Earnings Call Transcript - KB Q4 2021

Operator, Operator

Greetings. I'm Peter Kweon, the head of IR at KBFG. We will now begin the 2021 Yearly Business Results Presentation. I would like to express my deepest gratitude to everyone for participating today. We have here with us our group CFO and Senior Managing Director, Scott Seo as well as other members from our group management. We will first hear the 2021 major financial highlights from our CFO and Senior Managing Directors Scott Seo and then have a Q&A session. I would like to invite our Senior Managing Director and CFO to deliver our 2021 earnings results.

Scott Seo, CFO

Good afternoon, I am Scott Seo, CFO at KB Financial Group. Thank you all for joining KBFG Q4 and full-year 2021 earnings release presentation. Before presenting on the 2021 business performance, allow me to first run through key highlights. First, 2021 net profit on a controlling share basis was up 28% year-over-year to 4.41 trillion Won, meeting the market consensus. Diluted EPS was KRW10,891, up 25%. ROE was 10.2%, up 1.4 percentage points year-over-year, which is a testament to our increased earnings capacity. In the middle of the COVID pandemic, the Korean economy posted record high export growth last year on the back of global recovery, achieving 4.0% economic growth rates showing a clear sign of recovery. Driven by solid loan growth, interest rate hikes, and a booming stock market, core income, including interest income and commissions, posted growth driving earnings improvement. This earnings improvement, however, is not merely driven by interest income, but an outcome of stronger competitiveness gained from wealth management and investment banking, as well as a better insurance market backdrop and M&A impact from Prudential Life and acquisitions in Cambodia and Indonesia. Also, non-Bank contribution to net profit, which used to be 30% has risen to 43% in 2021. Second point to note is that net profit growth and double-digit ROE were achieved even under the group's conservative provisioning stance which we took voluntarily. The 2021 Group's credit costs were around 30 basis point, 1.5 times the pre-COVID average of the preceding three years. Also, 2021 NPL coverage ratio was 209%, up 62 percentage points versus the pre-COVID level. All this is an outcome of pre-emptive provisioning for 2021 amidst the softening of the asset market experienced in the equities, fixed income, and real estate market on the back of lower liquidity and interest rate hikes, as well as concerns from the market on asset quality regarding household debt levels and government-led COVID-19 forbearance support. Third, during today's Dividend on Demand, FY2021 payout ratio was set at 26% and we were able to bring back the payout ratio to pre-COVID levels after a temporary decline to 20% due to the pandemic. In terms of the Dividend per Share for full year 2021, including interim dividend of 751 per share paid out in August, amounts to KRW1,066 supported by normalization of payout policy and higher net profit DPS was up 66% year-over-year. There was also a decision to cancel KRW150 billion worth of treasury shares, equivalent to 3.4% of 2021 net profit. This decision was part of our commitment to enhance shareholder value amidst the difficulties brought on by the COVID-19 pandemic. We will continue to explore wide-ranging options for a more advanced shareholder return policy and do what we must to raise it to the global standard. Lastly, let me provide an update on our digitalization efforts. Over the course of 2021, to redefine ourselves as a number one financial platform company, we undertook bold strategies. Last year, we launched the new KB Store Banking, a super app and the group's hub platform, the Connect core subsidiaries, including the bank through which we were able to level up platform competitiveness as a comprehensive financial group. In the same vein, we also launched Liiv Next, which is a financial platform for Gen Zs to ensure potential customers for the future. This year, my data service will fully initiate, triggering fiercer competition between financial versus non-financial and big tech versus financial incumbents. Nonetheless, underpinned by valuable information from KBFG's 36 million customers, we will utilize data analytics capabilities, critical content from affiliates, and expert asset management know-how to rise as the number one financial platform in 2022. I will now run through our Q4 and full-year 2021 business results in more detail. Page two, KBFG’s 2021 net profit was KRW 4,409.6 billion on the back of interest income and net fees and commissions income, which are solid core profits growth and through inorganic growth via M&A. There were sizeable year-over-year growth of 27.6% attesting to enhanced earnings capacity of the group. Meanwhile, Q4 net profit was KRW 637.2 billion, a large decline quarter-on-quarter due to ERP expense this quarter, pre-emptive provisioning one-off items, and seasonality. But on a recurring basis, net profit was around KRW1.1 trillion sustaining a robust earnings capacity. As can be seen from the bottom right graph