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Edited Transcript of 105560.KS earnings conference call or presentation 21-Jul-20 7:00am GMT

Q2 2020 KB Financial Group Inc Earnings Call

Seoul Aug 27, 2020 (Thomson StreetEvents) -- Edited Transcript of KB Financial Group Inc earnings conference call or presentation Tuesday, July 21, 2020 at 7:00:00am GMT

TEXT version of Transcript


Corporate Participants


* Bong Joong Kwon

KB Financial Group Inc. - Head of IR

* Ki-Hwan Kim

KB Financial Group Inc. - Senior EVP & CFO


Conference Call Participants


* Do Ha Kim

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

* Doosan Baek

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

* Jaewoo Kim

Samsung Securities Co. Ltd., Research Division - Analyst

* Jin-Sang Kim

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

* Jung Wook Choi

Hana Financial Investment Co., Ltd., Research Division - Analyst




Bong Joong Kwon, KB Financial Group Inc. - Head of IR [1]


I am Peter Kwon, the Head of IR at KBFG. We'll now begin the 2020 first half business results presentation. I would like to express my deepest gratitude to everyone for participating in our call. We have here with us our Group CFO and Deputy President, Kim Ki-Hwan as well as other members from our group management. We will first hear the 2020 first half major financial highlights from CFO and Deputy President, Kim Ki-Hwan, and then engage in a Q&A session.

I would like to invite our Deputy President to walk us through the 2020 first half major financial highlights.


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


Good afternoon. I am Ki-Hwan Kim, CFO of KB Financial Group. Thank you for joining KBFG's presentation on first half 2020 business results. Before moving on to earnings results, allow me to first present on the operational backdrop. Despite prolonged uncertainties surrounding COVID-19 curve repeating the flattening and rising cycle helped by strong monetary fiscal policies worldwide in an effort to overcome economic recession, financial markets regained some level of stability. Nevertheless, concerns over global crisis of real economy continues. If and when COVID-19's second wave hits us despite massive quantitative easing, economic recovery could may well be delayed significantly. Thus, we are in no position to loosen our vigilance and in the face of ultra-low rate, banking industry is tasked with countering structural pressures as well.

In such an unprecedented crisis brought on by the pandemic, KBFG will fully live up to its role and responsibility, befitting a top-tier company and will proactively respond to changes in the financial paradigm so as to solidify our position as a leading financial group. First of all, in order to support companies hit by the pandemic and the vulnerable class, we have provided financial support, and KB independently is running various programs, including good consumption movement to help small local business operators.

Also, we are fully committed to asset quality and risk management. We operate continuous monitoring system on potentially problematic loans and conduct fine-tuned expert management of marginal borrowers and have uplifted the group's risk management system to be prepared for possible extended economic recession. Also to be preemptively ready for possibly -- possible quality deterioration, we made additional provision of KRW 206 billion this quarter.

In addition, KBFG is steadfast at its strategic tasks that seek to enhance earnings stability and gain growth engine for the future. To that end, last April, we acquired PRASAC, Cambodia's biggest microfinance company as a sub subsidiary. And in Q3, we'll complete the acquisition process for Prudential Life Korea, a best-in-class company in terms of capital adequacy and channel competitiveness.

Last month, we also entered a strategic alliance with global investor, Carlyle Group, issuing KRW 240 billion of EBs, exchangeable bonds. The EBs were issued at 0 coupon. As the company's high exchange premium on treasury shares were highlighted, KB's undervalued corporate value and growth potential were recognized. It is also considered a best case in the strategic use of treasury shares and diversification of funding sources.

Last but not least, KB Financial Group is focused on ESG based responsible management and growth in innovation. Including renewable energies and green industry for environmentally friendly investment, we plan to expand ESG-related product investment loans to KRW 5 trillion by 2030. As seen from recent launches of KB Clean Ocean Deposit and KB Clean Ocean Public Trust, we incorporated ESG elements to new product and service development. As such, we will endeavor to lead ESG innovation growth at the very forefront as a leading financial group.

