KB Financial Group Inc

I am Peter Kwon, the head of IR at KBFG. We will now begin the 2022 annual 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 SEVP, Scott Y. H. Tso, as well as other members from our group management. We will first hear the 2022 annual major financial highlights from our CFO and SEVP, and then have a Q&A session. I would like to invite our SEVP and CFOs to deliver 2022 annual earnings results.

Good afternoon. I'm Scott Y. H. Saul, CFO of KBFG. Thank you for joining the company's annual 2022 earnings presentation. Before looking at the details of the income statement, I will briefly run through the highlights of business performance and key indicators of the group. KBFG's FY22 net profit was $4,413.3 billion flat year-over-year, but has underperformed market expectations or the consensus estimates of the analysts. EPS for 22 was 11,021, down 1.2% year-over-year, and ROE on common stock basis was 9.9%. As a CFO, it's regretful to have to announce results that fall short of expectations of shareholders and investors. The biggest reason why we fell short of market expectations in 22 net profit is due to preemptive provisioning based on conservative SLC, forward-looking criteria. For three years up to 22, with the outbreak and spread of COVID-19 and living with COVID-19, Experiences which no one expected drove sense of instability and brought uncertainties to global economy and the financial markets, which heightened concerns. We expect macro uncertainties to grow this year globally, and the signals for recession in the domestic economy across consumption, investment, and exports are becoming more visible, building on the concern over rise in delinquency ratio and NPL ratios. At KBFG, to thoroughly prepare against such event, we adopted a more conservative FLC, future forward-looking criteria versus previous years. Preemptive provisions for domestic operations in 22 reflecting conservative FLC was $242 billion, up more than 30% year-over-year. This is to secure ample room if and when credit risks heighten. Next, provisions for overseas banks who we acquired that we set aside in Q4 on a consolidated basis was $570 billion and it was $382 billion on an equity holding basis. Although local supervisors continue to operate COVID-19 related forbearance program to prepare for possible deterioration once the program ends, KBFG decided to provision preemptively based on our own credit assessment principles. This additional provisioning done for domestic and overseas was under a conservative approach to enhance forward-looking projections, and as such, there will not be such a large-scale provisioning for overseas operations in the future. If such preemptive provisioning was absent, 2020 group net profit would have been $4,971,000,000,000, which is on par or above market expectations. Common equity-based ROE would have been 11.1%, highest ever in the past decade. This level of earnings for the group has yet again proven our solid fundamentals, even under difficult and uncertain financial market and the overall economy. Drag from securities and trading has been offset by stronger performances from traditional lending and deposit-taking of the bank and the PNC insurance business. Q4 consolidated net profit was $385.4 billion. Net profit saw a big decline Q&Q due to seasonal one-off factors, including ERP and preemptive and additional provisioning, but excluding such impact. On a running basis, net profit reported around $1.2 trillion, keeping to our solid earnings capacity. Next, Groups 2022 credit cost on a consolidated basis was 43 basis points against total loans. On preemptive provisioning for domestic and overseas, group credit costs showed steep rise in 22, but excluding this impact, credit costs on a recurring basis reported 26 basis points, staying within a steady level. Also, NPL coverage ratio as of end of 22 on a domestic operations basis was up 7 percentage points year-to-date to 216%. Considering industry top NPL coverage, I believe KBFG has sufficient buffer to fend off possible domestic and global uncertainties that may emerge in the future. Lastly, KBFG's BOD today approved a resolution to increase shareholder return rate up by 7 percentage points versus last year to 33%. In more detail, 22 cash dividend payout ratio was decided at 26%. on top of which there will be $300 billion of share buyback and cancellation. Also, including $1,500 of quarterly dividend already paid out, DPS, for FY22 was $2,951, marginally up from $2,941 last year. We will start buying Treasury shares starting tomorrow, and it will last for three months. And immediately following the end of that period, those Treasury shares will be canceled. I will go into more details on the capital management plan, including dividend policy, on the very last page of the presentation. Next, I will go into more detail on each of the line items. FY22 group's net interest income was $11,381.4 billion, up 18.9 percent year-on-year, while Q4 was $3,042.2 billion, up 5 percent Q&Q, driving performance improvement backed by solid loan growth and repricing of the loan book on rise in interest rates, which continued to drive up NIM. Next, Group's net fee and commission income for FY22 was around 3.3 trillion won. On depressed stock market, trading volume fell, driving down brokerage fee income from the securities business by 45% year-over-year, and on sluggish financial product sales, The bank's trust and fund sales also posted a decline, bringing a 0.4% year-over-year decline. However, despite difficult operational backdrop, both internal and external, thanks to the group's continuing efforts behind business diversification and stronger competitiveness, fee and commission income has been above $3 trillion for two consecutive years, attesting to robust earnings capacity. Group's IB fee income was up around 18% year-over-year, further broadening its market dominance. Net fee commission income for the fourth quarter was $717.9 billion. On the back of deepening downtrend in trading volume, brokerage fee income fell, and due to seasonal volatilities, IB fee income also contracted, lowering QFON number down by approximately 12% Q1Q. Next is other operating profits. Group's other operating profit for FY22 was $309.6 billion, showing a significant year-over-year decline, overall displaying underperformance. This is because of steep rate hikes. There were greater losses from bond investments, while due to FX rise and stock market declines, there was underperformance from securities and derivatives and FX. However, Other operating profit for Q4 was $196.3 billion, which is an improvement by a large margin versus last year. This is despite around $93 billion of valuation losses from securities investment. And on falling $1 exchange rate and bond yield, the bank saw a large improvement in securities and derivative FX-related earnings of around $425.5 billion on Q1Q, and base effect from insurance subsidiary subpar performance due to previous quarter seasonality has been removed, while loss ratio of non-life business improved, driving up insurance income by around 34% Q1Q.

