Greetings. I am Peter Kwon the Head of IR at KBFG. We will now begin the 2019 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 2019 major financial highlights from our CFO and Deputy President, Kim Ki-Hwan and then have a Q&A session. I would like to invite our CFO and Deputy President to elaborate on our 2019 business results highlights.

Yes. Good afternoon. This is Ki-Hwan Kim, Deputy President and CFO of KB Financial Group. I'd like to extend my sincere appreciation to everyone for joining us today at KBFG's earning call for full year 2019. Before beginning with our presentation of financial results, let me briefly take you through our key management highlights for 2019. In 2019, as the U.S.-China trade conflict became protracted, we saw a significant escalation of concerns over a global economic slowdown and the Korean economy entering a low-rate low-growth trajectory going forward. For the banking business, in particular, there have been consistent concerns of a deterioration in profitability due to diminished goal for further growth together with a squeeze in the loan-to-deposit margin. In spite of this negative business environment, however, KBFG Group placed utmost priority on financial soundness and profit-driven operations as a result achieving qualitative growth centered on a high-quality loan book improved net interest margin and noninterest income ultimately reaching KRW3.3 trillion in net profit and recurring ROE of 9.51%, representing strong underlying fundamentals. Moreover, as part of KB Financial Group's efforts to enhancing shareholder value, we were the first banking financial holding group in Korea to retire roughly 2.3 million treasury shares last December which was assessed as a firm step towards more advanced shareholder return policies. For your reference, our Board of Directors resolved on a dividend payout of 26% for 2019 at today's BoD meeting which is 1.2 percentage points higher than last year as part of progressive dividend policies. Also this year's dividend per share is KRW2,210, which is 15.1% higher than last year as a result of improved financials and additional buyback of treasury shares. Going forward, KB Financial Group will continue to enforce diverse shareholder return measures on the strength of our robust capital position.…

Thank you. Now, we will engage in a Q&A session. [Operator Instructions] Yes. Please go ahead, Mr. Kim Jin-sang from Hyundai Motor Securities. Go ahead, sir.

Yes. Good afternoon. Thank you for the detailed explanation. I have three questions. First of all, the banking industry is affected by the base rate changes lowering of the rate or so development of the real estate market. So it's very hard to defend profitability it seems. So what is the internal view for this year? What are the major management plans in terms of NIM forecast or lending loan targets for example? If you could share, I would like appreciate more explanation. And the conversion loans maybe smaller than initially expected, so it may have a limited effect. But what is the effect for fourth quarter and also the New Year? And so the P&C insurance industry is very struggling and results of KB Insurance is also sluggish. So lowering of the real loss indemnity premium for example maybe affected as well. So what kind of profitability, do you foresee for the P&C insurance business this year?

Thank you for the three questions. We will soon answer your questions. Please hold. Thank you very much, Mr. Kim Jin-sang for your questions. Regarding the first question, I will answer that. And for the loan conversion program, we will have the bank CFO, who will answer the question. And for KB Insurance, we will hear from the CFO of KB Insurance. So I will answer the first question. As you have just mentioned, this year we have low interest rates and we are seeing low growth. And it seems that the profit growth will be limited. In particular, with base rate cuts, or tighter regulations on real estate, it seems that interest income based on the bank will be quite difficult. We aim to have more concentration in WM capital market and our global business so that we can expand our earnings portfolio. We will have cost-cutting efforts across the board, so that we can have better profits. Through these efforts, we will have continuous earnings growth. Regarding the management plan, we will let you know in detail although it may take some time for loan growth. We believe that taking many factors into consideration, we believe 4% to 5% growth is estimated and for household loans for credit loans and Jeonsae and monthly lease loans 2% to 3%; and for corporate loans for the prime company 5% to 6%. So those are our targets for growth. In particular, because we have tighter real estate regulations, we are concerned about our loan growth. And because we have a high percentage of household loans, some might be concerned that we will be impacted. However, KB has been during the past many years focusing more on corporate loan growth rather than on household loan growth. And for household loans, it was…

I am Ki-Hwan Kim, in charge of finance for the bank. In the case of that relief loan conversions or conversion loans, as you know, for those who have signed up according to their eligibility and the price of their housing, the prices are changing and volatile, so the reviews will continue up till March. In last year on the books, it was about KRW2.4 trillion that was securities -- securitized as that relief conversion. And for other institutions it was about KRW1 trillion and for us it was KRW1.4 trillion. And we securitized KRW2.4 trillion to Korea Housing Finance Corporation and it seems that the amount is smaller than expected. And regarding the early fees that were recovered in Q4, we believe that there were KRW3 billion of minus effect. And in 2020, we believe that although it has not been confirmed yet internally, we believe that if we add everything together we will have minus impact that will be around KRW20 billion. Regarding the impact to the NIM, we believe that it will be around one bp to two bp that will have downward pressure on the NIM. Thank you.