With that, I will now move on to business results for the first half of 2020. KBFG's Q2 2020 net profit was KRW 981.8 billion. On recovery of other operating income from a more stable capital market in the second quarter, an improvement from net fee and commission income and underwriting profits, net profit was up 34.6% Q-on-Q. First half net profit was KRW 1.7113 trillion, down 6.8% year-on-year. But setting aside additional provisioning aligned with our future economic forecast and Q1's ERP expenses and other one-off items, on a recurring basis, our earnings capabilities continued to be solid despite difficult operational environment triggered by COVID pandemic which led to economic recessions and interest rate declines.

Now moving on to more details. Group's first half 2020 net interest income was KRW 4.6832 trillion. Despite lowering of the policy rate and low -- loan conversion program, which squeezed the NIM, supported by solid loan growth for the bank and the card, NII was up 2.9% year-on-year. Group's first half net fee and commission income was KRW 1.3813 trillion, up 21.6% or KRW 245.6 billion year-on-year, continuing a solid growth trend. This is because although bank's trust income fell due to restrictions and limits on ETF sales and increases in trading volumes, brokerage related fee income saw KRW 126 billion of sizable increases and also active card marketing and cost savings efforts led to sustained rise in the credit card fee income.

Next, in Q2, other operating income recorded KRW 227.7 billion, improving significantly over the previous quarter. We saw recovery from first quarter's securities, derivatives, FX-related losses, including foreign currency bonds, CVA and ELS valuation losses incurred from steep volatilities in the financial markets. Insurance underwriting performance also improved on overall decline of loss ratio. As there still exist further volatilities in the financial market from resurge of COVID-19 and deteriorating real economy, we will continue on with a defensive posture for the time being and manage our earnings in a stable manner.

Next is on the group's G&A expenses. Q2 group G&A was KRW 1.5864 trillion. On seasonal factors, i.e., setting aside for banks and cards welfare fund and payment of taxes and dues and inclusion of PRASAC, the sub subsidiary in the financials, G&A was up 8.7% Q-on-Q. But excluding these factors, there was only a minor Q-on-Q rise. For the first half, G&A reported KRW 3.0456 trillion, flat year-on-year and well under control, thanks to our group-wide cost savings efforts.

Next is the provision for credit losses. Q2 provision for credit losses posted KRW 296 billion, a 21.5% increase Q-o-Q. This was a result of additional provisioning based on FLC or future economic outlook scenario, despite some large-scale reversals. Excluding these one-offs, it decreased by around 26% Q-o-Q. In this quarter, KB applied forward-looking criteria from a conservative perspective and reclassified some high-risk loans in stage 1 to stage 2. KBFG provisioned an additional approximately KRW 206 billion in order to improve capability to respond to future uncertainties.

For your reference, as of end June, the group's NPL coverage ratio, including the current reserve for credit losses, posted 296.5%, a 3.0% point improvement Q-o-Q and is maintaining a high level. I will explain the major financials from the next page.

2020 first half cumulative group ROE posted 8.88% and the recurring ROE, excluding additional provisioning, is being maintained quite stably. These results are the fruit of our continued efforts to strengthen our nonbanking side. And going forward, KBFG will respond to the low growth, low interest rate regime and continuously diversify our revenue basis.

Next, I will cover the bank's loans and won growth. As of end June 2020, the bank's loans in won posted KRW 287 trillion, a 6.8% increase YTD and 2.4% increase Q-o-Q. In the case of household loans, driven by our focus on expanding Jeonse loans and quality unsecured loans, it grew 4.2% YTD. And compared to the end of the previous quarter, most of the safe conversion loans were securitized, and there was a slight downturn in growth.

In corporate loans, SOHO, SME and large corporate loans showed balanced growth, recording a 10% growth YTD and 4.2% growth Q-o-Q. In particular, SME loans, including SOHO loans, grew KRW 8 trillion YTD on the back of expansion of COVID-19 related financial support program. KBFG in the second half of this year will continue to have qualitative growth centering on safe quality assets and also strengthen low review standards as a measure to preemptively manage risk and to reduce potential NPLs. KBFG plans to focus more on profitability and asset quality management going forward.