Next, I will cover group G&A expenses. 2022 G&A expenses posted around 7,537.8 billion won, This was an increase about 4.7% compared to the previous year, and despite the increase in the size and cost of ERP in a situation where the group's digitalization-related investment is expanding, thanks to company-wide cost management efforts and efforts to improve the efficiency of the workforce structure, G&A is being well-managed. On the other hand, Q4 G&A expenses posted $2,357.7 billion, and due to seasonal factors including around $316 billion of ERP costs, it decreased significantly QOQ. The following is the group provision for credit losses. 2022 Q4 groups consolidated provision for credit losses amounted to $1,060.7 billion, a significant increase compared to the previous quarter. As mentioned earlier, this was on the back of preemptive large-scale additional provisioning, and excluding this, provisioning amount on a recurring level posted around the $370 billion level. On the other hand, the amount of provision for credit losses on a consolidated basis in 2022 posted $1,835.9 billion won, excluding one-off items such as preemptive accumulation of additional loan loss provisions on a recurring basis is posted about $1.1 trillion won. On the next page, I will cover key financial indicators. First, the group profitability in the upper left corner. As mentioned earlier, the group ROE in 2022 posted 9.9%. Next, Looking at the bank loans in one growth graph in the middle, as of end 2022, bank loans in one posted 329 trillion won and increased by 3.1% YTD and maintained a similar lever compared to late September. Among the loans, corporate loans posted 163 trillion won and SME, SOHO, and large corporate loans all had balanced growth. And on the back of this, it grew 9.4% YTD and realized the sound growth trend. On the other hand, Corporate loans decreased slightly by 0.2% compared to the end of September, and this was due to decrease in SOHO loan demand due to rising loan interest rates and economic slowdown, and also due to overall year-end debt recovery increase, including large corporations. On the other hand, household loans recorded $166 trillion won, and due to steep rise in loan interest rates and influence of loan regulations, it decreased by about 2.4% YTD centering on unsecured loans. With a 0.2% growth QOQ, there was a slight stabilization of household loans, which had been declining throughout the year, and in particular, housing loans due to increased real demand, just in Q4, increased by about 1.7 trillion Korean won. Next, I will cover the net interest margin. 2022 Q4, Group and Bank NIM recorded 1.99% and 1.77% respectively, and improved by 1BPQOQ. Bank NIM due to increase in core deposits and increase in term deposits led to funding cost burden increase and had a limited expansion until Q3 of the previous year, but with the still continued loan asset repricing effect, the overall improvement trend is continuing. On the other hand, regarding Group and Bank 2022 annual NIM, with steady loan asset repricing reflecting interest rate increase, As a result of profitability-centered loan portfolio management and efforts to enhance managed asset yields, there was a 13 BIP and 15 BIP sizable increase YOY, respectively, and led the group's interest income expansion. Let's go to the next page. First, I will cover group cost efficiency. 2022 group CIR recorded 50.2%, and despite the expansion of the group's ERP volume, on the back of solid growth in core earnings, there was only a slight increase YOY. Recurring CIR is being managed at a stable level at 46.7%, excluding one-off items, including ERP and digitalization costs. Going forward, we will continue to strengthen our top-line profit generation capabilities, and through group-wide cost management efforts, we will further improve the group's cost efficiency. Finally, I would like to cover the group's capital ratio. At the end of 2022, BIS ratio posted 16.16 percent, CT1 ratio recorded 25 percent, and we are maintaining the industry's highest level robust capital adequacy against economic slowdown and macro uncertainty. In particular, for the BIS ratio, despite the corporate loan center growth, rise in exchange rate and stock price decline, leading to RWA increase, on the back of capital management efforts, including hybrid bond issuance and flexible positioning strategy rules, 39BPYTD. On this page, I would like to cover KB Financial Group's mid to long-term capital management plan. The domestic financial market in 2022 had a rapid change in the macro environment, including steep rise in the key interest rate, sharp rise in $1 exchange rate, and expansion of global inflation. In the industry overall, there was greater interest and concern about loss absorption capability against economic