Greetings. I am Peter Kwon, the Head of IR at KBFG. We will now begin the 2020 Q3 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 Q3 financial highlights from our 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 Q3 major financial highlights.

Good afternoon. I am Kim Ki-Hwan, CFO of KB Financial Group. Thank you for joining KBFG's presentation on Q3 2020 business results. Before presenting on the earnings, let me first brief you on the operational backdrop. As of end of August, KBFG completed the consolidation of Prudential Life, Korea's top-tier insurer in terms of capital adequacy, sales capabilities and financial stability as its 13th subsidiary. With that, we have finally completed the acquisition of a life insurer, which was a long harnessed aim, gaining a meaningful market position in the life insurance industry. With a perfected business portfolio, second to none in the financial industry, we are now able to further enhance the group's potential for sustainable growth and profitability. Driven by robust earnings fundamentals following the expansion in our nonbank portfolio and preemptive and precise risk management, once again, we were able to record a quite stable earnings in the third quarter. However, with the prolonged COVID-19 pandemic, overall business environment for the financial industry is turning unfavorable. With social distancing and restrictions on economic activities, macro outlook for the Korean economy continues to be negative. While financial support program for hard-hit SMEs and SOHOs have been extended by 6 more months, which deepened concerns over asset quality deteriorations and have once again put to test risk management capabilities of the Korean banks. Firstly, I would like to affirm that under the crisis brought on by COVID-19, KB has kept its asset quality stable, underpinned by its rigorous risk management framework. With the extension of the financial support, i.e., moratorium on repayment, it is true that for some marginal companies there could be a carryover effect of deteriorations which would eventually lead to erosion of asset quality. However, by taking basic financial information of the borrowers and cash flow…

[Operator Instructions]. From Hyundai Motor Securities, Mr. Kim Jin-Sang.

First of all, thank you very much for a good earnings this quarter. I would like to ask two questions. First is on the loan growth and NIM. I see that the trend is favorable, in line with your guidance. Loan growth is higher than your projection, and you're defending the margin quite well. What is your year-end projection for loan growth and for NIM in the second half and next year? What is your outlook? And I also have a question on M&A. Since you've talked about the Prudential and also you have acquired products, and also from Cambodia, I feel that your acquisition efforts, and organic efforts have really helped with your growth. Do you also have any additional M&A plans?

Yes. Thank you. We would like to please prepare. Give us a moment, so that we could respond to your questions. Just one moment, please.

Yes, Kim Jin-Sang, thank you very much for your question. In terms of the loan growth and NIM outlook, I will be responding to your question. And for the M&A-related question, Lee Chang-Kwon, who's in charge of our strategy, will be responding to that question. Now coming back to the loan growth and NIM growth. As you know, in the first half of this year, the unsecured loans and large corporate loans have increased quite significantly. Policy loans and financial aid program had also been extended. As a result, the growth rate outperformed our initial projection. And also from the third quarter, we really focused on profitability and soundness, and we have moderated the growth rate around the corporate loans. By end of the year, basically, in light of the sales and write-off of the loan receivables, we believe that in Q4, the loan growth is going to be quite moderate. So on a per annum basis compared to September -- end of September, we think that there will be only a slight marginal increase. Looking at household loans, basically, there's been more stricter requirement on the new origination. So I think -- and as we enter into the Q4, the growth rate is going to be moderated. In terms of the corporate loan, we will continue to employ lending policies that focus on profitability and soundness. And at the end of the year, companies -- there's a seasonal effect as they increase their repayment. So when it comes to corporate loans, I believe that the growth rate is going to be quite flat as compared to the end of September for corporate loans. Moving on to our NIM outlook for the future. In the third quarter, because of the rate cut, asset yield had additionally declined. We have --…