Next is NIM. Q2 bank NIM posted 1.50%, a 6 bp drop Q-o-Q. This was mainly a result of a slight contraction in asset yield with key rate cuts taking effect in earnest and with a partial increase of ex FX liquidity management burden, although funding burden was relieved through growth of low-cost deposits and decrease of time deposits.

On the other hand, the Q2 group NIM posted 1.74% with decreasing mid interest rate products, including card loans and cash advances. The card NIM also dropped, leading to a 10 bp drop Q-o-Q. Taking into consideration the recent key rate reduction and expansion of policy loans, it will be quite challenging to safeguard our NIM this year, but based on the best channel competitiveness in Korea, we will focus more on expanding low-cost core deposits and apply a selective and sophisticated loan pricing program to guard the NIM as much as possible.

Let's go to the next page. First, I'll elaborate on the group's cost-income ratio. 2020 first half cumulative group CIR posted 50.6%. Excluding one-offs, including digitalization expenses, including next-generation IT investment costs, CIR on a recurring level posted a 48.5% level and showed a significant improvement compared to the recurring CIR level of the previous year. With noninterest income source expansion and group-wide cost-cutting efforts, cost efficiency is gradually tangibly improving, and we plan to improve it to a mid-40% level in the mid to long term.

Next, I would like to cover credit cost ratio. 2020 Q2 group credit cost posted 0.29%, and it rose slightly Q-o-Q on the back of additional provisioning that I aforementioned. However, excluding one-offs at 0.14%, it is still being well-managed at a low level.

Next, I will cover the group's BIS capital adequacy ratio. 2020 June end group BIS ratio posted 14.13%. CET1 ratio recorded 12.80%, similar to the previous quarter. Despite the risk-weighted asset growth following corporate loan and unsecured loan centered loan growth, along with sound net profit growth, strategic capital adequacy management, including issuance of hybrid bonds and disposition of securities FVOCI, we are maintaining the industry's highest level of capital buffer.

Please refer to the following pages since they cover the details related to the earnings that I just aforementioned. With this, we will conclude KBFG 2020 first half management results presentation. Thank you for listening.


Questions and Answers


Operator [1]


(Operator Instructions) From Hyundai Motor Securities, Mr. Kim Jin-Sang. Go ahead with your question.


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


Yes. First of all, thank you very much for good business results. Starting with your net profit as well as other financials also, quite positive result. But it seems that the bank's NIM has declined quite significantly, which is a bit unfortunate. I believe that the banking industry as a whole, on the backdrop of policy rate cut, it was relatively speaking not as negatively impacted because there was demand for loans and more growth.

So I know that you provided some background information, but could you elaborate a little more as to why your NIM fell? And what you plan -- what your plans are to recover? And you've mentioned KRW 206 billion of additional provisioning. Can you provide us some more color and breakdown of more details?

My last question has to do with COVID-19 pandemic. In the second half, we think the situation is going to more or less stabilize. However, the capital markets are fluctuating and the COVID situation also is quite volatile. And if this whole situation prolongs, there would be more pressure felt by the company. So in terms of asset quality prospects, forecast, what's your feel as we experience prolonged COVID-19 pandemic?


Bong Joong Kwon, KB Financial Group Inc. - Head of IR [3]


You submitted 3 questions. Give us 1 moment. We will respond shortly.


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


Thank you very much, Mr. Kim Jin-Sang, for your question. Bank's NIM basically fell by 6 basis points on Q-on-Q basis. Let me provide you with some more background information. As we entered into Q2, we've seen surge in the market liquidity. And basically, the low-cost deposit on a Q-on-Q basis have risen by about 8%, which is about KRW 9 trillion. Time deposits fell by about KRW 3 trillion. So on the funding cost side, basically, the pressures were relieved. But if we were to look at the drivers behind the decline in the NIM, it is as follows.

First, the biggest impact was felt from policy rate cut. This year, there was 75 basis point cut and market rate, therefore, declined, and that really fed into the NIM erosion. So due to the market rate decline, NIM was impacted by negative 3.2 basis points. However, in terms of interest rate sensitivity, this extent of interest movement or NIM movement, we believe, is within normal range.

