Shinhan Financial Group Co., Ltd.
Q1 2013 Earnings Call Transcript

Published: 29 Apr 2013

[Sung Hun Yu:]

Good afternoon, ladies and gentlemen. My name is Yu Sung Hun, head of the IR team at Shinhan Financial Group. I would like to thank the investors and analysts for joining us despite their busy schedule. We'll now begin the earnings call for the Q1 of 2013 for Shinhan Financial Group. We have Vice President Choi Buhmsoo, who's responsible for the strategy; and we also have Vice President Min Jung Kee, responsible for the financials. And we also have Mr. Jang Dong-ki, the head of the financial management team with us. Vice President Min, Jung Kee is going to give us descriptions, explanations on the results of Q1. And then we will have questions and answers session. We'll now invite Vice President Min to give us the report on the earnings of Q1.

[Jung Kee Min:]

Good afternoon. I am Jung Kee Min, the CFO of Shinhan Financial Group. First of all, I would like to extend my gratitude to the investors, analysts and journalists in and out of Korea for listening in to the 2013 Q1 Shinhan Financial Group earnings release. I would now like to cover the major highlights of Shinhan Financial Group's Q1 business performance. Let me elaborate on the group's income on Page 6. Shinhan Financial Group's 2013 Q1 net income posted KRW 481.3 billion. The group's major income-generating interest income, due to the NIM drop and a sluggish loan growth, went down 9.3% Y-o-Y and at 5.0% Q-o-Q, respectively. Noninterest income fell 13% year-on-year with decrease in gains on security sales. Compared to the previous quarters, with the absence of one-off loss factors, including losses from NPL sales and derivative CVA, there was a 94.7% increase in noninterest income Q-o-Q. SG&A went up 3.6% Y-o-Y, showing appropriate growth trends compared to the previous quarter with the overall cost falling following the absence of efforts to save cost, including the voluntary retirement plan, SG&A went down 6.2% Q-o-Q. Credit cost in Q1, due to one-off factors, showed a different trend compared to the previous quarters and went up 50.1% and 20.2% Y-o-Y and Q-o-Q, respectively, going against the previous quarterly trends. With the Shiksan [ph] quarter collective loan delinquency prolongation, KRW 71.5 billion of additional provisioning was fully recognized. Additional provisioning took place for certain companies under court receivership, including SunStar and also regarding the STX Shipbuilding voluntary agreement. In the case of card, additional credit cost went up due to a decrease in recovery from written-off assets and additional provisioning for recognition for long-term delinquent loans. Q1 business performance was different from the previous first quarter result in the past because of the drop in the interest income influenced by the policy rate cut, as well as the pushdown in income caused by the one-off credit cost factors. This caused the net income to stop at KRW 481.3 billion. From -- in Q2, we forecast a stable income flow with the NIM margin drop slowdown and the reduction of one-off credit cost factors. Next, Page 7, group subsidiaries income. In Q1, net income, taking into consideration the ownership of banking and nonbanking, posted KRW 341.5 billion and KRW 248.2 billion, respectively. The bank's net income contribution and nonbanking income contribution recorded 58% and 42%, respectively. Despite the drop in the income for nonbanking subsidiaries, including Shinhan Card and Shinhan Life with the Shinhan Investment and Shinhan Capital's income recovery, the nonbanking net income contribution slightly grew year-on-year. Page 8, group subsidiary income in Q1. 2013 Q1 Shinhan Bank income, due to the margin squeeze and credit cost hike, went down 48.6% year-on-year. SG&A decrease in gains from sales of securities led to a 54% increase Q-o-Q for bank income. The nonbanking side, due to the business environment deterioration, including the tightened regulation, base rate cuts and market contraction, went down 12.8% year-on-year and went up 50.6% Q-o-Q thanks to the income recovery of Shinhan Investment and Shinhan Capital. Due to the drop in the credit card income following the merchant fee revisions and increased credit cost, income went down 13.9% year-on-year. Thanks to the rise in interest income, SG&A contraction and sale of the Visa card shares, income went up 2.5% Q-o-Q. Shinhan Investment, despite the drop in the stock brokerage fees resulting from the lower continuous daily stock market volume Q-o-Q and Y-o-Y with the proprietary trading increase and CLN impairment losses write-back, saw a great recovery in net income. Shinhan Life, despite the rise in premium income and gains on bond trading, saw the income fall 38.9% year-on-year because of the low base interest rate and the rise in policy reserves for single premium policies. However, with the decrease in policy reserves with the single premium policies because the tax benefits have been abolished, compared to the previous quarter, Shinhan Life income increased 47.6% Q-o-Q. Shinhan Capital had a stabilized credit cost due to the absence of additional yearly provisioning for ship financing assets, which took place the previous year, leading to an income recovery year-on-year and Q-o-Q. Next, page 9, Shinhan Bank performance. 