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Edited Transcript of 105560.KS earnings conference call or presentation 19-Jul-18 7:00am GMT

Q2 2018 KB Financial Group Inc Earnings Call

Seoul Jul 20, 2018 (Thomson StreetEvents) -- Edited Transcript of KB Financial Group Inc earnings conference call or presentation Thursday, July 19, 2018 at 7:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Ki-Hwan Kim

KB Financial Group Inc. - Senior MD & CFO

* Peter Kwon

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Conference Call Participants

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* Chan Young Hwang

Macquarie Research - Head of Korea Research

* Jaewoong Won

NH Investment & Securities Co., Ltd., Research Division - Analyst

* Jin-Sang Kim

HMC Investment Securities Co., Ltd., Research Division - Analyst

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Presentation

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Peter Kwon, [1]

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Good afternoon. My name is Peter Kwon, in charge of the IR department at KB Financial Group. We will now begin the earnings conference call for our first half results. Thank you for your participation.

We will have the CFO, Mr. Kim Ki-Hwan as well as the executives heading the major subsidiaries within the group. We will first have the earnings presentation by the CFO, Mr. Kim, and this will be followed by a Q&A.

And now CFO Kim will present this year's first half results.

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Ki-Hwan Kim, KB Financial Group Inc. - Senior MD & CFO [2]

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Good afternoon. I am Kim Ki-Hwan, CFO of KB Financial Group. Thank you for joining KBFG's 2018 first half earnings release.

Before going on to earnings highlight, let me brief you on the operational backdrop for the first half of the year. KBFG's loan asset displayed a solid growth of 4% year-to-date based on banks loans in won. Household loan on the back of real estate regulations was up 3%, mostly around non-mortgage loans, i.e., loans for (inaudible), rental and prime unsecured loans. Corporate lending was up 5.1%, mostly around low-risk SME loans displaying an overall positive performance.

In terms of profitability, based on well-balanced business portfolio which underpins solid profit-making fundamentals and through continuous efforts towards cost efficiencies and asset quality improvements, profitability figures for this quarter was also overall positive. However, broader business environment for the financial industry cannot be deemed to be necessarily favorable. Under the rate hike cycle, there is growing concern for widening household and corporate credit risks, and with continuing global trade dispute, there is negative outlook for the Korean economy, which is known to have high external dependencies. Also, following the U.S. rate hike and strong dollar, there is greater concern for foreign capital outflow from emerging nations, and with higher volatilities of the global financial market, investment sentiment has been constrained, as shown through lackluster share price performance of domestic banks.

The company, therefore, has strengthened monitoring of various indicators and is closely following risk factors for the overall group in order to preemptively prepare for both internal and external uncertainties and also to diversify revenue sources and expand cross-subsidiary synergies as we enhance earnings stability. At the same time, as a leading financial group, KBFG is committed to its corporate social responsibilities in making a society where its citizens are most happy. To that end, we are taking more than just a passive donation but an active contribution befitting the stature of a leading financial group and, hence, are thinking hard about social problems and also discovering and designing various different programs.

In line with such efforts, we have multiple activities ongoing, such as providing support to build childcare facilities to respond to the issue of low birth rate, organizing expos for job seekers to solve youth unemployment problem, running a program to help start-ups and SMEs who have technical expertise and setting up funds to nurture social enterprises. Through such proactive corporate social responsibility programs, KB Financial Group is committed to bringing a real change to our society as the people's lifelong financial partner, and we believe such activities will eventually support the company's sustainable growth and corporate value enhancements.

With that, let me now move on to first half 2018 financial highlights. KBFG's first half 2018 net profit was KRW 1,915,000,000,000, which is up 2.9% year-over-year. On a recurring basis, excluding the one-offs of first half last year, including KB Insurance share bargain purchase gains, deferred corporate tax impact from BCC and gains from the sale of Myeongdong KB Bank building, net profit was up around 17.3% year-over-year.