Second is the impact of spread. Based on COVID, basically, we provided policy loans and also there were market stabilization funds. So various different types of financial support programs and also loans to large corporate and Jeonse loans where it's less profitable for us, we grew more on high-quality loan asset. So the return and spread basically declined, and that had an impact of about minus 1 basis point on NIM.

In Q2 with respect to COVID, in order to respond to potential FX crunch, we wanted to secure ample amount of FC liquidity. So from a short-term perspective, we expanded foreign currency short-term assets. Therefore, that had a downward impact on NIM by negative 1.2 basis points. But we believe that after June, things normalize, so starting Q3, we believe the pressures on NIM is going to get itself resolved. And lastly, April, as we acquired PRASAC from Cambodia, we financed for that investment, and there was about 0.5 basis point impact on NIM from the financing for the investment of PRASAC. So all in all, there was a 6 basis point impact on NIM.

In terms of investment in order to manage our NIM, basically, we want to expand our quality assets. So this is our growth strategy from a risk-adjusted return basis. However, by different business segment, we will look at profitability and capital efficiency and adjust our loan portfolio accordingly. And also make our loan pricing more sophisticated by different segments so that we can really guide against our profitability as much as possible.

On the funding side, LDR and LCR, which are liquidity regulations, they have been temporarily softened. So in terms of funding lower funding cost, basically, we want to be very flexible and make use of market funding as well. And KB has its channel competitiveness. We want to fully utilize that, really strengthen our marketing so that we can do our best to expand on low-cost deposits.

Our annual NIM projection for this year in light of policy rate cut, market situation and the impact of loan conversion, considering all of these factors, we believe that for this year, we will record 1.5%. We think that in the Q3, Q4, we will probably hit bottom, after which we will stabilize.

Responding to your second question, on the additional provisioning for the second quarter, due to COVID pandemic in order to preemptively respond to potential asset quality deterioration, we've taken a very conservative future projection criteria, reclassified assets and basically set aside, in addition, KRW 206 billion in provisions. Looking at different scenarios, basically, in the second half, this is the assumption. COVID-19 is going to come again. And next year, there's going to be another massive pandemic. This was the assumption. So we apply forward-looking model. Based on that forward-looking model, basically, we've set aside provision of KRW 143 billion of additional provisioning that is. Also, on top of that, of the Stage 1 loans, we looked at some highly risk loans. What we did was we reclassify them and put them under Stage 2 loans. And then accordingly, we have additionally provisioned KRW 63 billion from this adjustment.

In terms of the level of provision of the banks, I know there are some concerns. At KBFG, we've applied forward-looking area and model. And by the end of last year, we've provisioned KRW 529 billion. And this time around, we've provisioned KRW 206 billion. So basically, on a forward-looking basis, we've set aside KRW 720 billion or KRW 735 billion. So if you look at the group's NPL coverage ratio, it's 144.4%. And if you were to add the reserve, basically 295%, that's the coverage ratio, NPL coverage ratio. Our loan-to-value or basically coverage of collateral is 80%. So loss absorption capacity of the company is relatively high.

Responding to your third question about COVID-19, basically, what we think our asset quality outlook is going to be going forward. Because of COVID-19, with economic downturn, there's a lot of concern about quality deterioration. In the case of bank, delinquency ratio, NPL ratio is industry's best and also credit card company, we think our delinquency ratio is being maintained at a steady level. So compared to our peers, we are very rigidly managing and also by upgrading our credit risk management process, we're very much focused on quality management and also quality to be easing, financial support, low interest rate environment, all of these factors we fully are aware of. So we think the credit cost within this year can be controlled within 30 basis point.

The COVID-19 pandemic is global. And there's U.S.-China trade tension becoming worse. So these are more conservative scenario assumption. Even under that scenario, group's credit cost, we believe, will still be within 40 basis points. So even when things turn for the worst, we don't think our asset quality is going to be degraded significantly. However, on the back of COVID-19, there are some marginal borrowers, and there could be NPL that's formed from such segments. So on COVID-19, we have scenario analysis in different phases. So based on that, we've set up contingency plan and by different industry sector and the types borrowers, we've come up with more refined and sophisticated plan.

