'm Kim Hyung-Jin, in charge of strategy. In the financial industry many things are changing and the development of ICT actually will have a great impact on finance and we are all curious about what it is. In case of Shinhan Financial Group we believe that ICT changes are changing the demands of the customers so the services used by the customers will be influenced by this development.

In particular, for credit card marketing using big data has been a focus for us from early this year. With the establishment of a big data center we are actively accommodating the changes and we had great performance because we changed our marketing methodology. In addition, our existing channels need to nimbly change to the patterns of our customers. And we know that the digital banking is being done at state-of-the-art financial companies so we are doing some research into this. So channel-transformation, TF, team has been established and omni-channels or many different types of channels and products will be ready by next year.

Moreover, for mobile banking and smart banking, the numbers of users are going up. We will actively accommodate these changes and we have smart-banking research lab to actively respond to the changes.

For bank wallet Kakao or Kakao Pay, it's based on the existing Kakao customers, leading to more credit card transaction volume. So we are trying to come up with measures and we are also looking into how to make the security tighter. I believe that in the short term we will not have a big impact, but we need to follow the changes of the customers, of the markets.

And smartphones, after they were launched in Korea in December of 2009, it has been exerting a great influence on different industries and we are well aware of this. So Shinhan was the first to have internet banking, leading to innovative growth, so we will also pay attention to the changes in ICT. Thank you.

I don't believe that there is a question waiting to be answered. With this, we would like to wrap up our Q3 2014 earnings release. I would like to thank you for your active participation. Thank you.

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.