shock. In other words, capital ratio and adequacy. Accordingly, KB Financial Group, while increasing the group's capital ratio and managing it at a stable level to respond to economic shocks that may occur in the future, will expand shareholder value and pursue a continuous shareholder return policy. And to this end, we established a mid- to long-term capital management plan for the group. To this end, in early December 2022, after deriving KB Financial Group's optimal capital structure based on robust capital capability and abundant liquidity, a management plan was established. After this, through in-depth consideration and sufficient discussion between the management and the BOD, we came up with a capital management plan that takes into account complex factors, including appropriate capital ratio, asset growth rate, and shareholder return policy. Please look at the right side of the page, and I will explain in detail about our mid- to long-term capital management plan. First, our CT1 ratio maintenance target is 13%. This will not only meet the 10.5 percent regulatory capital ratio or RRP basis, but also as a result of the stress test reflecting a conservative scenario at the level of the IMF financial crisis, we found that if the group maintained a CET ratio of 13 percent, the group will secure a total of 250 BP management buffer. Secondly, KB Financial Group will pursue Group's growth strategy from the perspective of shareholder value. Therefore, system growth, such as the nominal GDP growth rate, will be used as the basic benchmark, and we will pursue flexible capital allocation and asset growth strategies considering macroeconomic regulatory environment and business objectives. In addition, with efficient asset management, we will make efforts to improve ROA and PBR in parallel. Thirdly, after achieving the aforementioned asset growth target, if exceeding target CT1 ratio of 13%, as long as there are no changes in the supervisor regulatory environment or financial market volatility or special reason for the business purpose of the company, our principle will be to actively return to our shareholders. Fourth, KB Financial Group, based on solid fundamentals and industry highest level capital strength, while maintaining the cash dividend payout ratio and amount at a stable level, we'll utilize various shareholder return tools, such as share buyback and cancellations, and gradually increase our total shareholder return ratio. In order to continuously expand shareholder value, since stability of dividends must be secured along with the expansion of shareholder return ratio, each year we plan to maintain at least the same level of DPS at the minimum, at the same level as the previous year, and gradually increase it so that we can provide stable payout to our shareholders. If KBFG's valuations absolute and Relative discounted transactions continue. We will actively implement share buyback and cancellation. Finally, KB Financial Group will do our best to play a role as Korea's representative financial institution and do our best to harmonize this with shareholder interest. As previously mentioned, KB Financial Group's subsidiaries, including our bank, is the most important source of liquidity for economic entities, and we believe that proportion of the role of KB Financial Group opportunities occupies in maintaining the stability of the domestic financial system is by no means small. Accordingly, KBFG is Korea's representative financial institution at a time when the unique functions and roles of financial institutions are needed, including stability of the domestic financial system and soft landing of economic entities in response to economic fluctuations. We will comprehensively review all interests, including shareholders and stakeholders, and implement our capital policy. For the stability of the social system, we plan to faithfully fulfill the role of the group at a time when it is needed, and to this end, we plan to have our sustainable growth in parallel with the expansion of shareholder profits. Through the group's mid- to long-term capital management plan I have covered so far going forward, we believe that we have come up with a framework which has developed a level further to implement a more sophisticated capital management and advanced capital policies. We promise you that we will more faithfully implement and develop this further to more solidify the group's sustainable growth, and at the same time, do our best to implement the industry's leading shareholder return policy. We will do our best. From the next page, there is detailed data regarding the business performance I have covered so far, and please refer to it if needed. With this, I will conclude my report on 2022 Business Performance Report of KBSG. Thank you for your attention.