Q2 net profit was KRW 946.8 billion. This is a slight decline Q-on-Q due to the one-off gain from the sale of the bank's headquarter building in previous quarter. But on a recurring basis, it was up approximately 7%.

Also, first half 2018 operating profit was KRW 2,551.2 billion, underpinned by even growth from interest income and fee and commissions income, together with cost reduction and asset quality improvement which led to structural improvement for profitability. All in all, it posted a growth of 27.4% year-over-year.

Now moving on to the breakdown. First half net interest income was KRW 4,340.2 billion, up 10.8% year-over-year on solid loan growth, which led to a sizable increase in the bank's interest income and higher interest income contributions from the nonbank subsidiaries. Q2 net interest income was KRW 2,196.4 billion, driven by even growth in interest income across subsidiaries, including the bank securities and nonlife insurance. It was up 2.5% Q-on-Q.

Next is on the group's net fees and commission income. First half net fees and commission was KRW 1,224.7 billion, up 18.8% year-over-year. This is due to the bullish stock market, which led to higher sales of ELS and ETFs, supporting a sizable increase in the bank's trust income and higher brokerage fee income from higher trading volume. However, in Q2 with the overall sluggishness in both the domestic and overseas equity market, fees and commission income dipped marginally Q-on-Q, mostly around trust and fund sales commissions income.

Q1 group's other operating profit significantly improved due to the consolidation effect from KB Insurance. However, for Q2, although there was gains from the block sale of loans to KAMCO, held by the Happy Fund, as part of the debt redemption program, with the rise in the FX rate and widening losses from derivatives and FX translation, there was a Q-on-Q decline.

First half G&A expense was KRW 2,743.7 billion, rising 10.2% year-on-year on KB Insurance consolidation effect. But excluding this factor, there was only around 1.8% rise. Q2 G&A expense was down 2.9% Q-on-Q, overall sustaining the group-wide cost efficiency improvement.

Next is on PCL, provision for credit losses. First half PCL was KRW 281.3 billion. Despite growth in loan asset, it was down 8.6% year-over-year, with cumulative credit cost recording 18 basis points for the first half. In Q2, there was a large-scale reversal with PCL, down 29% Q-on-Q, coming in at KRW 116.8 billion. Lastly, group's nonoperating profit in Q2 recorded a loss of KRW 20.9 billion due to one-off gain from the sale of Myeongdong headquarter building in Q1 and higher donations in Q3 -- Q2, excuse me.

Next, on Page 3, our financial indicators. The group's cumulative ROA and ROE in the first half of 2018 recorded 0.85% and 11.24%, respectively. Core earnings growth is continuing on the back of diversified business portfolio, and the recurring ROEs maintained at a level higher than 10%.

And now the NIM. The group's NIM for Q2 was 1.99%. It contracted 1 basis point Q-o-Q because of the falling card NIM due to decreased returns on credit card revolving loans and cash advance assets.

The bank NIM remained steady at 1.71%, similar to the previous quarter.

Despite the asset repricing reflecting the hike in the market rates and portfolio improvement effect, growth was much more pronounced in the low-margin assets in Q2, including the housing loans for (inaudible) and rent and Mugunghwa loans for the police officers. In addition, the funding cost increased as funding for time deposits outpaced that for the low-cost deposits.

In the second half, in order to minimize the impact of the funding cost on the NIM, more focus will be on attracting retail customers' low-cost deposits, including more payroll transfer accounts. And by business segment, there will be active NIM management, such as portfolio and margin management based on profitability and adjusting the securities portfolio.

The top right shows the group CIR, which was 49.2% in the first half on a cumulative basis. It's showing a steady improvement due to the even growth of both interest and noninterest income, and also, the cost efficiency-driven efforts are paying off. Going forward, as the top line grows robustly and as the cost-cutting measures produce visible results, the group's CIR is expected to improve to mid-40% level in the mid- to long term.

