Q3 2019 Siam Commercial Bank PCL Earnings Call
Bangkok Oct 30, 2019 (Thomson StreetEvents) -- Edited Transcript of Siam Commercial Bank PCL earnings conference call or presentation Tuesday, October 22, 2019 at 10:59:00am GMT
TEXT version of Transcript
* Arak Sutivong
The Siam Commercial Bank Public Company Limited - President
* Jens Lottner
The Siam Commercial Bank Public Company Limited - Senior EVP, Acting Chief Strategy Officer & CFO
Arak Sutivong, The Siam Commercial Bank Public Company Limited - President 
sort of sharing the latest update, the highlight from Q3, just the big events. And Khun Jens, our CFO, will walk us through the detail Q3. The big event for Q3 is a completion of the transaction of the SCB Life. With that, basically, SCB has shifted our business model of life insurance business to be from integrated model to be distribution only. And just worth emphasizing that we are not exiting life insurance business, but very much in the life insurance business, but doing it very differently.
This transaction, in the beginning, of course, about 3 months ago in this room, a lot of questions were asked. And unfortunately, we couldn't share a lot of details. But since then now, this time, now the completion, we could actually share a little bit more. And if you have any questions, we can go in quite a little bit of depth on that one. But basically, this is a transaction that will lead into, apart from the business model, the performance, significant performance change in terms of how we see the business, right? And in terms of the transaction itself, it leads to 2 parts. One is the onetime recognition investment gain of kind of pretax and post-tax as shown here. The post-tax capital gain of THB 11.6 billion to be booked in Q3 -- already booked in Q3. A lot of you have questions in and around how the calculation worked. But hopefully, by this time, it should be relatively clear, the cost and the tax and everything.
And the other part is defer recognition based on the accounting standard. THB 17.7 billion would be recognized over 15 years. So that will be amortized over the next 15 years, and you can calculate quickly what it is. Now what happens -- and, of course, there's -- let me try to address some of the questions that you might have in terms of what does it mean going forward. Would we be able to still deliver the kind of the growth that we want to see from the life insurance business? Of course, a lot of uncertainties remain, but I think we're confident. Some of the questions are coming in, where if you look at SCB Life, well, if you look at life insurance business, from a bank's perspective, it has 2 components, right? One is the contribution from SCB Life net profit plus whatever commission that bank gets. Of course, the commission still continue and hopefully bigger than before because of the product suite, the sales support and a lot of things. So we expect the commission stream to actually continue to expand possibly and expectedly larger than what we've seen.
But the question in a lot of people's minds, like the contribution from SCB Life, what would -- how would we replace that, right? And if you look at it, from at least a publicly available number in 2018, the net profit from SCB Life is about THB 5 billion to THB 5.5 billion, around that number, THB 5.2 billion, THB 5.4 billion, around that. So a natural question would be, with this shift in the business model, what would replace that, right? And I think we've been essentially sharing the message that we are confident that we would be able to replace that.
Now let me sort of give you the highlights of how we intend to do that without going to specific too much. One, of course, is now the THB 17.7 billion amortized over 15 years, so that would be one component. A second component, which is actually a big one, is the redeployment of the capital that we have. THB 92.7 billion is the total proceed. But if you subtract the tax, then you have about THB 80 billion left of cash to be redeployed. And the extent that you can get the return on this cash depends on the timeframe and the risk appetite, right? I can give you the range of things. For instance, being more conservative and definitely can be done, depending on the proportion that we want to set is, for instance, the high cost deposit replacement. In our high-cost deposit, we could be looking at 2.4%, 2.5% type of number.
A little bit more sort of a high return would be to invest in certain asset classes, which, for instance, in our yield for the earning asset, would be around 4% to 5%. If you invest in the quick equity, some sort of a private fund of some kind, you should be able to get something close to that. But of course, our ROE of 10% or the teens is what we ought to be aiming for. It depends on the time horizon. But based on those 2 buckets, one is the amortization, the other one is redeployment, you would already come quite close to the baseline.
And also, there's another bucket which is actually, unfortunately, not disclosed publicly because that's part of the agreement between the 2 parties. There are some components in and around allowance, in and around the performance-linked bonus. Those are things that hopefully will become more evident over time. So with those components, we are quite confident that we would be able to do better than just the contribution from SCB Life itself. And of course, on top of that is the commission. So all in all, I think this is a very value-accretive transaction. And hopefully, we'll be able to prove to you guys and to the broader community over the next couple of quarters when we start to see the results coming in.