Thank you very much for the presentation. We will now begin the Q&A. For those of you joining via the internet, please refer to the contact information on the very last page of the presentation screen. And for those of you joining us via the phone, press star and 1 to submit your questions. Please bear with us one moment as we wait for questions to come in. We will take the first question. Mr. Kim Jae-ho from Samsung Securities, please go ahead. Thank you very much for taking my question. My first question relates to your shareholder return policy. You did provide us with the detail, but I still do have a couple of items that I want to clarify. In terms of the total shareholder return rate, what is your target, and how do you break that between dividend and share buyback? We'd like to understand how you're going to balance between the two. You've been paying out on a quarterly basis, and I am wondering what your plans are, quarterly dividend or year-end dividend payout. Would there be any change in your dividend payout policies? We'd like to understand that in more detail. And also, last year, if my memory is correct, there was no shareholder buyback, but I believe that going forward you will be quite aggressive in share buyback and cancellation. And you talked about CET1 ratio of target of 13% and excess capital you would use aggressively to pay dividends. But when you achieve CET13%, one-third, about $12 billion of share buyback was announced by JPEE. So I'm just wondering whether you would move very aggressively and actively in actually paying out your dividend. And I would like to understand the shares that you buy back, how would you use them? Some of the global companies, rather than canceling them, they would use it to compensate their executives and employees. I would like to understand what your plans are with regards to that practice. Thank you. Thank you very much for the question. That is a quite difficult question to tackle. As I presented at the beginning, we came up with the mid- to long-term capital management plan, and I can tell you for certain that this was not attributable to any outside drivers, but we felt that internally it was necessary for us to really provide a strong commitment to the market. I just wanted to preface this answer with that If you look at capital management, we look towards advanced countries, U.S., Japan, Singapore, and Australia. There are multiple number of countries that we looked into, we studied them, and we adopted them as our benchmarks. But as you would appreciate, when we need to talk about dividend payout, we need to first start off with our target CET1 ratio. We also need assumptions on growth, and thirdly, With regards to the excess capital, we need to have a principle and discipline in place. At this point in time, last year, our group's ROE on a common equity basis was 9.9%. Now, for this year, if the nominal GDP growth rate for 23 was assumed at 5%, this is just for illustrative purposes, let me remind you. Now, so if nominal GDP growth was 5%, if there's 5% asset growth for the group, then in 2023, we would reach ROE of 9.9%. So under this capacity, this means that we cannot increase our payout ratio to 50%. This is just simple arithmetic, so you would understand this. So based on our basic capital plan, through asset growth, increasing leverage and increasing ROE, rather than taking that approach I want to emphasize that we would like to increase ROA continuously, and the way we could do that is a steady credit cost and SG&A, strong control over G&A, and not interest income increase. That's the way for us to increase the ROA. You mentioned JP Morgan of U.S. For us to pay out dividends like JP Morgan, basically ROE or ROA would have to rise significantly from where we are today. Our CET1 ratio target, if we meet that 13% target, and as the biggest financial company, if we achieve the asset growth up to our potential, basically our principle and discipline of paying back to the shareholders whatever is left in terms of excess capital is a strong commitment. I just want to emphasize that as well. And then you asked about how we will be paying out in terms of our quarterly payout plan. We have no plan to change that. Just as we've done in 2022, it will be done in the same manner. Third question relating to the treasury shares. We mentioned that we would buy $300 billion of treasury shares and immediately cancel them. If you look at treasury shares, when you purchase, the market principle is that you should cancel immediately. When we return that to our shareholders, this will be an element that we will put a lot of interest in. And as I also previously mentioned, for shareholder return and shareholder value, returning back to shareholders is very important. But our price to book or price to earnings at this point is very much at the lowest level. Under that situation, share buyback and share cancellation is something that we are planning to progressively expand going forward.