through continuous efforts to improve the business competitiveness of our subsidiaries, the bank, securities, insurance, and credit card sectors have all seen meaningful performance improvements. Non-bank contribution to group net profit has hence expanded to 42.6%. I will now dive into the details of each item. The 2021 Group's net interest income was KRW 11,229.6 billion, up 15.5% year-over-year or around KRW 1.5 trillion, a sizable increase that drove performance improvement. This result is driven by the bank's solid loan growth and NIM improving driving interest income of 11%. The impact of financial life and Cambodian prospective M&A further drove around KRW 500 billion of rise in interest income. Q4 net interest income was KRW2,974.2 billion, up 4.2% quarter-on-quarter, on the back of the bank's loan growth going up 2.2% versus September and continuing the uptrend, as well as NIM improvement of three basis points quarter-on-quarter. Next, the 2021 Group's net fees and commissions income was KRW3,625.6 billion, up 22.5% or KRW667 billion year-over-year. This improvement is due to increases in credit card fee income riding on the recovery of consumption and the bank's trust product sales recovery, which led to better trust income, as well as strong equities market and investment banking competitiveness driving growth in fee income from the securities business. On the other hand, Q4 net fees and commissions income came in at KRW881.7 billion, a marginal quarter-on-quarter decline on the back of seasonal squeeze on fee income from the securities business mainly around brokerage and investment banking. But compared to KRW2 trillion of annual group fees and commissions income in 2021, we notched up that level to the mid KRW3 trillion level, which endorses the group's improved capacity in generating such income. Next is on other operating profit. The Group’s 2021 other operating profit was impacted by rising market rates and currency exchange rates, which squeezed earnings related to securities derivatives and foreign exchange driving other operating balance down KRW183 billion year-over-year. But for the insurance business, with gradual earnings improvement from KB Insurance and the acquisition of Prudential Life making its mark, there was KRW256.7 million improvement year-over-year. Q4 other operating profit was impacted by higher financial market volatilities in terms of interest rates and equities index, which led to erosion of securities trading performance. Also, seasonal factors like cold waves, heavy snowfall, and high-value accidents drove up loss ratios, constraining insurance underwriting income, all leading to a lower quarter-on-quarter result. Regarding our Group's G&A, Q4 Group G&A was KRW7,200.9 billion, up 5.4% or KRW 368 billion year-over-year, mainly due to the acquisition of Prudential Life, the Indonesia spooking bank, and Cambodia's prospects which added approximately KRW 300 billion of expenses. Apart from such M&A impact, G&A was up only 0.8% year-over-year, which we believe is the tangible outcome of COVID-wide efforts on cost management and headcount efficiencies. Q4 G&A was KRW2,143.4 billion on the back of KRW262 billion of ERP expenses and higher promotion expenses, reporting a significant increase. Next is on provision for credit losses. Q4 provision for credit loss was KRW588.6 billion. As part of pre-emptive risk management, a large additional provisioning amounting to three times the usual quarterly size took place up to Q3 of 2021. Due to such one-off impact, there was a KRW389.2 billion rise quarter-on-quarter. To fully prepare for COVID-19 related uncertainties during the fourth quarter, we used conservative economic forecast scenarios reclassifying certain loans related to COVID-19 which led to about KRW 264 billion additional provisioning. As you know, on top of KRW377 billion of pre-emptive provisioning made last year, we've set aside yet additional provisions, which we believe have given us ample buffer against the COVID-19 uncertainties. For the credit card business, in compliance with Basel III revisions, a new Probability of Default model was applied and accordingly, in line with the required upgrade of the retail credit score model, there was additional provisioning of KRW34 billion in Q4. The 2021 total credit loss provisions reported for the full year were KRW1,185.1 billion, with a credit cost of 30 basis points following KRW143.4 billion of FY20 provisioning and a credit cost of 26 basis points. We decided to take a conservative approach to meaningfully provision above the 20 basis point level for two consecutive years. Next is on key financial indicators. Page 3, first is on the Group's profitability. KBFG’s 2021 ROE was 10.22% on solid growth in core earnings and diversified revenue sources, gross earnings fundamentals improved notably with recurring basis sustaining a steady 10% quarterly level since the beginning of the year. Next is the growth in loans denominated in Won. The bank's loans in Won at the end of 2021 stood at KRW390 trillion, marking a 7.9% increase year-to-date and a 2.2% increase compared to the end of