KB Financial Group (KBFG) has reported a modest year-over-year increase in cumulative net profit for Q3 2024, along with a decrease in profit compared to the previous quarter. The Group CEO Jong Hee Yang and CFO Jae Kwan Kim outlined the company’s Sustainable Value-up Plan, which aims to maximize profitability while maintaining asset quality, during the Q3 earnings call.
The company’s focus on shareholder returns, reflected in the Common Equity Tier 1 (CET1) ratio target of 13.5% by year-end 2024, aligns with plans for dividends and share buybacks.
Key Takeaways
- KB Financial Group reported a cumulative net profit of KRW 4.3953 trillion for Q3 2024, a slight increase from the previous year.
- The CET1 ratio is at 13.85%, surpassing the target of 13.5% for year-end 2024.
- A quarterly dividend of KRW 795 per share and a KRW 100 billion share buyback have been announced.
- Net interest margin (NIM) decreased by 13 basis points quarter-over-quarter due to market rate cuts and slowed loan growth.
- The group plans to stabilize NIM in Q4 and maintain conservative provisioning, particularly in real estate project financing.
Company Outlook
- KB Financial Group aims for sustainable, quality-driven loan growth and enhanced communication with individual investors.
- Management is focused on aligning Key Performance Indicators (KPIs) with the company’s value-up program, which will be reflected in executive and sales staff compensation plans.
- Noninterest income is expected to rise, contributing to overall net profit improvement despite anticipated dips in interest income.
Bearish Highlights
- The Q3 profit of KRW 1.614 trillion marks a decrease from the previous quarter due to provisioning impacts.
- Slowed loan growth and market expectations of base rate cuts have resulted in a decline in NIM.
Bullish Highlights
- The cumulative cost income ratio (CIR) for Q3 stood at 36.5%, showcasing solid earnings and effective cost controls.
- The credit cost ratio (CCR) remains stable at 41 basis points, benefitting from the stabilization of the real estate project financing market.
- Capital adequacy ratios indicate a leading industry position, with a base BIS ratio of 16.75% and a CET1 ratio of 13.85%.
Misses
- The group’s net interest income for Q3 was KRW 3.165 trillion, with a cost-to-income ratio of 36.5%.
Q&A Highlights
- Future earnings releases will offer opportunities for individual investors to submit questions in advance.
- The company is focused on capital-light growth to optimize capital efficiency and minimize the gap in asset and risk-weighted asset (RWA) growth.
- Asset quality is expected to remain strong, with proactive measures in place to maintain a CCR around 40 basis points next year.
KB Financial Group’s Q3 2024 earnings call reflected a company that is strategically balancing growth and profitability. The company’s conservative approach to provisioning and capital management, combined with plans to enhance shareholder returns, positions KB Financial Group for sustained success in the financial industry.
InvestingPro Insights
KB Financial Group’s recent performance and strategic initiatives are further illuminated by real-time data from InvestingPro. The company’s market capitalization stands at $27.3 billion USD, reflecting its significant presence in the financial sector. This aligns with the InvestingPro Tip identifying KB as a “prominent player in the Banks industry.”
The company’s P/E ratio of 7.55 indicates that it is “trading at a low earnings multiple,” as highlighted by another InvestingPro Tip. This low valuation could be attractive to value investors, especially considering the company’s focus on shareholder returns and capital management discussed in the earnings call.
KB Financial Group’s commitment to shareholder value is further underscored by its dividend policy. The current dividend yield is 2.55%, with an impressive dividend growth of 51.96% over the last twelve months. This is complemented by an InvestingPro Tip noting that the company “has maintained dividend payments for 16 consecutive years,” demonstrating a strong track record of returning value to shareholders.
The company’s recent stock performance has been noteworthy, with a 13.81% price total return over the past month and a substantial 95.58% return over the past year. These figures support the InvestingPro Tips indicating “strong return over the last month” and “high return over the last year,” respectively.
For investors seeking more comprehensive insights, InvestingPro offers 14 additional tips for KB Financial Group, providing a deeper analysis of the company’s financial health and market position.
