Shinhan Financial Group Co Ltd (SHG) 2014 Q4 法說會逐字稿

Greetings, everyone. I am Yu Sung Hun and I'm in charge of IR. I would like to thank you for participating in the 2014 earnings conference call despite your busy schedules. And we will now begin the 2014 Q4 earnings report.

Today we have here with us Deputy President Kim Hyung-Jin, who is in charge of strategy; our CFO, Min Jung Kee; and our SEVP, Jeon Young-Kyo, who is in charge of finance.

We will first open up the conference call with the 2014 yearly earnings presentation from our CFO, Min Jung Kee. And after the presentation we will be taking questions.

CFO Min will now deliver 2014 business performance presentation.

Greetings, everyone. I am Min Jung Kee, the CFO. First of all I would like to thank you for attending our Shinhan Financial Group 2014 earnings conference call. Investors, analysts and journalists in and out of Korea, thank you very much. Now I would like to walk you through the 2014 earnings presentation and its main highlights.

Please turn to page 6, which covers the Group's income. Shinhan Financial Group's 2014 yearly net income recorded KRW2,081b and Q4 net income posted KRW313.1b. What is noteworthy regarding 2014 performance is that despite the downward margin trend caused by the low interest rate environment, interest income went up following steady loan growth. Provisioning also continued the decrease thanks to stable asset quality management, leading to a 9.6% Group net income increase Y on Y.

Regarding the P&L, despite the Group NIM contraction with the yearly 8.8% growth in bank won loan and the increase of Shinhan Financial investment assets, Group's interest income grew 2.8% Y on Y and 1.2% Q on Q respectively.

In the non-interest income side there was 9.2% -- 9.6% decline Y on Y. This was due to the removal of the National Happiness Fund debt sales effect as well as the settlement cost related to the distribution of disposal gains from real estate investment trust.

To elaborate, real estate disposition gains from the Group's consolidated real estate investment trust posted KRW110.5b in total in Q4 and the Group recognized this as non-operating gains. However, since the KRW77.4b of settlement cost in order to distribute the gain to the external investment shares was recognized as operating cost, it had a downward impact on the non-interest income.

Q on Q there was a drop in the gain from the sales of AFS or available-for-sale securities, as well as impairment losses from Taihan Wire as well as the real estate investment trust disposal gain settlement cost, which led to non-interest income dropping 71.7%.

G&A, despite the Group's overall cost-cutting efforts, with one-off costs factors including year-end ERP program, late last year increase in welfare cost as well as seasonal G&A increase went up 6.2% Y on Y, 26.6% Q on Q respectively.

Provision for credit losses due to stable growth and preemptive risk management dropped 19.8% Y on Y. Group's yearly credit cost ratio maintained a 43bp level, a 16bp decline compared to 59bp last year, recording the lowest credit cost ratio ever.

Let's now move on to page 7, Group income. Taking into consideration the profit contribution of the bank and non-bank, net income recorded KRW1,464b and KRW923.7b respectively for the bank and non-bank. The non-bank profit contribution, thanks to the net income recovery of non-banking Group subsidiaries, reached 39%, a slight increase Y on Y.

Next, page 8. Group subsidiaries 2014 performance. Bank income, with the improvement in Shinhan Bank's performance, went up 5.6% Y on Y. Non-banking, also with the discontinuation of the National Happiness Fund debt sales effect, witnessed a slight drop in Shinhan Card income. However, with the income recovery of non-banking Group companies, including Investment Securities, Life Insurance and Savings Bank, there was a 7.7% increase Y on Y.

Bank income, with decline in non-interest income and voluntary ERP leading to a higher G&A cost, went down 55.5% Q on Q. Non-banking, with reduction in credit card securities disposal gains, declining gains from prop trading, G&A increase as well as life insurances increase in provisioning for policy reserve, posted a 30.3% drop in income.

Next, page 9. Shinhan Bank's performance. Shinhan Bank's 2014 net income posted KRW1,455.2b, a 6% increase Y on Y. Despite the increase in G&A, including the increase of ERP cost, credit cost went down 38.2% along with the improvement of interest income. For your reference, Bank's 2014 yearly credit cost ratio was at the 25bp level, which is a 18bp drop compared to 43bp of the previous year.