September. Additionally, reported loans totaled KRW170 trillion, with growth of 5.1% year-to-date attributed to actual demand. However, this growth slowed in the fourth quarter due to regulatory impacts on household loans. Corporate loans amounted to KRW149 trillion on a year-to-date basis. SME loans continued to show a steady uptrend at approximately 3% on a quarterly basis, while recovery in demand from large corporates and an improved corporate investment banking business led to strong growth in acquisition financing, resulting in an 11.2% increase. Quarter-over-quarter, the corporate bond market faced constraints due to rate hikes, which resulted in rising demand for loans alongside acquisition financing, amounting to around KRW4 trillion in large corporate lending. Next, I will elaborate on the NIM. 2021 Q4 Group and bank NIM each posted 1.85% and 1.61% respectively and continued an expansionary trend for two consecutive quarters. In particular, the bank's NIM reflected the interest rate hikes and while the loan asset replacement took place, as a result of our continued efforts to manage asset profitability and selective loan policy centering on profitability, it improved three basis points quarter-on-quarter. On the other hand, in case of the group and banks 2021 annualized NIM, the spread widened on the back of profitability centered portfolio management and with the effect of lighter funding burden following the core deposit profit growth, it improved by seven basis points year-over-year and contributed to the group's interest income expansion. We will not only thoroughly manage funding costs taking into consideration balloon pricing advancements and market circumstances going forward, but also improve profitability through securities management portfolio advancements and manage the NIM thoroughly. From Q1 of this year, we are expecting the NIM to expand with the full-fledged impact of UK interest rate hikes. Let's go to the next page, page four. First, I want to cover the group cost efficiency. In 2021, the group's cost-to-income ratio posted 49.7% and greatly improved year-over-year on the back of solid earnings increase and improvements in headcount structure. The cost efficiency improvement trend is truly taking place. In particular, when excluding one-offs including ERP and digitalization costs, CIR posted 46.3%, a record low. Going forward, the strengthening profit generation capacity and group-wide cost management, we plan to manage the CIR so that it can approach 40% level in the mid-to-long-term. Next is the credit cost ratio. The 2021 Group credit cost posted 30 basis points and if we exclude the aforementioned size of pre-emptive provisioning effect, it increased slightly year-over-year. But the credit cards excluding non-recurring items posted 21 basis points and have been safely maintaining at the 20 basis point level for the last five years demonstrating industry-leading risk management competencies. Although there are increasing concerns about asset quality amid an interest rate upcycle and impending termination of the COVID-19 forbearance program, we believe that by securing sufficient buffer through additional provisioning, the credit costs will be well managed going forward. Next, I will cover the capital ratio of the group. The 2021 Year-End group CET1 ratio posted 15.78%, tier 1 ratio recorded 14.55%, and CET1 ratio posted 13.46%, all increasing year-over-year, despite the rise of risk-weighted assets following loan growth and increased dividends on the back of strategic capital management, solid profit generation capacity and hybrid bond issuance. We are still maintaining the highest level of capital adequacy in the industry. From this page, I would like to cover the various challenges that the financial industry is facing this year (2022). I would like to cover the market's concerns about various 2022 challenges and elaborate on KB Financial Group's countermeasures. This year, there are concerns that non-interest income, which performed positively last year in a favorable sales environment, including the strong equity market, will weaken due to many reasons, including equity markets slowing down, interest rate hikes, and credit card merchant fee costs. There are also concerns regarding the potential worsening of asset quality along with the possibility of key interest rate hikes and the termination of the COVID-19 forbearance program, which could slow down the earnings momentum. In addition to the growing competition between financial and non-financial firms and the intensification of platform competition among fintechs and big techs, this year will be crucial for financial companies to secure platform competitiveness and market dominance as soon as possible. To confront these challenges, we broke down the 2022 challenges into four key areas: first, concerns about non-interest business deterioration, second, the possibility of asset quality worsening, third, intensifying platform competition, and fourth, full-fledged my-data competition. We are developing countermeasures for each of these areas. First, regarding concerns about weakening non-interest