Thank you very much. Thank you for your various questions regarding dividends, and I hope the answer was sufficient. We will take the next question from JP Morgan. Jihyun Joo, you're on the line. Thank you very much for this opportunity for me to ask questions. And I would like to ask about provisioning for your overseas subsidiaries. And I know that related to Bukopin, probably the provisioning is for that. And I think you mentioned this briefly. And can you tell us about the operations and regarding the provisioning, if it will not be burdened for the future, if it's already sufficient at this level? And I know that you are working to normalize the operations of this bank. And when do you think this bank will add to your earnings to the group? Are there other overseas subsidiaries involved? that you can tell us about that may lead to these types of provisioning or losses, or are there any positive movements for overseas subsidiaries? If you can answer that, it will be helpful. And in 2023 guidance, I would like to ask you questions, because looking at your book compared to your competitors, regarding your loan growth or others, it seems that it's a bit lower. So can you tell us about 2023 guidance, NIM and loan growth? and credit cost guidance, and your bottom line, what kind of growth that you are envisaging based on your guidance for 2023. Thank you very much. We will soon answer your question. Please hold. Thank you very much for your questions. And regarding Bukopin, I would like to explain a bit more about the situation. I'm the CFO, so maybe I can explain about the financials. And from KBFG, we can hear about the situation more from our CGSO, Jonam Hun. Regarding Bukopin, to explain the situation, in 2018, in July, Indonesia's mid-to-large think. Bukopin shares were acquired, and in July of 2020, we had, and in September, we had third-party allotment of capital increase. So we have about 67% of shares as of now, and we are the largest shareholder. The reason why we decided to acquire Bukopin, because we paid attention to the possibility potential of Indonesia, it is because they have a very high economic growth rate, Compared to other countries, they have very strong internal demand, economic structure, and abundant resources and a middle-class increase. They have a very large population of 270 million, and we found that they have a lower utilization rate of financial service, so we found that it's a very attractive market. And we tried to enter into the local market very quickly through acquiring the shares of Wukong Ping Bank, and by acquiring this mid-to-large bank with a large customer structure with very vast sales operations, we believe that we could have a differentiated move compared to other Korean banks that were pursuing organic growth. However, Bukopeng Bank, although we made many efforts to turn around Bukopeng Bank, there was a COVID-19 situation that became prolonged, and the top-line growth that we had thought of in the beginning was actually delayed, and there was the NPL of the loans, so it went against our expectations. In 2021, in November, there was the third-party allotment of capital increase, so there was about $390 billion of the burden, and we had $640 billion of capital increase, that we have determined as of now. And until now, currently, we had three rounds of investment after getting the shares, and total IDR, 982.2 billion won, which is about 790 billion Korean won, actually, that we had invested as shares. And the net asset value of Lukopin is IDR 11.6 billion. And we... had very conservative provisioning for Bukopin, so I would like to emphasize that. And for the Indonesian regulatory authorities, you can see the growth NPL ratios of Bukopin is 6.2 percent, and