In Q4, with the drop of AFS disposition gains as well as the ERP, net income fell 57.4% Q on Q. Bank NIM in Q4 posted 1.67%. With the fall of the market interest rate following the BOK rate cut, NIM went down 9bp Q on Q. For your reference, Shinhan Bank's NIM had 3 to 4bp drop sensitivity when the BOK base rate is cut 25bp on a yearly basis. We will do our best so that the margin drop is minimized by a more efficient funding cost management and continued appropriate loan growth.

Page 10, Shinhan Bank's non-interest income and G&A. Shinhan Bank's non-interest income in 2014 was maintained at a similar level to the previous year, posting KRW804.5b. Fees and commission revenue increase, including trust and decrease of commission expenses, led to 7.2% Y-on-Y increase of fees and commission income. However, with the decrease in AFS securities disposition gain, overall non-interest income stopped at 0.5%. Non-interest income went down 59.3% Q on Q. It was due to nearly no AFS securities disposal in Q4 and KRW73.2b of impairment losses from Taihan Wire.

Let's go to G&A. Shinhan Bank's G&A went up 8.4% Y on Y, 35.7% Q on Q respectively. Main factors were year-end large-scale ERP program leading to KRW106.2b one-off cost, as well as seasonal G&A increase, including increase in employee welfare cost. CIR, following the increase in G&A cost, increased 2.9 percent points and 4.1 percent points respectively compared to last year end for the Group and the Bank. However, excluding one-off costs, CIR is still maintained at the previous year's level. In 2015 we will more stably manage G&A through organizational structure innovation and work process efficiency from a mid- to longer-term perspective.

Let's go to page 11, Shinhan Card income. Shinhan Card 2014 net income recorded KRW635.2b, which might seem like a 3.5% drop Y on Y, but excluding the KRW68.4b of National Happiness Fund debt disposal gains of the previous year, credit card recurring net income slightly increased compared to the previous year. Looking at the breakdown, credit card-related gains went up slightly Y on Y due to increasing credit card and debit card transaction volume, but instalment finance and lease profit contracted due to price decline.

With the decline in funding interest rate, interest expense went down 10.5% Y on Y. Gain from collection from written-off assets dropped and conservative credit card provisioning credit card went up 19% Y on Y. Q4 Shinhan Card net income went down 33% Q on Q because AFS securities disposal gains declined and because of year-end seasonal G&A increase. In the case of written-off assets 2014 year end, the balance recorded KRW3,500b and the yearly recovery ratio is being maintained at a 6.3% level.

Let's go to page 13, Group assets. As of 2014 year end, Group total assets recorded KRW407 trillion, a 9.5% increase compared to last year end. Shinhan Bank's loan assets continuously grew, leading to Bank's 8.6% asset growth. Shinhan Financial Investment and Shinhan Life Insurance's assets under management continuously grew, resulting in 12.4% growth of non-bank Group assets.

Now page 14. Shinhan Bank's loans in won recorded approximately KRW160 trillion at year end, growing 8.8% Y on Y. The loan growth in 2014 was characterized by even growth throughout the year, posting about 2% every quarter. Another trend was the balanced growth of retail loans and corporate loans, enabled by growth recovery of retail loans in the second half.

Mortgage loans after deregulation in August grew in demand, leading to further growth. Backed by continuous growth in (inaudible) loans and unsecured-type loans for high-creditworthy individuals, total retail loans grew 9.4% Y on Y. Regarding SME loans, SOHO loans and non-audited SME loans were up 8.8% and large corporate loans were up 7%, posting an 8.3% growth for the total corporate loan.

Moderate recovery of Korean and the world economies is expected in 2015. The Financial Group shall stay away from excessive market competition but implement differentiated marketing strategies to achieve optimum growth.

2014 year-end deposits in won posted KRW163 trillion, growing 8.5% Y on Y. Time savings deposits grew by 3.6%, whereas low-cost deposits grew 17.7% during the year. This was due to growth in debit card volume and the number of credit card merchant settlement accounts, as well as attracting new stable funds from public institutions, all in all showing an even growth throughout the customer segments. 2014 year-end LDR posted 98%.

Page 15, Shinhan Card's funding and lending. Shinhan Card's year-end earning assets rose 40 -- 4.7% Y on Y to KRW20.6 trillion. As you can see on the upper left-hand side, Shinhan Card's transaction volume grew 4% Y on Y to KRW141.3 trillion despite slow pickup in private consumption. Debit card sales volume grew 26.3% Y on Y due to government's policies encouraging the use of debit card, and its portion out of the total card transaction volume increased to 13.7%. Credit card transaction volume also steadily increased, marking a 2.9% growth. Following last year, we expect to see this year increasing debit card transactions and a shrinking cash advance market.