So that's update one. On the transaction itself is already effective, but really, the -- there's some still in the transition. Hopefully, we will start to see the real traction starting next year in Q1. Q4 is -- they're in transition right now, but it's already -- the business is effective already.
Second one, which is the backdrop of the rest of 2019 and next year. Let me give you a little bit of our perspective, and from -- after this, Khun Jens will walk us through Q3 results as well as to explain some of the decisions we have taken.
So if you recall, actually, towards the end of last year, when we sat in this room, we were saying that 2019 would be relatively difficult year. And if you remember, we set a onetime provision. At that time, a lot of people were asking why because we kind of felt that it was going to be a relatively challenging year. In fact, it turned out to be more challenging than we thought, right? A lot of people did not expect the trade war to escalate to the level. There's no Hong Kong unrest. There was a lot of export and import issue being disrupted, Thai baht being very strong. The policy rate, interest rate remains extremely low and possibly hit historical low in -- by the end of the year.
So all those things, actually, in terms of the performance for the bank, of course, is taking a toll on overall condition in terms of growth, in terms of asset quality. That was the outlook -- the perspective coming into this year. And I'm sure that a lot of things turned out to be what we were kind of preparing and thinking about, which means that a lot of houses now actually revised down the GDP, the export and the Thai baht, everything to be sort of the right-hand most column. Oh yes, he has -- the house view has been actually on the sort of bearish side, and it turns out to be more accurate compared to a little bit more bullish by other houses.
Now with this as a backdrop, the -- we are actually intentionally taking sort of precautionary measures in a lot of things that we do, right, to build a buffer as required. So that also would explain the THB 9.1 billion additional provision that we took in this third quarter. That's just to build the buffer for going forward. The question might be, would there be more? I think at this point in time, when you look at the economy, it all depends on what the Q4 -- I think Q4 would be a good preview of what next year might be, and we need to take a closer look because it depends on a lot of factors. And as a bank, I think our stance is that next year is going to be a relatively volatile and uncertain year. So we'll need to take a closer look and decide on that one, and we still have quite a bit of time. And when we give 2020 guidance, which we typically do at the beginning of the year, we'll be able to share with you a little bit more on our guidance across all the headlines number that we typically do.
So basically, the tone for us for this year is relatively of a cautionary one. And next year, we still remain prudent and cautious in many things that we do, and hopefully, that will set the backdrop. But of course, we would be in a position to continue to grow, if that's -- the market opens itself up, but we do want to be -- send the message that we -- one need to be quite careful and considerate about the situation. That's also echoing by Bank of Thailand and many regulators as well, right? But in that sense, it's a little bit of a backdrop of 2019 and a sneak preview of 2020.
But here, today, we'll talk about Q3, which I think Khun Jens will take us through the key numbers.
Jens Lottner, The Siam Commercial Bank Public Company Limited - Senior EVP, Acting Chief Strategy Officer & CFO 
Okay. And so I walk through the Q3 numbers. Again, some of that is kind of the reflection of what Khun Arak just described in terms of and some of the forward-looking prospectus we have on the banking market. Okay.
So -- and if you look into the numbers, the first ones are kind of a little bit distorted because of the deal. So I tried to put them into perspective also what we guided and what you would actually have without and that one-off exercise. So -- and total income growth, of course, because -- and we had this massive gain and is pretty high. If you would have taken that out, so if you take the THB 24 billion out, which we have as a onetime capital gain, and we would have roughly been at 5% on growth on actual, so which is reflecting mostly actually a pretty good NIM scenario.
So our NIM, and even without all the other exercises, we're actually pretty okay. And the reason is -- and even when loan growth came in a little bit lower than expected, and so we are not seeing the 5% to 7%. We're actually lower because the economy is not growing as quickly. And on the other hand, we actually really saw a NIM expansion because of the way how we move the book and away from corporate and mortgage into higher-yielding retail loans. So we saw an expansion actually on the margin side, which actually helped and helped NIM. So NII would roughly be in that range, actually, of the 7.4%.