NPR is 2.8 trillion won. And on a consolidated basis, as of end 2022, the total provision is 57 billion Korean won, 570 billion Korean won. compared to the NPL, you can see that provisioning is much higher than this amount, so that is why this is very preemptive provisioning that we have implemented. For the additional provisioning this year, we believe that it is sufficient enough to absorb the future NPL, so we believe that we will not have more provisioning against future losses, and we believe that This will be the year 2023 to cut our ties with these NPLs so that we will not have any additional burden because of this. And I would like to ask Jo Nam-hoon, who is the CGSO, to explain more about the situation. I am Global Strategy Head Jo Nam-hoon. Regarding Bucopin and when it can add to the earnings of our group, well, because this is not normalized as of now, so we believe that we will need a bit more time for it to become normalized. And we are managing this situation with a long-term perspective. And as was mentioned by our CFO previously, compared to what we had planned, It is true that we have been delayed for two to three years for the normalization of Bucco PIN, and I am quite prudent, but because we had sizable provisioning this year, although it has not been normalized yet, I think prudently we can estimate that by 2026 we can have 2025, actually, where we can make a profit, and we believe that by 2026 it can have add to our ROD, at least not work against our ROE. And we are doing our best to faithfully implement our plan for normalization. And for our other subsidiaries, for 2022, there was Cambodia Prajak that we had acquired, another bank, and there's also other overseas subsidiaries that we had acquired and established. And they're being managed well for asset quality And for their earnings, actually, they are actually quite positive, even going over our expectations. So it is not a burden to us in our earnings. And we believe that the contribution they can make to our earnings will become very positive going forward. Thank you very much. I am Kim Jaegwon, the CFO of the bank. And for loan growth, I would like to answer your question in Q4 for the household loans. there was 0.2 trillion won growth, and strategically in Q4, there were securities 9.9 trillion won growth. And for this year, I would like to comment on a loan growth rate, 4% that we are estimating as an outlook, but we do have the interest rate burden. So we are seeing a lot of the repayment of the loans and there is the special loan situation and corporate loan market is stabilizing. So we believe that large corp demand will stabilize. So we believe that going forward, the loan growth, loan book growth will be a bit lower than expected, but we will do our best to meet the real demand in the market. And we are focusing more on profitability and asset quality on high quality loans rather than just size, growth based on size. Thank you very much. Just to add to that answer, for our capital management plan, I mentioned that for the asset growth, well, it will follow system growth for the midterm plan. And regarding the guidance for 2023 that you asked about, well, in principle, we don't give a net earnings guidance NP guidance, but what I can comment on is that with IFRS 17 change for accounting and when this macro situation continues and taking into account our preemptive provisioning, then 2023 earnings guidance will be quite positive. And when we have these earnings releases, related to Bukopin preemptive provisioning and FLC preemptive provisioning. If excluding that, then it would have been 4.9 trillion won of additional of these earnings. So we believe that this will become sufficient guidance for 2023. Thank you.