Full transcript – KB Financial Group Inc (KB) Q3 2024:
Operator: Greetings. We will now begin the 2024 Q3 business results presentation, and thank you very much for participating in today’s earnings release. We have here with us, Group CFO and SEVP, Jae Kwan Kim, as well as Executives from our Group. Regarding today’s agenda, first there will be a video of our Group CEO and Chairman, Jong Hee Yang, explaining our company’s value-up plan, which was disclosed today; and then our group CFO will cover 2024 Q3 major earnings results. After that, we will have a Q&A session. We will now watch a video covering KB Financial Group Sustainable Value-up Plan.
Jong-Hee Yang: Greetings, I am Jong Hee Yang, Chairman and CEO of KB Financial Group. I will briefly cover KBFG’s sustainable value-up plan to our shareholders and investors in and out of Korea who support and love KB. KB has the significant responsibility of both utilizing the capital that our shareholders have invested to maximize profitability to continuously achieve high profits and at the same time, maintain asset quality as a financial company, which plays a pivotal role in supporting the nation’s economy. During the past 10 years, KB, by strengthening fundamentals through painstaking efforts, diversified our portfolio. In addition, we firmly established our position as a leading financial group representing Korea in terms of earnings, shareholder return and ESG. As a result, our capital profitability and asset quality has grown to the point where it stands shoulder to shoulder with leading global companies. And our value per share also has considerably improved. In addition, through continued shareholder return efforts, 2023 total shareholder return ratio grew to 37.7%. However, shareholder return is still being pointed out as the biggest reason KB’s corporate value is being undervalued. And we have the task of increasing the level of our shareholder return for our company’s value to be properly assessed. While preparing for this value-up disclosure, what we believe was the most important shareholder return philosophy was, first, sustainability; and second, predictability. What we most painstakingly thought about long and hard about was how to catch three rabbits which were to continuously improve company’s profitability and also enhance shareholder value and in addition, maintain our corporate asset quality. Going forward, KB will link shareholder returns to CET1 ratio and return surplus capital excluding some management buffer to our shareholders. For example, if 2024 year-end CET1 ratio posted 13.5%, then 50 bp of capital, which exceeded 13% will be a source for next year’s dividends and first half share buyback and cancellation. On the other hand, with the profits that are accumulated throughout the year, we will maintain CET1 ratio of mid-13% and utilize the amount, which exceeds 13.5% in the second half for additional share buyback and cancellation. The higher KB CET1 ratio is, the more shareholder returns our shareholders can expect for the next year. In addition, you can predict the amount of shareholder return with the CET1 ratio as well. Like global leading companies such as JPMorgan, CET1 ratio and shareholder returns will give more amount back to shareholders. The higher the CET1 ratio is without limitations on total shareholder return ratio. To this end, KB Financial Group will strengthen our fundamentals, keeping in step with the new value of paradigm which pursues qualitative growth that goes beyond quantitative growth. We are organizing our business management system so that we can continue our RWA-focused growth efforts so that we can strengthen our fundamental earnings generation capabilities. From right away, we will begin from our business plans for 2025, that asset growth goals that will be fit our value-up paradigm and redesign key performance indicators. That is to say that all of our group members will move according to the program. Based on these changes, KB’s shareholder returns will lead the industry going forward, and our total shareholder return ratio will also maintain the industry’s highest position. KB, even before implementing our value-up program, was genuinely committed to shareholder value enhancements, including being the first in the industry to implement share buyback and cancellation and adopting quarterly even dividends on a total annual amount basis. We included in this disclosure, which was presented today, the results of our deep thoughts about how to satisfy our shareholders and interested parties. Due to time constraints, I cannot explain all details but we promise you that we will continuously improve our corporate governance structure, internal control, ESG and communication with shareholders. In KB’s sustainable journey to catch the three rabbits of profitability, asset quality and shareholder returns, all members of KB, including myself, will strive forward with one heart and one mind. Thank you for listening.