The non-NII growth would probably been roughly around flat. And we've seen actually pretty good traction on the really core recurring NII. So we look into Bancassurance fee, we look into fund management. They all actually were pretty okay. We also -- and finally won out this whole fee waiver. There were some elements, especially on more one-off transactions, capital market transactions, which we had last year, a couple of big deals, which were not coming in this year. So that actually brought it down, but we would have roughly been flat. And we guided in the beginning up to 5%, and we said already we probably are rather in the lower end. But again, we probably would be getting somewhere in the 0%, 1% in non-NII growth.
The cost-to-income ratio -- and again, right now, very, very low because of this one-off income, we probably would be in at around 48%, not at the level we wanted it to be. And I will explain a little bit like where we are on that and what we are intending to do.
And net profit would roughly be in -- would have roughly been around flat. And so we would actually have done quite okay on the income stream would gone up, as I said, roughly 5%. We would have taken a little bit more on the cost side, and we would actually also have provisions somewhat higher. So in the end, we would have been roughly flat.
So if you see then, the total loan growth, again, as I said, and we are below and reflecting the kind of that the overall industry is growing much slower. And the net interest margin would be on the high end. And so we would be higher than we guided, around 3.35%. We would actually be higher than that, and we would rather be in the 3.5% and with an increasing tendency.
The NPLs -- and again, that is probably at the 3%. And we said we didn't want to go through the 3%. And again, there's -- and you've seen that in the press, one big account. But again, I think we will see if we can still keep that under control, but we might be ending up at the end of the year a little bit higher, maybe 3.1%, 3.2% and around these areas.
The coverage ratio again maintains pretty high because of the THB 9.1 billion we put in. And I think when Arak already talked about it, but let me stress that, whenever we are doing these kind of provisions and also the THB 9.1 billion, this is for forward-looking exercises, forward-looking buffers. So if we run -- right now, running our models, if we're doing IFRS and all of that, whatever we have actually have enough. So this is looking forward. If we see further deterioration, if we see further unexpected events, that is where we put the THB 9.1 billion in. That's exactly the same like what we did in last year when we put the THB 4 billion in in the last quarter. This is kind of forward-looking.
And if we see certain things are really deteriorating, that we have the buffer and we don't want to [and even]. But it's not like, some were saying, "Well, is it a kitchen sink? Everything goes in." And that's actually not the case. This is really prudent behaviors. We're looking into what do we need going forward, what is in the book and usually we'll provision, according to the book, we're not putting a lot of extra provisions in on all of that. And so we're not really using that as a way to kind of bring profits down or something like that. But indeed, we are looking very much like we provision what we see and then we put maybe some extra buffer. And the THB 9.1 billion clearly is that extra buffer.
And return on equity assets and all of that, again, is a little bit distorted. So let me go a little bit more into detail through some of the numbers and then discuss them.
So again, probably on the net profit, operating profit, that's probably least interesting because, again, there's a lot of one-offs. So if you look into the kind of non-NII, and you see if you take basically THB 34.3 billion, take THB 24 billion off from the capital gain, you'd be standing roughly at THB 10.3 billion. So -- and THB 10.3 billion would be normal non-NII income. If you see that over the lines, it was roughly the same in quarter '18. But then you saw this actually dropped quite a bit over the next 2 quarters and then we started bringing it up again. And that's roughly also what we're seeing. We're actually seeing that, especially on the recurring income, as I said, we're getting traction, especially back on the Bancassurance we made and some good progress on loan-related fees. So the non-NII is actually, going from our perspective, pretty okay and strong according to what we have planned.
And you also see that the NIM is actually going up, right? So -- and THB 24 billion constantly moving up, which is exactly -- what I said is even if we don't expand the balance sheet, we want to be more effective in the use of equity. So we actually looked into most of the box, which we don't want to grow and wanted to price them up so that we get a better return and then really start shifting into the high-margin business, and that is actually driving NIM so that we have a higher NII income even if we don't aggressively expand the balance sheet.
What you see -- and that's usually what we're looking is, how is the industry tracking. And banks, of course, are very, very much proxies to the overall GDP environment. And as you see, as everything goes down, also the banking sector is coming down. And we are right now seeing roughly 2% loan growth year-on-year. And as we said, we wanted to be 5% to 7%, but that was also assuming a different macroeconomic environment. As this macroeconomic environment starts slowing down, we actually also will be pretty prudent in what we are doing, and especially on the housing side, on the corporate side and SME, we will be looking very carefully on how we underwrite. And if we are not completely convinced that this is the right quality, we will probably rather forsake loan growth in order to make sure that we protect the balance sheet.