income, I would like to elaborate on KB’s countermeasures for that. 2021 was a year when non-banking business performance was prominent in the overall financial industry. In particular, KB finance was evaluated to have improved its level of non-interest earnings power based on the most diversified business portfolio in the industry. We also expect that we can continue our additional growth momentum this year, as well, with visible results from the group’s four major growth businesses including Wealth Management, Corporate Investment Banking, Capital Markets, and Insurance. In the Wealth Management area, we will expand product sourcing, including ETFs, alternative investments, and overseas investment in asset management services. We will attach channels and products for customer segments and provide differentiated asset management services for high-net-worth clients, as well as non-face-to-face asset management. Additionally, we will connect my-data to expand market share. In Corporate Investment Banking and capital markets, we will expand the group's coverage and revenue sources through new investment, eco-friendly, and future-oriented business investments, enhancing our management capability. In insurance, we will advance the product channel system that expands revenue sources and increase investment in high-yield assets including alternative investments and structured products so that we can improve the profitability of our managed assets. Next, I would like to cover our countermeasures regarding the second challenge, which is related to the possibility of asset quality deterioration. KB Financial Group has proven its high-level risk management capability until now, maintaining a comprehensive delinquency rate and NPL ratio of 0.36% and 0.27% respectively. These ratios are being managed strictly at the lowest level in the industry, with an NPL coverage ratio close to 208.9%, indicating a strong ability to absorb losses. Despite this, 2022 may see credit risk rise with the interest rate hikes and the termination of the COVID-19 forbearance program, and we will do our best to strengthen our asset quality management system in response to the interest rate upcycle. We have defined high-risk sectors and are monitoring them while enhancing our asset quality management for high-exposure borrowers. To respond to the aftermath of COVID, we are tightening credit reviews on volume metrics and executing proper rebalancing based on semi-annual intensive examinations of potential borrowers. We plan to support a soft landing for firms after the termination of the COVID-19 forbearance programs through staged support. Moving forward regarding intensifying platform competition, KB Financial Group is focusing on enhancing our overall capacity to ensure that we can secure strong digital platform competitiveness through the KB STAR banking super app, which strengthens the connectivity of core services and represents a comprehensive asset management platform and digital financial platform built around asset management and settlement markets. We are also working to attract MZ generation users through platforms like Liiv Next, providing asset management and investment insights. Moreover, we plan to lead the platform market in the corporate finance sector. If we can secure seamless connectivity with offline channels and provide the most optimal products and high-quality services from the customer's perspective, we believe that we can secure top-tier competitiveness. Lastly, I would like to go over our countermeasures regarding the my data initiatives, which is a highly discussed topic in the financial industry. With the full rollout of my data in January of this year, the data economy era has begun in earnest. KB Financial Group strategies to provide unique differentiated content based on our financial expertise, linking specialized business services to our group platform, as well as providing hyper-personalized asset management services that reflect our daily activities. In the domain of asset management services, our banking services will offer a comprehensive asset management service based on offline omnichannel strategies, while our securities and card services will provide investment-focused and lifestyle-based asset management services, respectively. Additionally, the health management service will include healthcare and finance, and capital will provide auto financing solutions and auto-related financial content tailored to our various business units. Securing KB unique content competitiveness through this method, we believe that we will have a head start in dominating the my data market and contribute to establishing our top-tier platform competitiveness. In 2022, KB Financial Group is set to respond to these challenges through continuous innovation focusing on our customers. Together we will drive sustainable growth and aim to advance as a leading financial group. From the next page, there are details regarding the earnings results I have mentioned earlier. Please refer to them as needed. I will conclude KB Financial Group's 2021 earnings release presentation. Thank you for listening.