Jae Kwan Kim: Good afternoon. I am Kim Jae Kwan, CFO of KB Financial Group. Thank you very much for joining our third quarter 2024 earnings presentation. Before going to Q3 earnings, I will first run through the resolution made by the BOD today regarding the third quarter shareholder return. We’re on Page 4. Based on industry’s top capital strength and earnings capacity, KBFG is committed to a shareholder return policy with a view towards driving shareholder and corporate value enhancement. To pay out equal amount of dividend every quarter, we’ve done share buyback and cancellation driving quarterly DPS uptrend. As you can see from the value-up plan disclosed today, we will continue to enhance shareholder value underpinned by RoRWA-centric business management and through CET1-linked shareholder return policy. CET1 ratio, which is common equity Tier 1, is used for determining shareholder return and is expected to be 25 basis points increased Q-over-Q to 13.85% as of end of September. In Q, possibly due to FX rate movement, share buyback and seasonality weighing down on profit, CET1 ratio may slightly dip but we plan to keep it robust at above 13.5% during the year. And today, the BOD approved quarterly cash dividend of KRW 795 per share and additional share buyback and cancellation of KRW 100 billion. DPS, therefore, is KRW 795, marginally up Q-over-Q following the impact from KRW 400 billion of share buyback, which was announced during the first half of the year. And with KRW 100 billion of additional buyback and cancellation, our plan is to buy back and retire a total of KRW 820 billion this year, which represents industry’s biggest buyback and cancellation yet again, a testament to the strong will of the BOD and the management placing foremost priority upon shareholder and corporate value enhancement. Two keywords that characterize KB Financial Group’s value-up plan are sustainability and predictability of shareholder return. Guided by such sustainability and predictability, we will endeavor to sustain shareholder return at industry’s top-notch level in alignment with the new value-up program. Now moving on to KBFG’s earnings results for Q3 2024. I will begin with group’s performance highlights and key business metrics on cumulative basis ending Q3 ’24. The group’s Q3 2024 cumulative net profit was KRW 4.3953 trillion, up 0.4% year-over-year. This is thanks to good performance across nonbank subsidiaries, including securities, insurance and credit card businesses despite continuing headwinds from rate cuts and sluggish economy. On the other hand, net profit in Q3 reported KRW 1.614 trillion, down on a Q-over-Q basis. This is mainly due to the base effect of sizable provisioning last quarter for ELS compensation and save for this impact. On a normalized basis, net profit was flat Q-over-Q. Next, group’s cumulative credit cost in Q3 recorded an improvement of 11 basis points year-over-year, coming in at 0.41%. Despite ensuing macro uncertainties, we have ample amount of buffer following preemptive provisioning, and we expect to be able to maintain a robust control over credit cost going forward as well. As mentioned, as of September end 2024, group CET1 ratio reported 13.85%, maintaining industry’s top level of capital buffer on the back of solid profit generation and strategic capital management. This, in turn, has been the basis of KRW 100 billion of additional share buyback and cancellation enabling KBFG to continue on with differentiated shareholder return policy supported by capital strength. With that said, I will now move on to detailed breakdown of the company’s third quarter results. Group’s net interest income in Q3 was KRW 3.165 trillion, down 1.3% Q-over-Q on the back of interest rate cuts and which drove down yield from loan assets. Q3 net fees and commission income was KRW 942.7 billion on the back of increases in the bank’s bancassurance and securities investment banking fee driving 2.5% Q-over-Q increase. Next is other operating profit. In Q3, other operating profit reported KRW 398.7 billion, up 23.4% Q-over-Q, driven by fall in market rate and FX rate, which drove significant expansion in returns from security and derivatives. Next is on G&A expense. While Q3 G&A expense came in at KRW 1.6508 trillion, which is an increase of 3.6% Q-over-Q, Group CIR in Q3 on a cumulative basis reported 36.5%, keeping to below 40% level, thanks to a solid top line growth and sustained effort behind cost efficiency gains. Next is on group’s PCL. Third quarter PCL was KRW 498.1 billion, down 9.9% Q-over-Q, mainly due to lessened burden for provisioning at nonbank subsidiaries, including KB card, savings bank and real estate trust. Lastly, nonoperating profit in Q3 recorded a decline of KRW 140 billion Q-over-Q on the back of base effect of last quarter’s sizable provisioning for ELS compensation cost. On the next page, I will explain key financial indicators. First, profitability indicators. Q3 ’24 cumulative group ROE was 11.26% coming in and above the target ROE of 10%. In the face of upcoming rate cut cycle, we will also continue to place effort behind diversifying the revenue source and improving cost efficiency. Looking at now the growth of loans in won, bank’s total loan in won as of September end ’24 was KRW 362 trillion, up 2.9% versus June and 5.9% year-to-date. Household loan was KRW 176 trillion, on rise in demand following recent increases in the transaction volume, which drove 2.7% increase or KRW 4.6 trillion versus end of June. Corporate loan reported KRW 186 trillion, as loans to large corporates continued following the second quarter trend on top of which SME loans also up trended, driving 3.2% rise compared to end of June. Next is on NIM. Group and bank’s NIM in Q3 was 1.95% and 1.71%, down 13 basis points, respectively, Q-over-Q. Now this is because market rate has priced in expectations of base rate cut. And as repricing of deposit lags, loan repricing, we saw spread