The focus mostly on very good customers, customers we actually know, and on customers where we are pretty clear that their income streams are pretty well diversified and et cetera. If we are -- if this means that, at least in this area, we are forsaking a little bit of margin but we know actually the risk profile is very good, we would probably do that, just to make sure that we actually use the balance sheet. But again, we will play this very close by ear over the next couple of months as we look into the overall economic environment.
If you then look into net interest margin, that is -- and what I was talking about, again, a couple of these numbers are kind of a little bit inflated because the moment we took out the -- our life insurance business, we actually took out the assets. But on the other hand, still, for the full 3 quarters, we actually still collected the income. So therefore, our income numbers, if you take income, what we collected, divided by the assets, given the fact that the assets were already out, you see an inflation, especially on the yield on earning assets and not so much on the yield on loans because there were indeed some policy loans, but not to that [extent]. So probably, it's a little bit better to look into the yield on loans, and that's where you're seeing actually the upward trend, exactly what I described.
On the earning assets, again, that's also going up. If you would take this out, this onetime effect, and probably the 4.62%, we have this in the footnotes, but again, that's also reflecting actually the way how we are using our balance sheet a little bit more effectively. And that is even already incorporating some of the [MOR] or the policy rate cuts because the policy were coming down. So that runs a little bit through our books. 20% of our existing book is affected by the  bp drop which we did on the MOR and the MRR. But again, we were able actually to compensate quite a bit with some other capital market activities as well as the overall shift of the book.
So again, I think the NIM side, and from our perspective, is actually pretty well protected. And we're looking, of course, also if this starts coming down even further. But again, we have not done anything yet on the deposit side. We basically just cut down some of these special markups and all of that. And we have done this in the third quarter, just in order to maintain a certain liquidity. But again, as Khun Arak said, with the liquidity we're at right now having, we will probably not, as a minimum, use any of these high-cost deposits. We will actually start running them down. So again, I think on the NIM side, we are pretty comfortable that we will end at the higher end on what we have guided.
So that gives you a little bit a breakdown on the portfolio. So as we said, if you look into the corporate loans, they're actually down. And if you look on to the SME, we're pretty much in keeping that flat. The other one, big one, which is housing, again, we are marginally growing. Most of that was actually in the first quarter before the macro prudential and kind of requirements from BOT were coming in. But right now, actually, we're keeping it flat or even bringing it down a little bit, and most of the growth is actually in the high-margin business.
So a few trends -- okay, let me. If you translate that one into where we stand on the margins and we tried to basically bring them down, you see that, on the corporate side, we started pricing the portfolio up. Right now, as we're getting a little bit more kind of trying to basically really go after the really good, good, good names, and that might come with a little bit of a drop on the margin side. But again, I think from the overall (inaudible), that actually looks better. We have priced up the SME portfolio, we have priced up the retail portfolio.
On the housing loans, we're pretty much constant. But then you see, especially the auto, when it comes to credit card, Speedy is actually relatively higher-margin businesses. And again, we're trying to maintain actually the pricing discipline even as we start growing the book because, as we said before, in this area, we have a very, very low market share. So it's not about growing aggressively after new guys. And we had a lot of customers in the past which we just sent away. And right now, we are extending loan and facilities to those customers. So we don't have to be very aggressive on the pricing side. We can actually deal with that and pretty comfortably, which helps us to bring that up without increasing the risk.
Arak Sutivong, The Siam Commercial Bank Public Company Limited - President 
And if I could add on the loan business a little bit, because I know that for, I guess, the analyst and investor community, loan growth is one of the key targets that you typically would require in order to kind of estimate. But for us, more and more, I mean there's a concept of growth by design by the loan that we mentioned. We don't -- a bank of our franchise, of the size distribution that we have, the quantum of the loan itself is not a good measure of the quality of the business that we want to bring in, right, when we can drive the loan growth as in history that you've seen.
We can -- we are able to drive in the double-digit growth if we wanted to. But I think, more and more now, I think we will perhaps guide a little bit less on the quantum itself but more on the quality and the risk return that we want to see the margin and the segment that we want to see. So in that sense, if you don't see a lot of necessarily the growth target on the loan, don't be too surprised. But be very much mindful of -- ultimately, it needs to drive to the NII part of it, but don't get so fixated on what it might be. Because for us, as in this year, the growth itself on the quantum, it might not be big, but we do want to be able to still maintain the NII growth at the end of the day. So that's a little bit -- and then that's through the shifting of the portfolio, risk/return adjustment, optimization, the portfolio mix and all these things.