Thank you for that. We will take the next question from Citi Yaffe.

Hi, thank you for taking my question. I have a follow-up on capital return. So it's really around imagine you mentioned that 2023 profit will still be very good. And so the loan growth is relatively subdued. I just wanted to plug those numbers together and given your CET1 ratio already ahead of a 13% target, so is it possible that the payout ratio including buybacks is going to be materially higher than what you have for this year? So probably somewhere around 40% or even 50% range?

Thank you.

Thank you.

Yes, once again, from a mid- to long-term capital management plan, we have a very detailed plan laid out. But as I mentioned before, our principle, once again, is not to give out a specific number in terms of the payout ratio target. But as you've mentioned, once we achieve the net profit target internally and once we have enough of the capital ratio, as mentioned under the mid- to long-term capital management plan, Our clear principle that we shared with you previously is something that we will faithfully comply with.

Thank you very much for the answer. We will take the next question from Hanwha Securities. Kim Doyoung, please. Thank you for the opportunity. I have three questions. The first question could be a detailed question and you mentioned to us a target and you told us about excess return excess capital return. And I believe that it can be finalized at the end of the year. And like today, we will see the earnings finalized at end of February. And you mentioned that you will have share buyback from tomorrow. So do you think this will be the schedule going forward if you have the cancellation of the shares? So after the end of the year when everything is finalized, so at the end of the financial year, So it will be included in the previous year's shareholder return. And at the end of the year, if you did not reach 13% CT1 ratio, then it will be hard to expect your buyback. But we also expect more dividends in this situation. And next, regarding the share, what are you going to do with the shares that you hold now? And regarding the credit risk, I know that you have seen some provisioning. So can you tell us about your plans for the CETO-1 ratio, taking these factors into consideration? Thank you very much. We will soon answer your question. Please hold. Thank you for various questions, and I would like to answer those questions. We mentioned our mid- capital management and dividend plan, and maybe I was not clear enough, so I would like to emphasize this once again. For cash dividends, compared to the past, compared to the previous year, our principle is not to actually have at a level lower than the previous year. So that is our principle. And secondly, for shareholder return that you aforementioned, for a share buyback, as was mentioned in your question, For the 300 billion won of these shares, well, this will be included in the 2022 TSR, total shareholder return. And there is government-initiated dividend-related change for the dividends. And when this is confirmed, then, of course, we will include that if the change is confirmed. So we will communicate with the bank regarding this. For the Basel III credit risk, well, I would like to ask our group CRO, , to answer that question. Yes, regarding Basel III, I would like to answer your question for the credit risk. I'm the CRO, and we have actually implemented that already. And for this year, for Basel III, there's market risk and operational risk that we will implement. And for market risk, there's sensitivity. And for operational risk, there's the multiples internal multiples that we will use. And for the numbers, well, we will need to divide that in March. But I think although I cannot mention the numbers as of now for BIS ratio or CET1 ratio, we believe that it will have a positive impact. And we believe that the results will probably be similar to what we have been expecting.

Thank you for the answer. We do not have any more questions. waiting in the queue, but give us one moment. Yes, we have one question from CLSA. Please go ahead with your question. Can you hear me okay? My name is from CLSA. Thank you for taking my question. I have one question relating to domestic economic outlook. I would like to understand what the executive's take is on the future outlook of the domestic market. We hear these days a lot about the real estate market, and SOHO loans in the past have grown quite steeply, and so there's a concern relating to the real estate-related or mortgage-related loans, but is it okay for us to interpret that you are well prepared against such domestic economic recessions, or are there any areas where you are overly concerned about in terms of the domestic market? Allow me to respond to that question. With the very high rate cycle We are clearly aware of heightened uncertainty, so we do have concerns. We are mindful of the asset quality, of course. As our CFO has mentioned, we've been very conservative, and based on our forward-looking criteria, we have provisioned significantly. Even aside from Bukopin, we've applied a lot of stress on our economic scenario, based on which we've provisioned for the reserve. And also our asset quality management through our portfolio, this has always been the range that we have been foreseeing. And so once again, with ample amount of provisions, we will do our best to focus on asset quality management. On some of the areas where there may be more concern compared to the past, as long as we put in corporate-wide effort, we believe that we will be able to keep that under control. And come end of the year, I believe that our outlook and projection will more or less materialize. And so in terms of loan policy and managing the overall portfolio, we believe that we will have ample capability to be able to manage the issues. Thank you. We will take the last question.

From DB Securities, , you're on the line. Yes, thank you for this opportunity. I just have one question. Well, based on your NIM and your outlook, can you tell us about the situation? What is the NIM outlook? Well, can you repeat your question? I think the line was a little bit unstable. 2023 outlook for NIM outlook and your rationale behind that. Thank you for the question. Continuing from the previous year to this year, we have seen core deposits that are going down, and the interest rate hike cycle, well, there are expectations that this will end, so it has been already implemented into the market preemptively, and we are seeing the spread going down, so it seems that we will have difficulty in having a great NIMH hike. However, with the key rate increase, we have some loan repricing that we can have. So on a YOY basis, we can have a slight increase that we can expect for the NIM in 2023.

Thank you. We do not have any further questions that's waiting in line, but just bear with us one moment before we close. While preparing for the earnings presentation, We believe there will be a lot of interest regarding the mid- to long-term capital management plan, additional provisioning, and we had this opportunity to discuss quite a bit about these items. I would think that in terms of the financial performance itself, there won't be too many questions, as they are quite clear in and of themselves. But we will still wait just a couple more seconds. With no further questions being submitted, we would like to now close the earnings presentation of KBFG. Thank you very much.