contraction and lower yield on loan assets. However, downward pressures on NIM, including steep rise in mortgage lending and base rate cuts being priced in, have been mostly captured during Q3. And we, therefore, expect as repricing of deposits follows the lending rate, there will be offsetting of NIM erosion. Also, loan growth has slowed since September as government had stringent control on household lending, and we expect to maintain Q4 bank NIM at a steady level on the back of recovery in margin. Rather than focusing on growing the loan book, we plan to focus on quality-driven growth with adequate margin under a right balance between growth and profit, so as to broaden sustainable basis for interest income generation. Let’s go to the next page. I will cover the group’s cost income ratio, or CIR. As you can see on the graph on the top left-hand side, 2024 Q3 cumulative group CIR posted 36.5% and through solid earnings growth and group-wide cost control efforts, it is maintaining a stable level. Next is credit cost ratio. Credit cost, Q3 cumulative group credit cost posted a 41 bp level and with the real estate PF market stabilization, some reversal took place and thus, group’s CCR is being stably managed. Last is group’s capital adequacy. Despite the risk-weighted asset growth effect with the loan growth in the quarter, on the back of group’s proactive capital management efforts and sound net interest growth, we have secured the highest level of capital adequacy in the industry. In September, base BIS ratio and CET1 ratio is expected to post 16.75% and 13.85%, respectively. As I covered in the shareholder return slide, we will continue to work to improve capital efficiency to improve shareholder return visibility by managing the CET ratio to more than 13.5% throughout the year. KB Financial Group is striving and making diverse efforts to strengthen communication with and provide investment information access to not only institutional investors but also to individual investors. As a beginning, we will newly put up a value-up bulletin board on our website to provide diverse investment-related information, including for our value-up program. From the next earnings release, we plan to provide time to receive questions beforehand from individual investors and to answer them. Please refer to the next pages for details related to the business presentation that I have covered so far. With this, I will conclude KB Financial Group’s 2024 Q3 business results presentation. Thank you for listening.
Operator: Thank you very much. We will now begin the Q&A session. [Operator Instructions] And we will take the first question from Samsung (KS:) Securities, Jae-Woo Kim. Please go ahead.
Jae Woo Kim: Thank you very much for good earnings this quarter as well as the announcement of the value-up plan. I have two questions for comparative purposes. The first question is that I would like to know what your RWA target is, if you were to compare to other developed markets like U.S. and Japan? When we think about the appropriate level of shareholder return, it would be around 50%. So under the ROE target and for you to achieve that 50% of shareholder return rate, I would think that the RWA growth should be kept under 5%. So I would like to know as to what your target RWA growth rate is, would like to understand how you will be able to manage and control the RWA growth rate within that level. Also what is do you think the maximum limit that you think you can actually go because I do not believe that 50% is the top sealing depending on different circumstances. If there is more improvement in the ROE and more changes in the RWA, I think that you may be able to pay out more than 50%. So what will be your, I guess, ultimate target when it comes to shareholder return?
Jae Kwan Kim: Yes. This is CFO, Kim Jae Kwan. I will respond to your first question on the RWA target and the total shareholder return, TSR target. So why don’t I talk about the second question first and then move on to the first question on RWA. As mentioned, during the announcement of the value-up plan, at the end of the year, if the CET — the excess of CET1 ratio above 13% and what is in excess of 13.5% will be used for buyback and cancellation. So we do not set a TSR target separately. Now having said that, in order for us to further increase the TSR, we believe that managing the RWA growth rate is extremely important. So in order to achieve that, we are in the process of realigning the whole process within the group to be able to achieve and attain that target. Second thing I would like to emphasize is that we ask that you also pay attention to the increase in the size of the shareholder return rather than just the ratio of TSR. Next year, if you look at the total size that we will be returning back to the shareholders, we think that there is going to be meaningful increase. So following this year, we expect our net profit is going to continue to uptrend. So in terms of the ratio and on an absolute amount basis, we expect there will be some meaningful expansion. And also, we’ve been able to record industry’s best level of TSR. So going forward, we are committed to maintaining our positioning as the company with the best TSR. Now moving on to your question on RWA. If you look at the growth of our assets, it will be at around the nominal GDP growth rate. So that is our target. For risk-weighted assets, if you look at our average growth rate over the past decade, it was at around 6.1%. Now going forward, we will be pushing that down to somewhere around 5%. So that basically is the growth rate that we are projecting for RWA. So when we actually set up our business plan, we are well in line with our value-up plan and our objectives are set according to the value-up philosophy as well as all the KPIs for the members of and the employees of the group. Their KPIs are set in alignment with the objectives of the value-up plan. So we are in good alignment.