2013 Q1 Shinhan Bank net income recorded KRW 338.3 billion, a 48.7% drop year-on-year and 54.6% increase Q-o-Q. Interest income continued to grow with the loans in Korean won increasing by 3.7% year-on-year and 0.6% on a quarterly basis. However, the quarterly NIM dropped 31 bp year-on-year and 7 bp Q-o-Q. It went down 13.3% year-on-year and 6.9% Q-o-Q, respectively. Noninterest income showed gains from sales with the partial sale of SK Hynix and Visa card shares in Q1. However, the gains from sales contracted compared to the one-off gains from sale of securities, including gains from the sale of SK Hynix shares and went down 31.3% year-on-year. It went up 155.5% Q-o-Q with the absence in one-off loss factors, including losses from NPL sales and adjustment of CVA or credit value adjustment. SG&A went up 2.2% year-on-year, showing appropriate growth trends, and thanks to the strategic cost-cutting efforts, including costs related to employees such as voluntary ERP and the cost containment of administrative costs, SG&A went down 8.7% Q-o-Q. There was additional provisioning, including the KRW 71.5 billion, conservatively, provisions against the Shiksan quarter collective loan delinquencies, KRW 37.3 billion against the SunStar company undergoing court receivership, KRW 22.1 billion regarding the asset quality reclassification of STX Shipbuilding. With these one-off factors, there was a 44.1% increase year-on-year and 34.9% increase Q-o-Q. As was aforementioned, unlike in the conventional Q1 credit cost trends, when Q1 credit cost tend to be lower than the other quarters, the CI ratio was higher than the past in 2013 Q1 due to the one-off credit cost factors, including collective loan delinquencies. From Q2, a more stable CI ratio trend is expected with absence of one-off factors. The NIM trend on the bottom shows the continuous falling of the bank NIM with the interest rate cut and heated competition. From Q2, however, the NIM decline is expected to slow down, leading to a downturn in the interest income drop. The quarterly NIM, including the card, went down to 2.33% and posted 24 bp year-on-year and 7 bp decrease, respectively. Next, Page 10, Shinhan Bank's noninterest income and SG&A. Shinhan Bank's Q1 noninterest income posted KRW 250.3 billion. Fee income, including sales of fund and bancassurance, went down 7.4% year-on-year. Gains from sale of securities went down 28.2% Y-o-Y. FX trading and derivative-related income was reduced by 47.4%, with a decrease in valuation gains from equity method securities, which led to a 31.3% drop Y-o-Y. The reason why gains from sale of securities went down was because compared to the first quarter of last year, with KRW 143.3 billion one-off gains from the sale SK Hynix shares in 2012 Q1, in 2013 Q1, selling of part of the remaining shares took place, and this led to KRW 41.7 billion one-off gains from sale of securities, a downward trend. KRW 21.7 billion one-off impairment losses related to Hyundai Merchant Marine was also recognized. On the other hand, compared to the last quarter, due to the gains from SK Hynix shares and drop in derivative-related CVA, there was a 155.5% increase in noninterest gains Q-o-Q. Bank SG&A increased 2.2% year-on-year and is showing an appropriate cost growth trend. Compared to the previous year's fourth quarter, it went down 8.7% with the absence in costs related to ERP and overall cost reduction efforts. For reference, the retirement pension provisioning actuarial valuation costs have been reclassified in 2012 as comprehensive income and does not affect the gains or losses. Group and bank CI ratio are, respectively, 49% and 49.9%. An appropriate cost efficiency is being maintained. Let's now move to Page 11, Shinhan Card P&L. Shinhan Card's 2013 Q1 income trend shows that despite the credit card merchant fee revisions with the interest expense reduction and the KRW 40.1 billion of gains from partial sales of Visa card led to the pre-provisioning income slightly easing downward year-on-year by 3.8% and increasing by 7.2% Q-o-Q, showing that stable operational capability is being maintained. In Q1, with the reduction in the recovery of -- from written-off assets and prolonged delinquencies, KRW 86.7 billion of credit cost was recognized. The net income went down 13.9% year-on-year and went up 2.5% Q-o-Q, resulting in a net income of KRW 160.6 billion. Q1, seasonally, has a reduction in credit sales, compared to the other quarters. And in particular, credit card income went down 4.6% Q-o-Q, with the merchant fee income shrinking caused by the revisions in the merchant fee rate system. We are continuously making efforts to maintain profitability through interest expense reduction through funding cost stabilization and SG&A and marketing cost minimization. 