And for vulnerable class, we will continue -- we will operate continuous monitoring. So we have risk management regime and schemes in place. For household, basically, the credit ratings of the borrower or whether that borrower has multiple loans, so depending on different criteria, we would monitor. And for marginal borrowers, we would continuously monitor so that we can really allow for a soft lending. By corporate, for COVID-19 sensitive industries, we will make our lending origination criteria much more stringent and also preemptively reduce potential NPLs. So we're rebalancing and strengthening our credit review. So above BBB-, our ratio is about 80% as of end of June.

So our loan portfolio has been continuously being improved, as you can see, and we think that there is limited possibility for things to actually worsen below fundamentals, especially for SOHO loans because they are highly sensitive to economic cycles. There are concerns about asset quality. Delinquency at this point is 0.16%. And collateral ratio is around 90% and also high credit rating portion is about 90% as well. So all the asset quality indicators are quite positive. And if you look debt servicing capabilities and also in terms of review process, it's mostly focused preserving the actual loans. All of these are the basis for managing all of these aspects.

In the case of credit card, basically, the delinquency ratio on a Q-on-Q basis had fallen by 0.2%. So for credit card, all the quality-related indicators are quite positive. But if COVID, once again, spreads, then individual small operators, and small businesses may be exposed to further deterioration in the credit quality. So we are applying more fine-tuned to review strategies for different industry sectors, depending on their exposure to economic cycles. So we are being prepared against crisis so provided some more detail on the asset quality management.


Operator [5]


We'll take the next question from Samsung Securities, Mr. Kim Jaewoo.


Jaewoo Kim, Samsung Securities Co. Ltd., Research Division - Analyst [6]


I have 2 questions. The first question is, as it was given to us, regarding your loan growth, you mentioned that it grew this year. And can you tell us more? Because it seems that you have reached your goal. So can you tell us about the changes that you may have? And your future loan-related policies, guidance going forward? And related to the recovery of your other operating losses, in Q1, you mentioned some details about why you saw some operating losses, other operating losses and since they were improved, we think it is very fortunate. And can you tell us in more detail about what actually improved, leading to the recovery? It will be very helpful if you could explain to us.


Bong Joong Kwon, KB Financial Group Inc. - Head of IR [7]


Thank you, Mr. Kim Jaewoo, and we will soon answer the questions for you. Please hold.


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


Thank you very much for your question, Mr. Kim Jaewoo. Regarding our second half loan growth goal on a won basis -- Korean won basis, we had seen a 6.8% growth. And our goal was between 5% to 6% loan growth for this year. So it has actually exceeded that. Regarding this, in the second half of this year, we are going to focus on profitability and asset quality, and we are going to have a very conservative loan policy and we're going to have qualitative improvements entering on a portfolio improvement so that we can actually keep an eye on the speed of our growth. We also will see some regulatory effect from the real estate regulation strengthening, and we believe that there might be a decline in the demand for loans so we believe that on the whole, there will be limited growth factors for loan growth in the second half of this year.

We believe that our second half loan growth goals will be more limited than in the first half. So that will be our policy going forward. And for household loans, there are unsecured loans, Jeonse loans that we are going to focus on. And for corporate loans, in the second half of this year, we are going to have a more conservative loan policy and we are going to flexibly respond to the market environment, so we are going to actually control our growth speed centering on high-quality growth industries.

I would like to talk about the other operating gains and losses. And you can see that actually, it was KRW 227.7 billion, and it was actually a minus figure, minus KRW 27 billion -- minus KRW 207 billion, and you can see for the FX derivatives in Q1 of last year, we had seen surmountable losses because of the FX market. But in Q2, we have seen a stable stance in the financial market, so we have seen a KRW 545 billion of gains. And you can see of profits. So we have seen a growth of KRW 495 billion, and you can see that it was actually similar to the level of the previous quarter.