Jae Woo Kim: Thank you very much for the answer.
Operator: We will take the next question from Hanwha Investment Securities, Kim Do Ha. You are on the line.
Do-Ha Kim: Thank you for the opportunity. Regarding your value-up disclosure, I have also questions, and thank you for the announcements. Well, looking at it at first glance, it seems that it’s not a return ratio target, it’s more of a CET1 capital amount that will decide. So I think RWA prediction will be quite important for RWA forecast. Regarding RoRWA, do you have any targets? And in the disclosure, I think you had targets for ROE, but I don’t think for RoRWA. So if you can let us know if you have a target for that, it will be greatly appreciated. And looking at the value-up disclosure PDF, it says our principle for share buyback cancellation and cash dividends, and it says that you can continue share buyback and cancellation if there are good results. And for the dividend profit, it will be decided on the market conditions. So I agree with the philosophy, but I’m curious about where the balance is gearing toward. So regarding that, for cash dividend amount compared to the ROE amount, you mentioned that about KRW 300 billion. So you — the DPS will go up even if you have the share buybacks and cancellation. So for this, adjusted weight, can you tell us more about the balance of how you will carry this out?
Jae Kwan Kim: Thank you very much for the question. I am CFO, Jae Kwan Kim. And regarding the RoRWA target, you asked us questions. And of course, from next year’s RoRWA, we will have targets that are set forth, although I cannot make that public at this time. And when we set up our business plan for our subsidiaries and for different businesses and different departments, we will have detailed RoRWA targets, and we will continue to monitor them going forward. In particular, regarding the RoRWA, there is actually linkage to management executive compensation. So we’re going to expand that next year. And we are going to actually expand it to the sales because we think that it’s going to be very important. So we are going to do our best to have our KPIs redesigned so that our value-up program will be actually communicated to our employees. And regarding cash dividends and share buyback and cancellation you asked us questions. And in principle, our PBR, until it’s 1.0, we are going to expand the amount of our share buyback and cancellation. However, regarding the amount of our dividend, we are not going to leave it at KRW 1.2 trillion, but we’re going to look at the dividend yield ratio and we’re going to look at the market so that we’re going to expand that according to the conditions. However, until PBR is 1x, regarding the amount of our dividends, it will gradually go up, but regarding the amount of share buyback and cancellation because it’s continuously increasing, we believe the speed of DPS uplift will be accelerated.
Do-Ha Kim: Thank you.
Operator: From SK Securities, Seol Yong Jin. Please go ahead.
Yong-Jin Seol: Thank you for taking my question. I would like to also ask you questions on value-up, Page 8. Anything in excess of 13% of CET1, you will use that resources to do dividend payout and also share buyback. And you have mentioned that anything above 13.5%, you will actually be doing the second half share buyback. So when you say second half, basically, the 13.5%, what is the timing or the baseline of the 13.5%, so that we could get more color on when that share buyback is going to happen in the second half?
Jae Kwan Kim: This is the CFO. In our disclosure in the second half, just to clarify that, it’s based upon the CET1 ratio as of the second quarter. If there are any special circumstances, we could base it off of third quarter number, but our target is to base the CET1 ratio as of the second quarter of the year.
Yong-Jin Seol: Thank you very much.
Operator: We will take the next question from Korea Investment Securities, Baek Doosan. You are on the line.