Yes. I'm from KB Insurance. Thank you for the questions. So we have heard at a high level from the KBFG CFO, but as you mentioned we are facing low growth low rates and aging of demographics which are all negative factors impacting the P&C industry. In terms of long-term insurance, there is this competition over new business anticipating the deterioration expense ratios and weighing on our profitability. And due to lower market rates, the investment yields are also diminishing. So, this year, overall, it will be difficult to expect significant or meaningful improvement in our performance. And more so than anything else as you mentioned, this year the auto insurance premium price actually has been determined at 3.5% which is lower than expected. And for the indemnity real loss health policies as well, there are many factors that could call for higher increase. However, the actual increase was decided at a rate that was much lower than the industry expectations. And also with increased coverage of medical health insurance there actually has been an increase in medical claims for previously un-reimbursable items. So, overall, for 2020, we think that the sluggish performance for P&C players is likely to continue this year and real loss indemnity premiums will only be increased by about 9%. Now, even taking into consideration these difficult conditions, still we think that compared to 2019, our net income on a full year basis well the target is about KRW250 billion. For the long-term business, there is the driver insurance, comprehensive health insurance, these insurance products for persons with preconditions. So, we will focus on these strategic products to drive growth. And we also want to strengthen management profitability be more sophisticated in terms of managing our loss rates through tighter claim management. For auto line, we…

Thank you for the question and answer. We're waiting for the next question.

From Samsung Securities we have Mr. Kim Jaewoo on the line.

I'm Kim Jaewoo from Samsung Securities. I have three questions. The first question is about your treasury shares. And KB, for the first time in the industry, had the timing of the treasury shares and you have had continuous shareholder return policies. And I think you were quite significant. Regarding your positive review at the company that returns value to your shareholders, it is very positive. And regarding retirement or share buyback or related to dividend, can you brief us on your future plans for usage of capital? Do you believe that you will have retirement of shares this year as well? Second question is about Cambodia PRASAC and you mentioned briefly in your presentation. And can you tell us more about why you acquired the stake and the background? You can please briefly on -- briefly tells us on the upcoming schedule if you can? And if you can tell us about when the earnings will be consolidated to the group. The third question is related to Prudential. And it is seeing constantly -- actually brought up in the media for Prudential Life and I know that it's hard for you to answer at this time. But if you can brief us on the future forecast, it will be greatly appreciated. Other than this, if you can tell us about any other M&A spend for the group; it would be greatly appreciated as well. Thank you.

Thank you very much. Please hold and we will soon answer your question.

Thank you very much Kim Jaewoo for your questions. Regarding the first question, it was about the share buyback or share retirement possibilities and other ways to use capital. We acquired KRW 1.5 trillion of shares last year. And for the first time in the industry we had the retirement or cancellation of the shares. So we believe that in terms of shareholder return policies we played a significant role and we will continue to play that role as well. In the case of dividends, actually it was at a 20% level 20 years ago, but our dividend payout ratio is at 26%. And our DPS has actually through the earnings improvement and share buyback has improved greatly as well. As we have been mentioning consistently, we aim to have the dividend payout ratio go up to 30%. And for the DPS we want to have it go up consistently as well. Regarding the cancellation or retirement of shares, I cannot tell you with solid numbers now but we do know the retirement of shares leads to more value for our shareholders and for the capital usage. So we are truly aware of it and we are fully open to future possibilities. Regarding the share buyback we know that it is also always an option for us to utilize our capital. However, there are different M&As that we are thinking about now and other ways to use our capital, so we will need to look at the timing and at the amount for us to make the final prudent decision. We have differentiated capital power. So for dividends and for share buyback, we have been consistently giving back to our shareholders and we also want to add to our ROE through M&A. We want to have many efficient ways to…

Thank you, very much.

50 minutes have already passed and the business results presentation covered many details and I think we had a full Q&A session. I believe that we can receive one more question and then conclude our earnings call.

From DB Investment Securities, we have Mr. Byung Gun Lee on the line.

So, let me just ask a very brief question because, I think there's not a lot of time. Regarding the conversion loans, you said KRW 2.4 trillion were stated last year, KRW 800 billion have been securitized. So, December and January, if you look at the securitized, it's about KRW 810 billion that was securitized in December and then in January, it was about KRW 920 billion. So combined, it's about KRW 1.74 trillion that is a securitized in total. So, according to what you said before, there's a lot of -- have you already done a lot? So, there will be less to come out of KB in the next months like February and March? If that is the case, then the effect of the conversion loan securitization is -- will it stop after January? And then LOC accelerated amortization actually was a major factor you mentioned earlier. So, does that mean that that kind of factor has already been priced and factored in? There's no further outstanding effect on account of LOC amortization?

We will soon answer your question. To answer your question, regarding the -- that Liiv conversion loan as aforementioned, for the other institutions amount received because we can't generate fee income, so the financial impact will be there revenue-wise. And until Q4, KRW 2.4 trillion was mentioned. And among the KRW 2.4 trillion for our bank, we handled KRW 1.4 trillion. So, from our mortgage loans, it became securitized and that is why we have the LOC impact. In Q4, I mentioned that we had one bp for the NIM, but on a yearly basis it's 0.25 bp impact -- NIM impact for the year. As mentioned previously, to actually assume the total amount, it's still too early because, it has not been confirmed yet because, we need to get a review until March and we need to see how March will come to us. And as was mentioned in the beginning, that impact we believe that on a yearly basis for this year will be minus KRW 20 billion.

For those who have additional questions, please contact our IR department and we will do our best to answer your questions. We will conclude our earnings call. Thank you very much.