On the bottom left is the group's credit cost ratio. The first half cumulative CCR was 0.18% for the group and 0.01% for the bank, posting an improvement year-on-year. With the overall improvement in credit quality, we expect the subnormal cycle to persist for some time, and we expect this year's group credit cost will remain within the range of 20 to 25 basis points.

As of June end this year, group BIS ratio and CET1 ratio were 15.14% and 14.59%, respectively. And the bank's BIS ratio and CET1 ratio were 15.89% and 14.84%, respectively, showing the industry's highest capital adequacy.

The group's digital strategy is discussed on Page 4. KB Financial Group's digital strategy is summed up in the word ACE, in which A stands for agile, C stands for customer centric and E stands for efficiency. KB Financial Group aims to take the next leap forward as the customer's first choice and the first mover, quickly responding to the changes of the digital era enabling new financial environment for the customers through the use of new technologies.

We are witnessing rapid changes in the customer contact channels, especially in the bank. Looking at the digital banking transactions on the top left. The number of customers who engage in Internet banking reaches 23 million people or 72% of the KB Bank's total customer. The number of customers on Star Banking app or the mobile banking platform amounts to 14 million people or 45% of the total customers, out of which 61% are active customers.

Looking at the frequency of the channels used for transaction. The online channels account for 90% out of the total banking transaction, indicating a clear shift in that direction. By major financial transaction type, 60% of the new installment deposit customers signed up through the online channel, and the channel is also picking up quite rapidly in the new fund and household loans as well. Especially for the household loans, there are a lot of Internet and mobile loan products available, and the annual growth rate is as high as 260%.

In order to respond to these digital changes in a timely manner, the group is enhancing customer access by digitalizing the customer contact channels. And by strengthening the channel linkage, it plans to provide customer-centered, seamless omni-channel services. As can be seen from the top right, the group has in place many platforms, including Liiv, which is core banking service-oriented platform; and Liiv On, the real estate specialized platform. By providing many online platforms suitable to different customers' needs, the group is expanding the contact points for the customers and reinforcing digital competitiveness.

For the sake of work efficiency, project-based agile groups are run within the group for speedy decision-making and implementation. Robotic process automation is introduced to maximize work efficiency by adopting digital technologies even in middle and back offices. We're also dedicated to building an inclusive financial ecosystem by discovering fintech start-ups with high-growth potentials, providing them with the right amount of support and internalizing relevant technologies within KB. Please refer to the following pages for the details.

And this brings me to the end of first half 2018 earnings presentation for KBFG. Thank you.

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Questions and Answers

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Peter Kwon, [1]

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We will now entertain questions. Those of you connected via the Internet, please refer to the contact number on the very last page of your presentation. (Operator Instructions)

Yes. We will take the first question, Mr. Kim Jin-Sang from Hyundai Motors Investment & Securities.

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Jin-Sang Kim, HMC Investment Securities Co., Ltd., Research Division - Analyst [2]

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I have 3 simple questions relating to NIM and asset quality. Over the several quarters, the bank's NIM has been quite stagnant compared to your peers. CFO has previously mentioned this during the presentation, but can you provide some more color as to the reason why your NIM performance is as such? And at the same time, I would like to ask that you please explain the NIM outlook. My second question is with regards to your provisioning. Compared to your peers, I see that your provisioning level is significantly low. Even considering the one-off reversal of Q2, it is still quite low. So I would like to understand how long will this provisioning level, do you think, is going to sustain. So if you could focus more on the prospect and forecast regarding provisioning, that would be appreciated. And my last question has to do with the very difficult economic outlook that we are currently facing. The real estate prices are going down, and there are some factors that make us worry about the asset quality as we go forward. So can you provide some color as to what your forecast is with respect to asset quality?

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Peter Kwon, [3]

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Thank you very much for those questions. Please bear with us for one moment. We will respond shortly.