Doosan Baek: Thank you very much for the opportunity. I’m Baek Doosan from KIS. Thank you for the value-up disclosure. And in order for this value-up to be sustainable, I believe that designing a compensation plan and execution will be very important. And I think this was briefly mentioned beforehand, regarding setting the KPIs, regarding RoRWA and for the management and for the employees, regarding the value-up program, what are the incentives that you’re offering to them? And can you tell us about any changes or any directions that you can give us more color about?
Jae Kwan Kim: I am Jae Kwan Kim, the CFO of the group. As aforementioned, we have already a lot of this reflected on the compensation for executives and management. However, the importance will be emphasized for next year. So accordingly, the proportion of this will be more reflected on the compensation plan for our executives. And this will not just remain at our executives or the offices, but we believe that sales will need to play a very great role. So we will do our best. So KPIs will reflect this going forward so that sales will also realize that this is a very important paradigm and move along with this and become more aligned. So we are working very hard to align our value-up program to everyone in our company.
Operator: Moving on to next question from Citi Securities of Miseon Lee. Please go ahead.
Miseon Lee: I am Miseon from Citi. Thank you for great earnings. And thank you for taking my question. I have three questions. The first one, regarding the value-up program that you have announced, what is your competitive edge? What is the strength? And what do you think are some of the weaknesses or shortcomings that needs to be improved? And in order to improve ROE, you said that you will expand on shareholder return. Also, do you have any strategies and plans that could help you further improve on your top line and bottom line growth? And for this year and next year, what is your NIM outlook? And would like to understand what your assumptions are in terms of the rate cut, the extent of rate cut and the timing included.
Unidentified Company Representative: Well, thank you. Just give us one moment as we prepare for the answer. Regarding the value-up program and how we differ from others is characterized by sustainability and predictability. When it comes to shareholder return, it is linked to CET1 ratio, which means that if our CET1 ratio is higher, our shareholder return will also expand. And also, throughout the year, because we are keeping to CET1 ratio of 13.5% in terms of asset quality, it also means that we will be able to maintain a steady asset quality. So with regards to this type of a value-up approach and this type of policy or plan can only be used for companies like us that have elevated or high levels of CET1 ratio. And also, as we’ve mentioned before, as we maintain our CET1 ratio at a high level, it’s important that we push up the TSR ratio, total shareholder return. But in order for there to be meaningful growth in terms of absolute amount of return back to the shareholders, I believe that net profit growth is also another important lever. So last year, this year and also going forward, we expect the net profit growth trajectory will continue with the rate cut cycle. In terms of interest income, there may be some dip in the total interest income that we make, but as the interest rate comes down, this is going to have positive impact on the returns we get from capital market so we are expecting an increase in noninterest income. So for this year, there were ELS compensation cost related reserving, so that worked as a base effect. So going forward, we believe that because of this base effect, we could also see more pronounced improvement in net profit. And also, we’ve been very preemptive and proactive in provisioning, and that also is another factor that’s going to contribute to further growth in net profit going forward. In terms of your question about NIM, I will turn it over to the CFO of KB Bank.
Unidentified Company Representative: I am [Hee Jong-Min], CFO of Bank. Basically, Q3 NIM for the bank was 1.71%, which was about 13 basis points down on a Q-o-Q basis. Now in the first half of the year, there was interest rate cut in the market and that had impacted on the margin. However, in the first half, we were able to defend the impact from the rate cut because we had a longer duration asset that worked to our benefit. And also in the second quarter, the accumulation savings, the maturities came for these types of products, and those account savings have been shifted to core deposit. And that helped us save on the funding cost, and we were able to defend the NIM decline. So as we entered into the third quarter, basically such reverse base effect had normalized, and there has been more heightened expectation on the rate cut. And we were able to see that on the lending rate, there was pricing in of the market rate changes quiet and it had actually sped up the overall repricing impact. And basically, on the asset side, the yield and the spread has gone down. So compared to other commercial banks, basically, we have relatively more long duration asset. And in a situation where the yield curve had reversed in Q3, the interest rate cut expectation that we were seeing in the third quarter was priced in for the longer-dated assets, so that had an impact on Q3 NIM. Now the yield curve reversal is becoming more normalized. And so we believe that the impact that it has on our — the lending rate is going to be actually bigger. And also in terms of the household loans, we are, at this point, putting in a lot of efforts to make sure that we price these deposits appropriately. So in light of all of these factors, we believe that in Q4, the NIM will be controlled at a steady level. Next year, we believe the quarterly NIM is going to be quite similar to what we’ve seen this year. And going forward, we will focus our efforts on profitability as well as the capital efficiency so that we can continue to drive growth and improve our portfolio based off of low-cost deposit.