In Q1 of the previous quarter, the securities ETF ELS portfolio investment and CVA and our private -- our PE fund related losses was about KRW 330 billion. But in Q2, we had about KRW 170 billion of profit. So we had seen a KRW 500 billion of improvement for our FX bonds. You can see that most of it was recovered, and our securities ETF almost all recovered and our portfolio ETF almost have all recovered. And our CVAs also have mostly recovered as well. So on the whole, you can see that in most areas, we had seen a recovery.

In the case of ELS and for PE funds, our losses are recovering at a slower pace. However, for the ELS management, you can see that the market, if it continues to stabilize, then we can see the profits coming in from the prepaid repayment. And with the expansion of COVID-19 going forward, if there are shocks in the market, and there is a high possibility that it might happen, and if that happens, that in our group, we're going to have a defensive stance so that when the market volatility increases, we are going to respond to that. And we are going to actually focus on our stable profits going forward.


Operator [9]


We will take the next question from Hana Financial Investment, Mr. Choi Jung-wook.

Apologies, I think we got disconnected.

As we will move on to the next question Baek Doosan from Korea Investment Company -- Korea Investment Securities.


Doosan Baek, Korea Investment & Securities Co., Ltd., Research Division - Research Analyst [10]


I have a question on asset quality and loan classification. My first question is, this quarter, Q-on-Q, I see that your recovered loans volume has declined. Does that have to do with the reversal of the provision? Second question, basically on substandard loans, we've seen some increases, but this didn't come from bank or card. Is it from KB Securities? What are -- what's the type of this loan? And also, as you reclassified Stage 2, you've also added on the provision. So below substandard, what is the size of the substandard loans for this quarter in relation to the reclassification into Stage 2?


Bong Joong Kwon, KB Financial Group Inc. - Head of IR [11]


Thank you. We will respond shortly. Yes, we're preparing to answer your question. So just give us one moment.


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


Thank you for your question. Because your question was very specific, I had to look for some numbers. I will be able to respond to third question and there are some numbers that I do not have, and I will make sure that our IR department respond to that later. In terms of doubtful -- excuse me, in terms of doubtful loans -- now in terms of reversal of the provision, basically, there were reclassification from doubtful to normal. So there was a reversal or write-back from doubtful to normal. In terms of substandard, I would have to go back and check our numbers again. For Stage 2, basically, we reclassified normal loans to precautionary.


Operator [13]


From Hana Financial Securities, Mr. Choi Jung-wook. You're on the line, sir.


Jung Wook Choi, Hana Financial Investment Co., Ltd., Research Division - Analyst [14]


Yes, I am Jung-wook from Hana Financial Securities. Recently, we see fintech or big tech, which are both worse in the market and KakaoBank's asset is fast-growing and Naver Financial is trying to expand its influence. So for these big tech companies, what are your thoughts? And from the group, do you have a specific strategy to respond? And for different subsidiaries, what are their different approaches to big tech?


Bong Joong Kwon, KB Financial Group Inc. - Head of IR [15]


Please hold and we will soon answer your question.


Ki-Hwan Kim, KB Financial Group Inc. - Senior EVP & CFO [16]


Thank you very much, Mr. Jung-wook, for your question. There is a lot of talk about big tech and fintech, and you asked about what is our strategy to respond to these trends. As you mentioned, with the COVID, the unpack trend has been expanding and from the off-line channel to non-face-to-face channels, the major channels have been shifting, and we are seeing the competitiveness of fintech which has been expanding according to the government's policies as well. And we're seeing financial NOMADs emerging in the market with more competition with big tech companies and the fintech regulatory policies are quite different from the past. And we are seeing that the commercial customers have been shifting, and this can lead to changes in the profitability. So we believe that it can actually be addressed to the banking business on the whole.

However, seeing from another side, we can actually enter into new markets that were locked in the past, and we can actually evolve as new platform companies. So we believe that we can also fully utilize these changes. So in the digital big tech and fintech market, we believe that we can actually lead the way. It's because we have 35 million customers and we have diverse subsidiaries and banks and diverse financial products and we offer diverse services. So we can utilize these, and we have our strong banks off-line channel, and we can link these together. We can have seamless services between online and off-line services so that the customer experiences through digital innovation can be provided from the group.