Jens Lottner, The Siam Commercial Bank Public Company Limited - Senior EVP, Acting Chief Strategy Officer & CFO 
Okay. So therefore, that is the other side then of the coin of the loan side, right, so -- which is the NPLs. And on that one -- and again, the -- you see the -- an increase in NPL, especially new NPL, that mostly is one account and which wound its way into the press, and there is one or 2 other corporate names which [we] brought that up. Because we have put some of that already into the special mention bucket, you see that the special mention bucket, they're actually coming down because some of that just started moving on to the NPLs. And then if you see the total [TDR], that actually has come down. So it's not like that we're seeing a constant inflow into the portfolio or what we need to restructure.
So there are still areas on SM and NPL, we -- as you see on the other side, and corporate, again, has come up. In SME, and we're still worried especially about that part of the portfolio. I think as usual, SME is probably the ones which will be most affected when it really comes to a slowdown of the economy. And again, if we have a protracted slowdown, we watch that very carefully.
And housing loan is, I think, at an elevated level but again, under control coming down. And the same is true on the Auto Loans, coming up a little bit. I think we will still see some of these numbers to be elevated. And again, that's also when Khun Arak talked about, okay, we monitor that actually now over the next couple of months very closely and then give very clear guidance at the beginning of next year.
But the -- again, coming back to the THB 9.1 billion, we said, we set it basically against that trend and we didn't set it against specific names. And so we just are mindful as the start going up, we want to make sure that we actually have a sufficient buffer to deal with that situation. And again, we monitor that over the next couple of months because we hope actually get a little bit more guidance on how the economy is really developing.
The provisions, therefore, if you put the THB 9.1 billion in and still -- and stays at the 144, as we said, we wanted to have roughly 130 bps. Of course, the credit cost, if you start putting that together, is becoming very elevated because we put that in our normal business as usual. And what we're putting in is probably [more] than the 110, 115 basis points, which we guided at the beginning of the year. At the beginning of the year, we guided at around 115 to 135. 135 would have been, if we would really have seen very, very aggressive growth in the retail and the high-margin area, we haven't seen that to that extent. And so therefore, we also don't need so much. So we actually put that down. So that's the average provisioning, of around 110, 115 basis points. And then on the other hand, the THB 9.1 billion is what we put in, in addition, which then led the credit cost actually skyrocket.
If we come to the fee side. And again, you have this big, big piece there on the net gain on investments, if you're taking that out. And I think the interesting piece is really mostly around the -- if you look into the net fee income, the THB 6.5 billion, THB 7.2 billion, THB 7.4 billion, that's actually where we see that we start on compensating for this fee waiver. You also see that the net insurance premium, which used to be the result of our SCB Life operations, which always used to be kind of THB 1 billion or something like that a quarter, right now, stands at minus 0.64, which, again, reflects just one of the reasons we always talked about that there were certain elements in the book of SCB Life right now from the shift from very much savings products to protection products and all of that and including some other elements like let and other provision requirements, which actually make this a very volatile swinging entity, which is the reason, actually, we didn't like it. So this one is the last time you see this number we presented because last quarter, we still had most of the insurance business for us. But going forward, we will actually shift all that into another number, which is actually the Bancassurance fee. So the Bancassurance fee going forward will look very, very differently because a lot of that will just be booked into that area.
But even there, you see that -- and we said this before, Bancassurance actually, right now, quarter-on-quarter, has grown 14%. And on the year, it has grown 2%. And if we would have shown all the income on the commission income, which we have received from SCB Life without the kind of operating results of the manufacturing parts of the net interest income, the provisioning and all of that, that number already would actually have been showing an even higher number. So again, from the Bancassurance side, we're actually pretty comfortable that this was a pretty good year. You see the mutual fund also looked pretty okay.
So on the core recurring income or the core fee income, we are actually seeing some of the benefits of all the transformation efforts we've done over the last year. So we see actually online but also on our physical distributions, the branches and some of the sales forces really start kicking in. So -- and we expect that to actually look better going forward.