Operator, Operator

We will now begin the Q&A for those of you joining us via the internet. Please refer to the contact info on the very last page of the presentation screen. Please give us a moment as we wait for questions. We will take the question from Mr. Kim Jin Sang from Hyundai Motors Securities. Please go ahead.

Jin-Sang Kim, Analyst

Good afternoon. Thank you for the good results. I would like to ask you two questions. First, relating to capital management in terms of your treasury share cancellation and normalizing your dividend payout ratio. I'd like to express gratitude for your decision and also would like to understand what your direction going forward would be from a mid-term perspective as well as for this year. This year you have already cancelled some of the shares, but I think the size is not that significant. Would you be making some additional share cancellations as we go forward? Also, you've paid out interim dividends. Are you – at the same time considering quarterly dividend payouts? I would like to understand whether that will be your approach and from a progressive payout policy perspective, I know that is the position that you have taken. Could we also expect an increase from your payout ratio? My second question is about the challenges that you mentioned regarding the non-interest earning side. If we break that down, there are the business securities and insurance business. These three businesses already reported a high base. Do you see discrepancies across these different businesses with some subsidiaries performing better visibly this year? We'd like to get some color on that.

Scott Seo, CFO

Thank you very much for that question. Just give us one moment. Thank you for your question. I'd like to say hello and also wish a Happy New Year. I will answer the question on capital management and then the second part of the question regarding our commissions income and overall operational backdrop. To respond to that, I will invite our CFO from KB Bank and Managing Director of KB Securities, as well as Senior EVP from KB Insurance. Let me first talk about our capital management. There’s DPS, payout ratio, and third, share buyback. Based on our strong fundamentals and our capital strength, we want to adopt a more advanced shareholder return policy. For the past two years, due to the COVID-19 crisis, dividend payout had been capped. We want to quickly normalize that to the 30% level. KB has a sufficient capital buffer, and we believe that we have the capability to pay out to that level. We need to continue to grow our earnings to ensure DPS continues to trend upwards. We also have a very conservative policy regarding provisioning, so we expect that DPS will also rise as we go forward. Another important aspect is the interim dividend. We are considering many options to further boost our total shareholder return levels. We have not yet made a firm decision on share buyback or cancellation, but that is always an option we are open to, including quarterly dividends. We are fully benchmarking against global advanced financial institutions and will listen to feedback from shareholders to develop a more shareholder-friendly policy.

Unidentified Company Representative, CFO of KB Bank

As we are only at the beginning of the year, considering there are many different variables, I would like to take a cautious view in responding to this question. In terms of interest income or NIM income, we anticipate about 7 to 8 basis points growth and loan market growth of 5% to 6% we think it is achievable. On the non-interest income side, considering the current volatilities of the financial market, there may be difficulties; however, we are growing our flow business and anticipate the growth of our investment banking business, hence expect our non-interest earnings power to continue to build. Hello, I am from KB Securities. You are probably aware of the current stock market situation. Putting that aside, in terms of trading volume, it has decreased by about 20% compared to the previous year, so we expect brokerage income to decline to a certain extent. However, as you know, KB Securities was one of the main arrangers for the LG Energy Solution IPO, and we expect our participation in more significant deals this year. Additionally, we are actively participating in global acquisition financing and consistently experience growth. Although we anticipate decline in wealth management, we expect to compensate for that in other business areas. Regarding interest on the bond side, we are taking a position to protect ourselves against the decline in equities. Good afternoon, I’m from KB Insurance. First, looking at the overall insurance market, there are pros and cons. The medical indemnity loss ratio is extensive and will take time to fully normalize. As we enter the so-called risk COVID phase, we expect the auto loss ratio to aggravate. Having said that, looking at 2021, if you look at our profitability breakdown, our P&C insurance has improved in both investment yields and underwriting income. In 2022, we expect steady levels of profitability from our underwriting profit, which is driven by improving key performance indicators including loss ratios. Good afternoon, I am from KB Credit Card. This year, after the merchant fee reduction in 2019, we expect a similar level of cuts in merchant fees. We aim to minimize the impact from that. Our strategy includes securing key competitiveness in our core businesses while focusing on building both profitability and revenue growth. We will grow based on our credit card numbers and increase our income accordingly. In the payment business, we will avoid excessive marketing that does not generate profit, and in terms of financial business, we plan to improve our credit scoring model to adapt to the regulatory environment and to expand our revenue sources.

Operator, Operator

Thank you for the detailed answers. We will move on to the next question from Samsung Securities, Mr. Kim Jaewoo.

Jaewoo Kim, Analyst

I'm Kim Jaewoo from Samsung Securities. Thank you for your question. My first question is about your digital transformation. I know that you have new scar banking and other impressive initiatives, and what I'm curious about is the current competition landscape and your goals for MAU. More importantly, time is significant when it comes to using the app. How are you planning to increase the time users spend on it? Could you elaborate on the merits of your platform and why customers should use it? Lastly, there's been considerable discussion in the news regarding data quality, particularly concerning loans. What are your thoughts on this, especially regarding shareholder perception compared to the past? Furthermore, can you provide insights into your capacity to manage risks if issues arise, considering that security has also increased?