I would like to comment on the M&A strategy and to overseas markets that you asked about KB, so far, has been trying to garner sustained growth drivers and a balanced portfolio and to expand our business, we have been working very hard. And as the CFO has mentioned, as a result of our efforts, in 2014, we only had 20% of nonbanking profit contribution. But in Q3 of this year, it has gone up to 40%. Bank and securities, life insurance, non-life insurance, credit card, in different areas, we now have a solid portfolio. So in the industry, we have the most balanced and most stable portfolio. Regarding the additional M&As going forward, for the time being, rather than focusing on new M&A opportunities, we will work hard, so that we can perfect our merger with Prudential and with PRASAC, so that it can be safely settled. And to create new values, we are currently working on PAA -- PAI. So we are going to focus all our efforts on the smooth settlement. However, if there are good opportunities that can help our value, then our profitability -- if it can help our profitability and financial effect and if we can have a value up, we were going to comprehensively view them, so that we can look into those opportunities with prudence. In the case of overseas entries -- entrants, there are the country risks and other characteristics, cultural characteristics and linkage with our company. So we're going to consider all facets, so that we can make prudent decisions.

Next question from Hana Financial Securities, Mr. Choi Jung Wook.

Hello. I'm from Hana Financial Securities. My name is Choi Jung Wook. It's a little bit early, but I would like to ask some questions about dividends. The market is very much interested in your dividend plan going forward. And recently, the authorities, because of COVID, they have asked to refrain from giving out dividends. And I think in the news, we have heard about that. And KB has had very good earnings until Q3. And compared to last year, it seems that your, actually, earnings and performance could be better. And if that happens, then there could be some dividend impact. So could you actually give us your take on what is going to be the direction of dividends going forward? And not only this year, but in the mid- to long-term, can you tell us about your dividend plan and shareholder plan because you have mentioned that it's going to go beyond 30%? But we -- if you can tell us in more detail about your mid- to long-term dividend plans, it would be very helpful.

Please bear with us, and we will soon answer your questions. Thank you.

Thank you very much, Mr. Choi Jung Wook, for your question. This year, due to COVID-19, we have had some economic downturn. And regarding management of capital adequacy, there has been higher requirements. So I know that people have growing concerns over dividend payout contraction. And just to give you our position, because of COVID-19, the global economic crisis is now becoming a reality. And in the financial authorities of major countries of U.S., Europe and Australia, they have been recommending that the bank's dividend and share buybacks will actually need to be toned down. And Korea's financial authorities also are asking the banks for conservative capital management. And in our side, we also have been making thorough and strict preparations. But we also have very solid capital capability. So we are trying our best to meet both ends. For this year's dividend payout ratio, I cannot give you very concrete details at this point. But since there are some concerns about the prolonged economic downturn following COVID-19, and because of the economic uncertainties, we need to be fully prepared. We can say that very aggressive dividend payout expansion could be a little bit challenging in the current environment. And for this year's dividend payout ratio, we need to take into account management environment and management strategy and to make a final decision. For the Korean banks, their dividend payout ratio is in the mid-20% range and total shareholder return ratio is at about 30% rate. So compared to the banks in the U.S., Europe and Australia, it is markedly low. And the Korean banks have stability in strong earnings and capital adequacy and very solid asset quality. So taking into these factors, we believe that we can -- it can work positively in the dividend payout ratio. So we believe that we are going to do our best, so that our dividend payout ratio can be maintained at least to a similar level of last year. And regarding the future dividend payout ratios going forward, we have been consistently maintaining 30% rate that we want to push it up too, and we are going to actually keep on that trend. But regarding the treasury share buybacks or cancellations, we cannot give you a final say at this point. But at the current stage, we believe, in the current environment, it will be quite challenging. But from next year, taking into account economic environment and other factors, we could make other decisions.

Next question is from Kim Jaewoo from Samsung Securities.

I would like to ask two questions. First question is on COVID-19 related financial aid, which was supposed to end in September, it got extended. So there's concern that there could be further deterioration after the program actually ends for marginal companies and that could actually impact your equity price. I would like to understand what your assessment is on the quality and the credit worthiness of the relevant loans in question? And also, what's your outlook for provisioning for next year? Second question, last month, Korean government announced the Korean new deal plan. I understand that Korean banks are also taking part in that initiative. I understand that KB is committed to investing KRW 10 trillion up to 2025. Can you be a little more specific as to what types of projects or businesses you would be investing in?