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Ki-Hwan Kim, KB Financial Group Inc. - Senior MD & CFO [4]

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Mr. Kim, thank you very much for submitting your questions. Q2 bank's NIM recorded 1.71%, so it is quite stagnant, and I do understand that the market may be a bit disappointed. If I were to provide some more elaboration. Now from the funding side, there was an increase in market rate, and therefore, it was very difficult for us to utilize low-cost deposit funding. So compared to the other peers, our loan growth was quite steep, and basically, our proportion of time deposit was quite big in -- comparatively speaking. And also, we also preemptively did some funding by issuing certain debt in light of the potential rate cycle. And also, if you look at the market rate hike, there has been some impact in terms of asset repricing and improvement in the portfolio. But if you look at household loans, there are certain housing loans for the (inaudible) and rent and also policy loans for the police. So from a risk-adjusted perspective, the return is quite big in terms of its contribution to the profit. But the lending yield itself was mostly low because of such a -- because these assets have low lending yield. And also, there's been a slight compression in the new spread when it comes to the corporate lending because we expanded on the low-risk SME loans. But if I could add, we want to diversify our revenue sources. We want to reduce our dependence on the loan-to-deposit margin type of a business. And also, we've expanded on the securities-related investment for the beneficiary certificates, in line with our asset management strategies, and that compressed our interest income slightly. And so we want to really focus on minimizing the NIM compression. And in the second half, we therefore is going to adjust the KPIs so that we could really attract more retail customers and also get more payroll-related accounts. We have very strong commitment in the growth strategy to increase high-quality asset, but by different business segment, we are going to manage our portfolio and margins depending on the profitability aspect. Therefore, we want to expand on the retail unsecured loans, high-quality that is, and also originate more of the blended-rate type of housing secured loan and also increase more loans to the high-quality SMEs and also have a very flexible rate policies for the SOHO loans. So we are going to continuously rebalance our low-cost loans. The NIM outlook in July, we originally thought that there would be about one rate hike, 25 basis points. So we were projecting originally compared to previous year about 4 basis point increase. But NIM in the first half had been quite slow, and the fact -- the policy rate hike has been delayed. So we think, on a per annum basis, NIM will improve about 2 to 3 basis points. That is the current plan that we -- or the assumption that we're working based off of. But even if the policy rate does not go up because of the asset repricing and also improvement from the portfolio, we still believe that, on a per annum basis, we could still expect the NIM to go up by about 1 to 2 basis points. Second question has to do with provisioning. Despite the loan asset growth, if you look at our provision on a year-over-year basis, the absolute amount had declined. And if you look at the bank, the level is very low at 5 to 10 basis points. So we are able to maintain this at a relatively very low level. So the credit cost has been continuing to be at a subnormal level for several quarters, and that is because we have deleveraged our nonperforming assets, we focused more on growing our high-quality asset. As a result, our loan portfolio quality has improved quite significantly. Therefore, we are seeing limited provisioning due to the migration or progression of the asset quality. And also, the real estate project finance, the NPLs, some of these projects have been resumed, and we were able to collect on certain apartment-related loans, and so the overall backdrop has improved. Now to what extent this type of a trend can continue? We've done some internal simulation, and if you were to consider the current level of credit quality and also future outlook for reversals, we believe that subnormal credit cost cycle can continue for a couple more quarters. And at the bank, with respect to the interest rate hike, we did some crisis scenario analysis, and at current level, if the policy rates, let's say, were to go up by 70 -- 75 basis points all at once and by different economic assumptions, we do some correlations. And if we define certain assumptions, we believe that credit cost will be able to be maintained within the 15 basis point level. Having said that, there could be interest rate hikes and also some economic sluggishness. And so if we are to maintain a very conservative perspective, we believe that the credit cost could be stable at around a 35 basis point level. And your last question has to do with the economic outlook and also the interest rate hike cycle, would that not have a damaging impact on the asset quality outlook. So on the basic premise, I do agree with your proposition. We've done a lot of scenario analysis, and in terms of the soundness-related indicators, we're very closely monitoring different measures. And also, we are preemptively adjusting our portfolios for potential events or impact. So we believe that in terms of the market concern, whether the fundamental is going to be undermined, of the banks, I really don't think that it will be to that severe level. The reason why we think that is because we believe that the policy rate hike is not going to be all that fast because you have to think about the interest differential between countries and also, there may be pressure in terms of the FX rate on the rate hike. But basically, you won't have to consider whether the economy itself has the fundamentals to actually bear such rate hike in terms of inflation, household loans and also consumption. So having considered those factors, I am quite cautious to say that a steep increase will be quite difficult. So if it's a predictable and gradual interest rate hike, we can respond to it, and we believe that it will have a positive impact on our revenue. On the household loan side, loss given default is very low. So even if there's any issues, then its impact on provision is going to be very limited. And also, if you look at corporate lending, the quality of our portfolio has really improved. And in terms of construction, real estate PF and shipbuilding and shipping, all the troubled sectors, they were able to handle their NPL. And also the high quality, above BBB-, the high-quality corporate in the early 19 -- in 2014, their proportion was about 40%, but it has increased to 75%. So we have the basis and the fundamentals to be able to continue our asset quality. So in light of all of these different factors, we believe that we will not meet a situation where the fundamental of the bank will be damaged. Thank you.