SFG will utilize big data analytics to develop differentiated products and fortify marketing capabilities so that we may capture the customer demand in the card market.

Page 17, Group asset quality. Group's NPL ratio posted a very stable 1.15% at year end, having fallen 0.11 percentage points Y on Y and 0.04 percentage points Q on Q. Even though total loans increased 8.8% Y on Y, NPL decreased due to continuous risk management. Group's NPL coverage ratio was up 5 percentage points Y on Y to 168%.

Page 18. Shinhan Bank's year-end NPL ratio posted 1.03%, down 0.13 percentage points Y on Y and 0.04 percentage points Q on Q. The total amount of write-offs and NPL sales in 2014 was reduced to KRW1.1 trillion, down 30% from the previous year's KRW1.6 trillion, clearly showing improved Bank's asset quality. As you can see on the bottom left-hand side, Shinhan Bank delinquency ratio posted 0.31%, down 0.08 percentage points from previous year's 0.39%.

Page 19. Shinhan Card's year-end NPL ratio stood at 1.67%, up by 0.14 percentage points Y on Y, but down by 0.05 percentage points Q on Q. The NPL ratio for the card had temporarily spiked in Q1 and since then is steadily stabilizing. The NPL coverage ratio recorded 300%, similar to the previous quarter. The card's year-end delinquency ratio posted 1.89%, maintaining a fair level.

Page 20, credit costs and write-offs. As shown on the second graph from the left, the Group's credit cost ratio posted 43bp, a 16bp drop compared to last year's 59bp. Thanks to the Bank's decline of credit cost, Shinhan Card's credit cost grew over the year due to decrease of gains from collection of written-off debt, decrease of unused credit written back to credit loss provision and upward adjustment of credit cost, reflecting falling debt collection rates. We expect the recurring credit cost ratio to stabilize at the current level. The Group's write-off and NPL sales posted KRW1.6 trillion, down KRW700b from previous year's KRW2.3 trillion.

Page 22, capital adequacy. The BIS ratios for the Group and the Bank were 13% and 15.5% respectively, having fallen 0.4 percentage points and 0.8 percentage points each Y on Y. Even though risk-weighted assets increased due to loan growth, year-end dividend had an effect of reducing shareholders' equity. Shinhan Card's capital adequacy ratio stood at 29.7%, maintaining healthy capital adequacy.

And for your reference, the Group's cash dividend on common stock for FY 2014 was determined at KRW951 at BOD meeting, and the payout ratio is expected to rise to 21.6%. The resolution was passed with the rational level of cash reserves in mind. Going forward, we will continue to pay close attention to shareholders' expectation and government policy direction. In so doing, we will implement consistent dividend policies within the range of qualifying capital adequacy ratio to enhance capital efficiency.

Please refer to the remainder of the presentation material for additional information on the subsidiaries, major business indicators and Shinhan Bank's SME loans.

This concludes the presentation on Shinhan Financial Group's 2014 earnings. Thank you.

And now we are ready to take your questions.

(Operator Instructions).

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We hope to serve you better. Thank you.

Koo Kyunghwe, Hyundai Securities.

I am Koo Kyunghwe from Hyundai Securities. I know this may be a detailed question and it may not be fit for the first question. I have two questions. One is about the real estate. In Q4 the operating income was not recognized. And will this happen in the next year, in Q4, or was this a one-time factor?

And the second question is about the ERP. So there was about KRW100b of expense for ERP. The demographics of the Bank staff are getting older and older and the ERP expense I don't think is a one-time factor. I think it's an incurring cost. So I know it's going to be very difficult to estimate the expense going forward, but do you expect such ERP expense to occur every year? Or are you -- or are we to believe that this is a one-time factor? Thank you.

The first question was about the real estate investment trust. In Q4 we had this event and it was because of accounting issues. We had non-operational gains increasing because of the recognition. It is because real estate investment was sold to an overseas fund. And this will probably not occur in such a big scale in Q4 of 2015.

For your reference, regarding real estate trust, in Q4 we had KRW100b of non-operating gains. But for the other investors we had the profit distribution. And this was taken out of our non-interest expenses. So it was about KRW700b -- KRW70b actually. So we had KRW33.1b for our Group. So regarding the first question, this is just a one-off and this will not occur often in our Bank -- in our Group.