How we're going to respond is the following: first, we are going to find out the pain points of customers, and we are going to reestablish our platforms. We have our main apps Star Banking, Liiv and Liiv ON. And we are going to completely revamp them so that they are customer based so that we can offer more polished customer experiences. It will be faster, simpler, customized and the communication will be more improved.

Secondly, we are going to cooperate with other companies so that we can lead innovative service development. We are going to develop innovative APIs and based on open API platform, we're going to have an innovative financial ecosystem. Within our group, we have cloud-based KB Drive, and we have already implemented this and we're going to also have a open based, cloud-based collaborative platform, CLAYON, and we are discovering -- uncovering start-ups. And we have KB Innovation HUB that we are actually already implementing, and we have a KBC fund within our group from 2018, and we have been making strategic investments.

Thirdly, we are going to meet the needs of our customers so that we can offer differentiated products and services. According to the different age brackets, we can have asset management services for the seniors, and for millennials, we can offer different types of services that will meet their needs and their digital environment, we are going to act and respond very aggressively.

Fourthly, is regarding data, the internal data integration will be utilized, and we can actually link that to external data. Our internal data will be utilized in the optimal way, and we're going to have public data and nonfinancial data that will be integrated together. And based on that, we're going to have big data analysis so that we can offer more services, and we're going to offer more profitable services, so that it can work for us. From August, we're going to have MyData that will be implemented and have a TFT within our group so that we are seeing the different directions of the different subsidiaries and we had 8 subsidiaries, including bank securities, insurance car capital, and we have actually submitted our preliminary demand for MyData to financial authorities. And from February of last year, with our card business, we have our independent my data business that has been already been implemented and we have KB My Money that will be improved, and we're going to offer online/offline simultaneous services for our asset management. We are going to have a leadership role in the MyData era as well. Thank you very much.


Bong Joong Kwon, KB Financial Group Inc. - Head of IR [17]


It's now been 50 minutes since we began our presentation. I think we are entertaining sufficient number of questions. But -- so due to the time constraint, we will take the last question. If you have any additional questions, please contact the IR team, and we will respond.


Operator [18]


As our final question from Cape Investment Securities, Mr. Kim Do Ha. Please go ahead.


Do Ha Kim, Cape Investment & Securities Co., Ltd., Research Division - Analyst [19]


This is Kim Do Ha. Excuse me, I just have 1 question. I would like to ask if you look at credit costs and your delinquency figures, I think the figures are quite positive despite the COVID situation. However, when it comes to the other support programs, the moratoriums that you have applied on the repayment of principal and interest, we believe that, that moratorium program had an impact. So extending of the repayment period or interest rate payment, do you have any specific figure that could actually tell us what the impact of the moratorium program on the principal repayment and interest payment is?


Bong Joong Kwon, KB Financial Group Inc. - Head of IR [20]


Please bear with us. We will respond shortly.


Ki-Hwan Kim, KB Financial Group Inc. - Senior EVP & CFO [21]


Kim Do Ha, thank you very much for your question. In relation to the COVID pandemic, the government has announced various different forbearance program. And at our group, through the government support program, we have been providing preemptive liquidity into the market and have been playing up to our role and responsibility.

So in terms of such preemptive liquidity provision, we feel that they play an important role in bringing about soft lending and also help against deep asset quality deterioration or sudden rise in provisioning. If we get government program, most of these programs actually compensate for the interest rate or also they use a credit guarantee fund and also different types of government guarantees are provided. And most of these forbearance support is all guaranteed by the government. So as to a burden that needs to be borne by the bank is not that significant.

If you look at the specifics of the loans that's been originated under such program, we will collect that information and provide that to you later as I do not hold the data at this point. And when we did a forward-looking provisioning, I think we did reflect some impact from these types of financial support program, the government forbearance program. There is government support, but at the same time, the credit cost increases or delinquency increases, we wanted to make sure we can control them and to fend off any asset quality deterioration. So we have things in place, and we will continuously and preemptively, really focus on managing our asset quality. Thank you very much.


Bong Joong Kwon, KB Financial Group Inc. - Head of IR [22]


As I had mentioned, we will conclude our earnings release. Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]