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Peter Kwon, [5]

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Thank you. I think that answered your question sufficiently. We will wait for the next question. Please stand by. Yes. Next question, from Macquarie Securities, Mr. Hwang, please.

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Chan Young Hwang, Macquarie Research - Head of Korea Research [6]

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I have 3 questions also. First question has to do with -- yes, overall, the results look good, but as for KB Securities compared to the -- well, continuing from Q1 and Q2, the numbers do not look as good. So why the underperformance for KB Securities? And what is your outlook for the recurring operating income? And during your presentation, you did mention it, but as for your CSR activities, it seems that the donation has increased. And going forward or annually or quarterly, what should we expect for your CSR budget? And my third question has to do with Indonesia. I heard that you acquired some shares in an Indonesian entity. And what are your global strategies forward?

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Peter Kwon, [7]

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Mr. Hwang, we will prepare for the question. Please stand by.

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Ki-Hwan Kim, KB Financial Group Inc. - Senior MD & CFO [8]

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Thank you, Mr. Hwang for your questions. As for the underperformance for KB Securities, let me explain the results why. In the first half, the net income was KRW 152.8 billion. Wealth management, wholesale, investment banking, these had fair performance. But as for sales and trading, because of the higher rates and because of the lower index in and out of Korea and because we did not respond to the ForEx hike, we could not meet our target and so thus, the underperformance. And as for Q2 net profit, it was KRW 74 billion on a consolidated basis. But in Q2, the stock market was not doing so well, so the brokerage fee income decreased KRW 12 billion. And there was the -- KB Securities also suffered from KRW 20 billion of translation loss on the CERC Group-guaranteed ABCP. So excluding that one-off, the net income is KRW 90 billion. And as for the future projection, we believe the internal delivery target for the net income is KRW 100 billion per quarter. And to meet our target, we are doing well in terms of wealth management, but we are not getting that synergy with the bank and the CIB. So we need to get our act together on this, and also, we need to improve our performance in sales and trading. So we need to enhance our management capabilities. And we have co-located the capital market-related organizations like bank, securities and asset management within the group, and I think and I expect that efficiency will continue to grow, albeit on an incremental basis. And the second question had to do with our CSR activities. As you're well aware, it's a global trend for the companies to reinforce their CSR activities. And many global big players are donating 3% to 5% of their net income. And we are paying attention to the low birthrate issues and youth unemployment issues, and we are supporting necessary programs to solve these social problems. The donation budget or the CSR budget was about 3% per annum, but starting this year, we are planning to expand the CSR budget to 5% of the net income. And of the budget, we have recognized KRW 78 billion in the first half. We cannot talk about the scale of our future CSR activities going forward in specific numbers, but we will consider our social stature and our roles and play our due role. As for ROA, it will be within the limit of not undermining our target. And about the deal with Bank Bukopin in Indonesia and our overall global strategies, I'd like to talk about going into the Indonesian market. Indonesia, as you're well aware, is a fast-growing economy. It has high economic growth rate. The domestic demand is very sound. There are rich resources, and the middle class is growing rapidly. So it's a very attractive market for financial companies. And the loan proportion out of the total GDP is too low, and not many people are using the institutional