And regarding ERP, to elaborate, last year, in the case of Shinhan Bank, we had 166 employees in the ERP program and this amounted to KRW56.1b this year. When we just look at the Bank, we had 314 people who had the ERP program participation, and this exceeded KRW100b, about KRW103.2b of expenses.

Regarding the ERP, as was mentioned, this is done each year. But the scale or the volume will -- we need to take into consideration the year's performance and this is not planned strictly early on in the year. And we take into account the supply and demand of our employees, so it is very difficult to give you a prediction of how the ERP will play out for this year.

Additionally, it's not only Shinhan Bank that has the ERP program. Other Group subsidiaries, Credit Card, Life Insurance, Securities and including Jeju Bank, we have ERP program throughout the Group.

We will need to look at the level of Group subsidiary ERPs as well. So it's very difficult to give you a figure of this year's predicted ERP expenses. For your information, for the Bank it was exceeding KRW100b for ERP. But when we include the Group subsidiaries, we believe that in 2014, related to ERP, we had KRW120b.

Lee Byung-Gun, Dongbu Securities.

Good afternoon. I am from Dongbu Securities, Byung-Gun. I have two questions. One is about the dividend policy. You mentioned that you are going to satisfy the BIS ratio and pay out dividends. And yes, you did try, so the payout ratio came out 21.6%. And I'm sure you want to meet the regulations. And if you have your plans for loan growth, I think there is room for increasing your dividend. And I was wondering what type of capital adequacy ratio you're looking at and how high can the payout ratio go?

And the second question is about NIM. There were base rate cuts and the bond market is also confused. And there is a mismatch of long-term and short-term rates and the Bank's NIM. How will it be affected by another base rate cut by the BOK?

And as for Life Insurance, I think it's time that its earnings were spread. But I was wondering what the spread is and how do you -- at what level do you manage to maintain the NIM at Shinhan Life Insurance.

I am Jeon Young-Kyo. I am going to answer your question about dividend and the capital adequacy ratio. We are a financial institution and when we decide on our dividend policies, we have to look at the capital ratio. In mid to long term, about looking at five years ahead, the BIS ratio 14% and common tier 12%, that's our target. Tier 1 is about 12%. And the US is talking of tapering. And because of these factors, the uncertainty in the financial market may go up and we have to prepared for the shock.

And it was our will and it was the government's efforts to boost the market. So we had come up with the payout ratio of 21%. And we believe it's desirable to maintain our payout ratio at that level.

And secondly about the NIM. In Q4 the NIM went down much more so than our expectation. And the biggest reason is because of the base rate cut. And at the same time, the market rates also fell more because of the market sentiment and the NIM was lower than expectation. And to add to that, the mortgage loans carry lower margins and that increased in Q4. So because of that, the NIM fell.

The Bank's NIM falls by a lot in Q1. And after that, the funding effect rate kicks in so the NIM improves. So annually the NIM does not fall as much. And internally we are increasing the portion of low-cost deposits and restructuring the portfolios. So we are going to minimize the fall of NIM.

And as for the Life Insurance, the secondary income is not going to improve in the near future. It is also affected by the base rate cut and the long-term rate may decrease and the scenario will evolve. In 2014 we tried to make up with it with the disposition of AFS securities, but we don't know what the future holds for Life Insurance. We want to maintain the status quo. Thank you.

[Shin-Joo Sun], Samsung Asset Management.

Yes. I'm Shin-Joo Sun of Samsung Asset Management. I have several questions. First question is about the one-off Q4 factors.

And secondly, compared to 2014, I would like to know your business plan for 2015 and [growth] margin and provisioning.

Next, it seems that downward pressure will continue in mortgage. So I'm curious about your forecast and how you're going to deal with this downward pressure. Thank you.

In Q4 there were some seasonal factors, so let me elaborate. In Q4, on a recurring basis, our net income had some seasonal factors, such as G&A. And when we consider that, it's about KRW490b for Q4. And our year end is KRW313.1b. So there we have a difference of KRW180b.

What made the difference was -- one of the biggest factors was G&A. And regarding this, we had some seasonal factors. First, ERP expenses, about KRW120b for the Group overall. Secondly, our fees and commissions. We had some increase in this area. For example, our advertisement costs, KRW32.5b of increase. In credit card we also had a one-off factor. We had IC terminal replacement, which was about KRW19.5b. These were the biggest contributors to G&A increase.