Miseon Lee: Thank you very much for your answer
Operator: [Operator Instructions] Well, I think value-up disclosure was of great interest to the market. So I think there was a great focus on those areas. And we will take the next question from NH Securities, Jung Jun-Sup.
Jun-Sup Jung: Thank you for the opportunity. I’m Jung Jun-Sup from NH Securities. Regarding the disclosure, thank you very much, and the explanation was very helpful. I also have one question related to the value-up program. And regarding your holder return, the amount and others, I think it is very closely linked to RWA. Compared to other companies, it seems that RWA, there is the market influence by the interest rate and FX rate that will play a role and effect. So regarding the external changes like cost p or others, there will be some sensitivity to CET1 or others. Do you have any numbers related to your projections or forecast? Thank you.
Unidentified Company Representative: I am [indiscernible] in charge of Group CRO, and RWA is related to risk. So let me answer that question. And regarding the sensitivity, for stocks, basically, we don’t have a very big open position. So I don’t think there is much impact from that. However, related to FX, I think we need to consider that because if there’s KRW 10 fluctuation in the FX, then there is some impact on RWA. And it seems that it’s not a very significant amount. But when the FX goes up and down by KRW 10, there is 1 bp effect. So it can go up, it can go down. So when we plus and minus, that is the extent of the influence.
Jae Kwan Kim: I am the CFO of the group, Jae Kwan Kim. And let me just add a bit more going forward regarding our asset growth and RWA growth. We will try to actually have a smaller gap and lessen the gap is our goal so that we can have more efficient use of our capital. So we will have capital-light growth so that we can lessen the gap, and we’re currently working toward that. And this year, as you may be aware, there was a sizable amount of ELS provisioning reversal in RWS — RWA increase, but our CET1 was actually managed at a very high level. So I think this was partly because of our efforts to manage this very well.
Jun-Sup Jung: Thank you.
Operator: From JPMorgan, Jihyun Cho. Please go ahead.
Jihyun Cho: Yes, thank you for taking my question. Since most of the questions were geared towards the value-up program, my question will refer to asset quality. This quarter, you briefly also mentioned there was a reversal from the PF provisioning. So I would like to understand when it comes to credit cost, what is the projection that you have. And if you look at the project financing market, restructuring is ongoing. Are there any other additional provisioning that we need to be mindful of? Can you provide us with an update on the current market situation and what impact it may possibly have? Especially on real estate trust products, are there any issues or concerns that we should be mindful of?
Unidentified Company Representative: Yes, I will respond to this question about provisions. Basically, we have been very conservative and preemptive in setting aside the provision. Last year, when it comes to real estate project financing, we had a very conservative and preemptive approach. So for this year around, we are now therefore seeing some reversals from the provisioning, and we expect there to be some reversals next year as well. However, this does not mean that there’s any concern about asset quality is completely eliminated. But — so we will continue on with our approach of conservative and preemptive provisioning. Now having said that, even if we maintain our conservative approach, because of what we have already done, CCR is currently capped at around 40 basis point. And next year, we believe that we will be able to maintain the CCR ratio at around that level. Since you’ve mentioned real estate PF, why don’t I also add by saying that as our CFO has mentioned, in terms of asset quality, we’ve been conservative, and we’ve been preemptive and provisioning, recently with the rate cut, in the market, we are seeing that these problematic sites are currently up for auction, and they are going through resolution process, which means that the NPL is going down, and we see that some of the provisions, therefore, are being written back and reversed. Now for real estate trust, yes, we are seeing a new formation of — or new provisioning that is required. But in Q1 and Q2, we had ample amount of provisioning that we set aside. And basically, in 2022, up until the early 2022, there were a lot of problematic sites. And so after that point in time, we do not expect any significant increases.
Operator: [Operator Instructions] Well, I think a lot has been discussed already regarding your interest in the market, so if you have any further questions and if you did not get an opportunity to ask questions today, please contact our IR team, and we will be happy to answer your questions. We will wait just a little bit more to see if there are any further questions. It seems that there are no additional questions coming in. So let us conclude our Q&A session. We will conclude our earnings presentation. Thank you very much.
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