Cost-to-income ratio. To be fair, that's not something we really expected at this level, and we also don't like it. And I think some of you have rightfully commented on it. There are a couple of things in here, and it's not kind of an excuse, it's just an explanation. One is we expected a faster migration from people out of the branches. So while we have seen a massive increase on actually on the technology side, on the digital channels, there's still a very, very persistent flow into the branches. And when we ran through the branches and we closed down all the ones we had, roughly 250, the ones we're touching right now are actually still profitable and they are marginal profitable. But only if more and more people probably still start moving out, will we be able to close them down and without major disruption to customer service and customer satisfaction?
So that persistence of the branches is probably something where we hope to act much faster. And we will see, right now, there are certain developments, especially on the agent side. So we see transactions going not into digital channels, but transactions going from the branches on to agent channels, especially 7-Eleven. So if that continues, that would actually enable us probably another round of freeing up of capacity in the branches. But again, that's something we still have to work on, which probably is going slower than we actually had expected.
We also had redeployed a couple of people -- actually quite significant amounts of people into revenue-generating roles, into sales force, into the branches, but into the sales of the branches. Now given the fact that this is not the easiest environment and right now -- and also that some of the sales started shifting already to digital, I think we probably have a decision to take where we think that if the productivity really doesn't start to pick up, should we actually do something else, and should we actually take this out as a cost? Again, we budgeted for a revenue increase. We have not seen that amount of revenue increase. And then if the environment around us is getting even more challenging, we probably have to really relook from our side into how we structure the cost base.
And then there were a couple of one-off exercises in there, which, again, probably we should have budgeted for, but we haven't. In any case, this probably is, together with the NPL, the biggest area we will be looking into over the next couple of months. And so when we give guidance and we will give you more details on how we're actually deciding to bring that down. And we guided a middle 40% income -- as we said, right now, we're standing at 48.1%, even if we have the one-off gain and that artificially brings that down and we are not at the productivity levels we want to be, and again, that clearly is an area where management has to look into.
But why we're seeing the slowdown? We have not yet seen the real increase we're actually looking for. So that clearly is an area we still have to look into. We expect already next quarter to come down. And -- but again, we have to do actually much more in order to get to a sustainable draw because right now, our draws are kind of flat. And even with the 4% to 5% revenue increase which we had, and if you take the one-off, in a way, we still have this 4% to 5% OpEx growth, slower than before, but again, still significantly too high to our liking. And so again, we will give you more information on that.
And deposits, again, I'm not talking so much about it. And I think just from the funding side, because we get a lot of the funding in right now from transaction and we see actually a pretty high LCR net stable funding and all of this because we have not started to completely redeploy that funding into other yielding assets because just came in. So right now, we are replacing mostly on deposits. So that will actually mean that because we're replacing mostly high-cost corporate deposits, and so what you will see is actually that NAV ratios, stable funding ratio, LCR will all be at pretty comfortable levels. They were never low. They were always pretty actually high, but we will see that to be in a very comfortable funding situation even if we see loans going down further.
Capital. We released -- or we increased core Tier 1 roughly by 1.7%. And so 1.2% was coming out because we are not consolidating SCB Life anymore and then we appropriated the first half profits in 2019. And we already -- and [redeemed in some Tier and 2]. And so contrary to some of our competitors who issued Tier 2, we actually brought it down. And because we still see at the [CAR] level of 18% and 16.9% Tier 1, that we don't really see the need why we would have it just in order to fulfill the overall CAR situation. If, at one point in time, we find a more efficient use of the Tier 1 and we actually can still maintain our CAR ratios with cheap Tier 2, that's what we are going to do. But at this point in time, we actually -- because there are some other considerations we're having when it comes to maybe also nonorganic moves, we want to keep actually that Tier 1 there we guided before.
And if, at the end of next year, we have not found really good redeployment of capital, as Khun Arak said, ultimately, we have to return cost of equity. So if we're still running at pretty high elevated level over and above what is relatively required, then we actually have to look into more efficient ways of using the capital.
And at this point in time, frankly, we had a kind of different debate 2 or 3 months ago. But as we see no real sign of recovery in the economy, and we rather right now prefer to err on the conservative side because we don't know exactly what's going to happen. Again, we replaced Tier 2 with Tier 1, but we're not really bringing down Tier 1 or the overall CAR level at this point in time because there's so much uncertainty.