financial services. So the potential for the banks is very high, and so KB considers it a very important strategic market. And Bukopin is a retail bank. It's the 14th largest in Indonesia. KB signed a contract to acquire new shares to be issued by Bank Bukopin, earning the preemptive right to buy new shares. And by -- the maximum stake we will have is 22%, and we will become the second largest shareholder. And after we acquire the stake, we will support stronger risk management for the bank, and we will continue to provide synergy, the capabilities that we have in digital and other areas and find ways to enhance the value of Bank Bukopin. And we will communicate with you the details after the final stake number is settled. And as for our overall global strategies, we consider the regulatory market, the demographics, the financial infrastructure, and we look at the financial industry characteristics for the markets. And we want to focus on 4 areas. First is the microfinancial area because it's relatively easy to get the license and the margin rate is high for the microfinance, and we have the capabilities for that in card and capital. And so we are present in Vietnam and Myanmar. And the second area is the retail banking. We are a traditionally strong player in that, and we want to adopt the digital banking model in retail banking. And we have presence in Cambodia with Liiv Cambodia, and after the market test is complete, we have plans to expand our presence to Vietnam and Indonesia. And the third area is CIB. We have the infrastructure knowhow and the expertise in the equity and debt capital markets. We are targeting the advanced markets, such as Hong Kong and London, but we don't have sufficient global network yet, so we are thinking of potential alliance with Japanese banks and start from there. And the last area is asset management. The Korean society is aging rapidly. We see the growth momentum tapering off, and there will be less demand for loans. So considering all the limitations in the Korean society, we need to move away from the simple loan-to-deposit margin business and we need to look for new revenue sources. So we are looking toward Asia, including China, and we're thinking of strategic alliance with the European and the U.S. asset managers. That was all for the overall global strategy. Thank you.

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Peter Kwon, [9]

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Thank you for the answer. We will wait for the next question. From NH Investment & Securities, Mr. Won Jaewoong.

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Jaewoong Won, NH Investment & Securities Co., Ltd., Research Division - Analyst [10]

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My name is Won Jaewoong from NH Investment & Securities. I would like to ask you 3 questions. First with your -- has to do with your dividend payout ratio. This year, you have been reporting good results. You have high capital ratio. And I understand that you have mid- to long-term plan to increase your payout ratio to 30%. I understand there is some regulatory pressure. Can we expect the higher payout ratio this year? That's my first question. Second question has to do with your digitalization initiative. Now considering -- there's a lot of talk about the separation of the banking and the industrial capital. There seems to be higher possibility of that separation. If that happens, then companies like Kakao Bank, basically, it's collaborating with Korean investment securities, then we -- with the change in the legislation, Kakao's holding in this entity could actually increase. So do you see that as a threat to your business? And considering that you have KRW 7 trillion of loan and deposit and there's an account of 500 -- 5 million accounts, what do you think the growth trajectory is going to be like? And also, I understand that KB Securities is preparing to issue a note. Now I -- the customer base could be different, but there could be an overlap in terms of the customers or the client. So would this not trigger any cannibalization?

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Peter Kwon, [11]

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Thank you for the questions. We will -- give us a moment before we respond to that question.