Regarding provisioning, we had some write-backs and provisioning. And when we add it up together, write-back-wise it was about KRW28.1b pre tax. And one of the biggest factors in that was Kumho Group is going to soon graduate from a work-out. And regarding Kumho Tire, we had KRW31.4b of write-back for non-interest income and losses for our securities. We had some impairment losses from Taihan Wire, which was KRW73.2b. And we had, on a positive note, we had security disposal gains because Master and Visa card-related security disposal gains had been KRW38.3b.

So taking all of these factors into consideration, for our non-interest income we had these one-off factors. Overall we had some seasonal one-off factors. And in Q4 it seems that G&A led to the greater differences.

Next, regarding our business plan for 2015. Actually for 2015 it's very difficult for me to give you some numbers, but just to talk to you about our strategy for growth, last year we grew actually higher than the market. And we believe that this will be maintained to a certain extent in 2015, but the scope will not be as high in 2015.

How we are going to grow? Well that will depend on the trends. And in 2013 we underperformed compared to the market. It was because of securitization and other parts, but we wanted to review our risk related to growth. Fortunately we did not have major issues after that so we had a basis for firm growth.

So seeing the breakdown for the sectors, for the large corporations, it will be volatile. But we don't think that we will have much growth. We are focusing on high-creditworthy individuals, credit loans. And for the unregistered SMEs, we believe they will be our focal point and there will be some over-performance in those markets.

BOK rate cut impact, well, it seems that 7 to 8bp maybe, but we have higher- or lower-cost deposits so we think that it will probably work for us. And I mentioned that Q4 margin was lower than expected. It is because, with the BOK rate cut, we had the higher market rate cut. So it was reflected earlier on. So even if we had BOK 25bp cut, we believe that the decline will be not as steep.

Lastly, in 2015 -- well, in 2014 we had the lowest and -- credit cost ratio, so we believe that this will continue.

There were -- we don't have many large-scale NPL possibilities. And we have had a loan policy that was smaller in size and more dispersed, following the government policy so we have lower risk. And because of interest rate low environment, we don't think that the companies will also have much -- many problems.

There are no questions on queue so please stand by.

I have an additional comment to make. As for the competition in the mortgage loan sector, yes, the numbers show that the mortgage loans are on the increase, but I don't think this is going to continue. In 2015 I think this is going to slow down. Of the mortgage loans, not collected, but the loans given out at the kiosk, at the teller's desk, I -- we are going to increase that portion and we are going to move towards securitization of the mortgage loans.

And in relation to the government policies, the 2.8% fixed-rate loans are just on the drawing board and there's no specific execution. And I cannot say anything more concrete about that. But I believe that the mortgage loans will not increase as much as was done in Q4. And we're going to increase the portion sold at the teller's kiosk.

Kyobo Securities, Mr. Hwang Seok-Kyu.

Yes. I am Hwang Seok-Kyu from Kyobo Securities. I have two questions. First, regarding the funding, it seems that there will be, in 2016, some changes. And I'm sure that the commercial banks will be ready for this change. And I'm curious about some competition and about the account-moving system. So I'm curious about the funding environment forecast for you. And what is your strategy for this change?

Secondly, this year FinTech seems to be the buzzword for the financial market. The government has come up with some FinTech-related policy directions. And how are you going to respond? How do you think this is going to impact the financial industry? Well, this is a very broad question, but I just want to know what your thoughts are for FinTech.

Well let me first answer your question about FinTech. Recently, FinTech market, based on global IT companies, is expanding its services, in particular settlement and payment, easy payment of money is going to a lot of Internet banks. So it's actually expanding its scope to acting as agents.

In our case, FinTech is not popular yet in Korea. But in other countries, such as China, we see cases of FinTech gaining more popularity and becoming more widespread. Korea will need to wait and see about how we will deregulate and how we will have developments in ICT. Alipay in China or Apple Pay in the US is taking a lot of the transactions for -- these transactions, AliFinance and other companies, [MMN]. These market trends will need to be closely studied.

There are some companies or banks, Jibun Bank, Sony Bank in Japan, or in Australia UBank and in France Hello bank. These types of banks have sprouted up and GE Bank or BMW Bank, many different Internet banks are sprouting up and they're trying to expand their platform and their ecosystem.

We are fully aware of this global trend. And in the case of Shinhan, from three years ago in Shinhan Data Systems, which is our subsidiary, we have a smart ICT lab. And we have 50 people that are working hard to prepare for smart banking. Shinhan Bank and the holding company is also holding of FinTech working group and we have a taskforce team to respond to FinTech.