Unidentified Company Representative, Senior Managing Director of KB Financial Group

Thank you very much for your questions, Mr. Kim Jaewoo. We will address them in two parts. Firstly, for the digital questions, I will invite our senior managing director from KB Financial Group to answer you. Secondly, for asset quality and risk management concerns, our risk head of KB Financial Group will provide you with a response. Regarding your questions about the mobile banking app, we anticipate achieving an MAU of around 7 million, and for our financial platform to be recognized, we need to exceed 10 million MAU. Our ambitious goal for the KB Star Banking Super App is to achieve 15 million MAU. After its revamp, we reached an MAU of up to 9 million. By focusing on enhancing our product structure and targeted marketing strategies for our existing customer base of 24 million, we believe we can achieve our target. Additionally, improving the time users spend in the app is crucial. To enhance this, we established a digital content center that belongs to both our banking and financial groups. Improving our assets in conjunction with the financial services will attract more customers to our app. I am in charge of risk at KB Financial Group. Regarding concerns surrounding loans and vulnerability, I would like to explain our stance. The delinquency rate for corporate SOHO loans is 16bps, and they have 93% security. The retail delinquency rate is about 19bps, similarly backed by a strong collateral rate. We believe that we will not see accumulating risk or additional losses for SOHO loans because the collateralization rate is very high. Even if the situation deteriorates, we have strong security backing, which allows us to manage risk effectively.

Operator, Operator

Thank you for that answer. We will move on to take the next question from Hanwha Investment Securities, Do Ha Kim.

Do Ha Kim, Analyst

Hello, I am Do Ha Kim from Hanwha Investment Securities. I have one question regarding the banks' margin and another question related to Prudential Life. Last year in Q1, your margin uptrend was quite steep, but in Q2 and Q3, the increase was not as fast compared to your peers. If that is due to cyclical differences, for this year, a margin improvement of 7bps to 8bps is your target, but when do you expect to see this reflected in actual numbers across different quarters? Regarding Prudential Life, considering its exposure to variable factors, can you provide more details regarding the variable exposure at Prudential Life?

Unidentified Company Representative, Risk Head of KB Financial Group

Regarding the margin, the net interest margin is expected to grow by 7 to 8 basis points. Should there be an expedited policy rate hike, we believe net interest margins have the potential to increase even further. As for Prudential Life, we will follow up with more specifics through our investor relations team after the call. Regarding the anticipated improvement in interest rates, we will adopt flexible strategies for variable and mixed interest rates to ensure we secure appropriate margin levels as we expand our loan portfolio while keeping a close eye on rate trends. Thank you for your queries. Regarding the credit card business, we can minimize the impact of the merchant fee reduction. We focus on building both profitability and top-line growth through our credit card issued numbers. We aim to integrate slight credit expansion while maintaining profitability and growing overall revenues.

Operator, Operator

Thank you for the informative discussions. We will move on to the next question from Citi Securities, Yafei Tian.

Yafei Tian, Analyst

Hi, thank you for taking my questions. I have two quick inquiries. The first one is on buybacks. The second question concerns the IP expenses. Can you elaborate on your technology spending?

Unidentified Company Representative, CFO of KB Financial Group

Regarding buybacks, as previously mentioned, share buyback is a consistent option we consider depending on market circumstances. We aim to normalize the payout ratio while exploring buybacks to boost shareholder returns. Regarding IP and technology expenditures, while we are prepared for substantial investments for sustainable growth, we prefer to maintain a conservative approach towards G&A spending, with trends of anticipated top-line growth driving our decisions.

Operator, Operator

Thank you for your response. This will be our final question from JPMorgan. We have someone on the line.

Unidentified Analyst, Analyst

Thank you for the opportunity. I have a simple question regarding your provisioning for this quarter. It seems that you were quite conservative, and I thought that they were sufficiently reflected in your macro view. Can you elaborate on your extent of conservativeness and break down your assumptions regarding macroeconomic parameters, the COVID-19 forbearance program, and your provisioning strategy?

Unidentified Company Representative, CFO of KB Financial Group

I will provide an overview and then our risk head will give more detail. During my presentation, I mentioned that before the outbreak of COVID-19, our average credit cost was 21bps, and it was 30bps for the preceding year. In 2021, the level was maintained at 30bps as well. We are ensuring to enhance shareholder value. We focus on higher earnings and consistent returns. For 2022, we have planned to stick to a conservative and pre-emptive provisioning approach. For FLC and provisioning strategies, our approach has focused on pre-emptive and conservative measures. We aim to manage solvency rigorously while being mindful of lingering risks. We plan to maintain a conservative stance towards provisioning, considering historical financial crises and potential macroeconomic downturns.

Operator, Operator

Thank you. We do not see any further questions waiting in the queue. Just give us one moment before we close. I see that there are no additional questions raised. This brings us to the end of KBFG’s earnings release. Thank you.