Give us one moment, and we will soon respond to your questions.

Thank you, Mr. Kim Jaewoo, for your question. The first question relating to the financial aid package and what negative impact it may have on our asset quality and its implication on our provisioning going forward and we will also respond to the Korea new deal that was announced by the government. In terms of the financial support, now COVID-19 has become much more prolonged. And basically, the program is now extended to March of next year. So for SMEs and SOHOs and small merchants who are hard hit by COVID-19, are qualified to receive such support. And that triggered a concern about carrying over effect of the deterioration of the asset quality. Now at this point, KB, including such financial program, we have been very preemptive and also being precise in managing the asset quality. We have segmented the borrowers, and we have adopted a very phased and gradual approach in managing them. And most of the financial program, basically, there is a guarantee element to it. So if you look at the actual volume itself, it is not as significant as one might be concerned of. So in terms of the soundness aspect or the prudential aspect, one may not be overly concerned. We believe that this could be well kept under control. To provide you with more specifics, when it comes to new loans that's been extended, the guaranteed portion and prime loans are very high in terms of their portion out of the total new origination. And most of the loans are all collateralized. It is secured with payment guarantees and properties. So basically, these are types of loans that are quite stable. In terms of the interest moratorium, which I believe is triggering the biggest concern, as of September, the principle that's subject to this…

I believe that we have had a lengthy Q&A session, and it is -- it has been nearly 50 minutes. I know that we may have other questions on the line, but please ask our IR department directly afterwards, and we will take one last question.

We will take the last question from Cape Investment Securities, Kim Do Ha.

I'm from Cape Securities. I'm Kim Do Ha. It might be an overlapping question, but I have two questions. The first question is about mid dividend payout. And I know that some things are having short-term dividend payout and some others have other types. And I know that you have very strong capital. So do you have any plans for short-term or midterm dividend payout? If you do, please share with us your interim payout plan. And for provisioning, do you believe that you will need Q4 provisioning to prepare for COVID-19 possibility? In Q2, you had some preemptive provisioning. And I am curious whether you have other plans for preemptive provisioning against COVID going forward in Q4?

We will soon answer your question. Please hold. Thank you.

Thank you very much, Kim Do Ha, for your questions. Regarding dividend, we have actually given some answers, and you're asking questions about interim dividend. And for interim dividend, actually they're in the regulations or AOI of the listed companies. And you need to change the AOI if you were mentioning some changes. But for KB, we have interim dividend payout possible in our AOI. So we do not need to make any changes to our Articles of Association -- Incorporation, AOI. So we have that possibility. For the bank, we have had some limitations in the growth. So we know that there is a higher demand for dividends in the market. And I know that many banks have short-term or interim dividend payout. And regarding interim dividend payout, we do not yet have confirmed details. But in order to improve shareholder value and increase shareholder value, we believe that it is a possibility that we could consider. So regarding interim dividend payout, if there are more details that we will confirm going forward, we will share these in the market. You also asked question about provisioning and to prepare for COVID-19 effect, you asked about any preparatory provisioning that we might accumulate in Q4. We have had some economic forecast and for forward-looking. And taking forward-looking into consideration, we do need to provision for this year. The economic forecast rate is low. But for next year, because of this year's base effect, it could be within the range of plus/minus 3% -- plus 3%, actually. So for forward-looking, if we assume we provision, we believe that the amount of provisioning will be an amount that we are currently calculating, and there could be a possibility that this provisioning amount is not sizable. So regarding the vulnerable industries of COVID, so you will not have an overlay -- it will not be overweighed. And in order to prepare for the future economic environment and other possibilities, we are going to maintain our plan of preparedness. And in Q4, we are going to prepare going forward.

Thank you very much. That ends the Q&A. And that ends today's earnings release. Thank you.