FinTech companies and IT companies and online transaction and settlement companies and deposit and loan industries, it seems that all will be converged together. Shinhan, in July of 1999, was the first to have Internet banking, revolutionizing the Korean banking industry. So we will need to have some policies or social issues resolved. But still we will be the leader and we will come up with a response to FinTech that befits the Shinhan status.

On the Internet, Bank, Credit Card and Life Insurance we have a vast array of Group portfolio. So we will try our best to come up with the most beneficial way to provide a variety of products to our users.

Yes. About funding and about the account switching system and how we are preparing for that, it's all about how we can have customer loyalty. And we are not going to approach this phase by phase; we need a long-term plan. Starting from the year before, we have been increasing the portion of low-cost deposits, such as payroll accounts. And we have the credit card merchant accounts. And we wanted the consumers to use these accounts as their main accounts.

And as for the low-cost deposit growth rate, in 2014 it recorded a growth rate of 17.7%. And in 2013 it recorded a growth rate of 11.9%. So two years in a row, low-cost deposit customer base is increasing, low-cost deposit customers is increasing. And last year, as for the payroll accounts, we have added KRW1 trillion more. And as for the merchant accounts, we have added newly KRW400b. So we are increasing the customer base and that's how we are preparing for the account switching system.

And it should not be only the Bank's efforts, but the Card, Life Insurance, Investment Corp. We need to collaborate together to create a synergy effect. And we need to develop products to meet the customers' demand and that is what we are doing at the moment.

Lee Byung-Gun, Dongbu Securities.

Well I would like to ask one more question. You mentioned in your answer to mortgage loan about securitization of part. And you mentioned that it's more profitable to give mortgage loans at the teller's kiosk. And for the new mortgages, can you give us a current status? And in December compared to November, I think there has been a slight improvement at least. So if this happens, do you think securitization is better?

I'm asking you this because in Q3 and Q4 of last year you had the increase of conforming loans fell. And among all the banks, you were the most conservative. So it seems that you are going to focus more on creditworthy individuals. And I'm curious about your -- added to the [total] conforming loans and if they have become different and your thoughts about the margin.

Well I will give you more detailed information about the margin later on. Regrettably not now. But it seems that the margin is being squeezed a bit.

Regarding the conforming loans and our view, the government's current policy is probably why you're asking this question. I think that soon there will be some confirmation by -- made by the government about the details.

Regarding the profit, we have had more stable loans. And it seems that it will eat into our -- some of our profits. But we can't really measure, but we think that the potential risks will go down. Later on this week, when there are confirmed plans announced by the government, we can let you know about our view.

Michael Na, Nomura Finance Investment.

I am Na from Nomura. I have two questions. You said that the low-cost deposits grew 7 -- 17.7% Y on Y. And how do you explain the growth, because this is a huge growth? Is it just a fund that is parked temporarily and will it exit?

And as for the expectation on the G&A expenses in 2015.

Yes. We looked at the profile of the low-cost deposits and the highest share was, yes, some of the funds are parked temporarily. And we had an increase of KRW6 trillion and that was the highest growth ever in the Bank's history. We see it from institutional consumers and we have the wealth management, high net worth PB customers. And what is also encouraging is that, to enhance the convenience of settlement and through cross-sale of the subsidiaries, we have more of these accounts used as payroll accounts and merchants. And we see the growth coming from that in 10%.

Yes, so some of these low-cost deposits are funds parked temporarily, but others are more consistent and long-term.

And as for the SG&A expectations in 2015, in 2014, yes, the SG&A grew by 6%. And I guess this was higher than your expectation. And I guess you're concerned about the next year's SG&A. And as was mentioned, we had the seasonal factors of ERP and the credit card IC terminal replacement. So if we take out these one-offs, the annual SG&A grew about 3.6%, 3.7%. So in 2015, of course we will continue to have ERP expenses, but it's too early in the year to come up with a figure. We believe that SG&A will probably grow at a 3% level on a recurring basis in 2015.

And for the last three years we have been exerting cost-cutting efforts. And we are cutting down on costs that can be cut. And as for ERP, for wages and those expenses, there is room for improvement. So we do not believe that the SG&A will grow in 2015 to the extent that it did in 2014. Thank you very much.

If there are no other questions, then we would like to conclude the 2014 earnings conference for Shinhan Financial Group. Thank you very much for participating despite your busy schedule. Thank you once again.

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.