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Ki-Hwan Kim, KB Financial Group Inc. - Senior MD & CFO [12]

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Yes. Mr. Won, thank you very much for your questions. In terms of the payout ratio, let me respond to that question first. From a mid- to long-term perspective, and we've been communicating over the years, the global average of 30%. So we will be progressive in terms of our dividend policy. And that's our objective, and we're moving towards that. However, for us to up the dividend payout ratio in a steep manner and sudden manner is going to be challenging. This year, we're looking about 24%, 25%. We will be gradual, and we will take a gradual effort to increase our payout ratio as we go forward. So for the time being, the payout ratio may not be all that satisfactory for the market, but through dividend or inorganic growth or M&A and also treasury share, so we will ultimately increase the shareholder return and also increase shareholder value. So our efforts will be towards those direction. And then you asked about -- the second question, the digital banking-related question, the specialized online banks in terms of their customer base and their lending growth and deposit growth. At the onset was a quite spectacular performance. So the question is, to what extent could this sustain? And can this translate to the bottom line contribution? There has been some capital-related constraint. However, with the change in legislation for separation of banking and industrial capital, that will, of course, have an impact on this industry. If you look at the online specialized banks, they need to prove to the market that they can manage risk, and they also need to secure certain level of margin. So they need to improve and enhance their profitability. So they have multiple things that they need to do. So they need to think hard about their business model. As of now, we have to look at how the legislation process -- or the revision process is going to go forward. So there is no immediate threat. But in terms of UI, UX, convenience of trading and easiness of taking out this product, financial product, it is true that they have strength in those aspects. So we need to benchmark against these entities, and we are preemptively also responding to that. And we have plans as well. The bank has both the online and offline platform. So omni service -- a seamless omni service is what we are pursuing so that we can acquire new customers and as well as manage our existing customers. So for our senior customers, in terms of asset management, there is -- will be more offline channel-related activities. And for the young people, we would realign our digital platform and also develop our digital contact -- our customer facing, so that we can respond to such trend for higher digital requirement. So Internet banking is growing. And these online specialized banks are growing, but we don't yet see them as a specific threat. I hope that answered your question. And in terms of the KB Securities issuance of promissory note, in month of July, we've submitted an application, and our target is to receive approval by October. So within this year, basically, issuance against our client base and sale for the client base can initiate, so there are multiple preparations that are ongoing. Now would there not be any cannibalization within the group across different subsidiaries? No. The duration as well as interest rate, now this is more short term. Bank note is more mid to long term, and also, there is differentiation in terms of the rates and the pricing of these notes. So these are distinct markets. There may be some risk of cannibalization. However, within the group. We will make sure that it doesn't become cannibalization but it becomes a collaboration to bring about higher level of synergies. We have the CFO from KB Securities. If he has anything to add.

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Unidentified Company Representative, [13]

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Yes. I'm from KB Securities. My name is [Kim Young-suk]. I'm the CFO. In terms of sourcing, KB Bank and Securities are going to work together. So we have about 8 CIB centers, and through such CIB centers, bank and securities subsidiary is going to collaborate and find companies to source in terms of investment, in terms of lending. If you look at this stage of a corporate evolution, like venture capital or start-up, because securities can digest higher level of risk, so the securities will make more investment. The risk appetite for the bank and the securities subsidiary is different. So our view is that there's not going to be any cannibalization. As the CFO Kim has mentioned, rather than cannibalization between the bank and the securities, we will make investment and we will originate loans with the view to create more synergies.

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Peter Kwon, [14]

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Thank you for the answer. We don't have any questions on queue, so we will stand by.

We had a fair quarter this quarter, and it seems there are not many questions. If there are no further questions -- so we will wait a little more, and we will conclude if there are no further questions.

It seems that there are no further questions. We will conclude the Q&A, and we'll also conclude the earnings call for the first half. Thank you very much.