2013 Q1 end balance of written-off loans posted KRW 6.6 trillion. There was KRW 64.8 billion of income from the recovery of written-off assets, which went down 3.7% Q-o-Q, but the appropriate recovery performance is being maintained. Next, let's go to Page 13, group asset growth. Total assets as of Q1 for the group posted KRW 351 trillion. It recorded KRW 314 trillion on a consolidated basis, a 2.6% and 2.9% growth year-to-date respectively, continuing the asset growth trend. This was a result of Shinhan Bank's 2.1% asset growth following the loans in won growth in Shinhan Investment, 9.2%, thanks to the asset growth. And Life Insurance assets grew by 4.8%, thanks to loan asset growth for Shinhan Life Insurance. Total assets grew 3.8% year-on-year, continuing a stable asset growth trend. Page 14 covers Shinhan Bank's lending and funding activities. Shinhan Bank's Korean won loans continued on a sound growth trend to stand at KRW 145 trillion at the end of Q1 2013, up 0.6% from the yearend. Retail loans fell by 0.2%, while loans to corporates saw an increase of 1.4%. Despite the seasonal factors, general purpose loans grew 3.1%, thanks to increase in high-quality credit loans and housing loans or chance [ph] loans. On the other hand, mortgage loans had declined 2.2% due to securitization of over KRW 500 billion worth of loans, such as conforming loans. Corporate loans maintained a healthy growth rate of 1.4%, with loans to SMEs, in particular, those SOHOs growing 2.2%. The Korean won deposits also continued on a stable growth path, growing 1.3% from the year end to stand at KRW 149 trillion at the end of Q1 2013. Time deposits and low-cost deposits rose 5.5% and 4.5%, respectively. LDR was also kept at a stable level, falling to 96.6% at the end of Q1. Let me now go over Shinhan Card's transaction and funding activities on Page 15. As you can see on the upper left-hand side, in Q1, Shinhan Card's transaction volume rose 0.9% year-on-year to record KRW 32.9 trillion. Operating assets fell 3.9% from the yearend as credit sales declined due to seasonal factors. However, both the transaction volume and operating assets returned to the growth path in March. Selective marketing activities targeted at prime merchant and customers will be implemented to increase credit sales while at the same time, efforts will be made to keep appropriate level of growth for credit card loans. Now moving on to Page 17 for asset quality. Shinhan Financial Group's NPL ratio at the end of Q1 rose 0.08% from last year and to 1.42%. And precautionary and below loan ratio increased 0.12% to post 3.01% for the same period. Compared to other quarters, write-off for the NPLs in Q1 was smaller, only amounting to KRW 52.9 billion. As for precautionary and below loans, they also saw an increase from last year due to asset quality reclassification which came about as a result of the voluntary agreement with creditors of STX Shipbuilding. Shinhan Financial Group will continue to conservatively manage its potentially bad debts. And for your information, asset quality numbers for the savings bank are reflected in the group's asset quality data. And as a result, the group's NPL ratio posted a slight increase. However, it is expected that in 2013, we'll see stable NPL ratio for the rest of the year as there will be continued management of the savings bank's asset quality. The group's NPL coverage ratio posted 164%, dropping 6% from the end of last year. However, sufficient efforts are exerted to counter any potential deterioration of the assets in the future. Page 18 looks at the bank's asset quality. As I have mentioned before, due to the decline in the bank's sales and write-offs in Q1, NPL ratio for the bank in Q1 stands at 1.18%, up by 0.10% from the year end. NPL coverage ratio dropped 9% from the same period to stand at 162%. As you can see from the lower left-hand side, Shinhan Bank's retail delinquency ratio went up 9 basis points compared to the end of last year. SME loans, including SOHO loans, also experienced delinquency ratio increase of 14 bp from the same period. However, this is not an increase for actual delinquency for the debts before sales and write-offs, and the delinquency ratio is being kept an appropriate level. Now asset quality of Shinhan Card is highlighted on Page 19. Shinhan Card saw slight increase in its NPL ratio. The ratio went up to 0.11% from the end of last year to 2.26%. NPL coverage ratio fell 7% from last year to 247%, allowing the bank to hold sufficient provisions in case of potential economic downturn. The bank's delinquency ratio at the end of Q1 stood at 2.53%, increasing 18 bp from the year end. Given the decline in the operating assets and delinquency roll rate trend, the ratio is expected to be kept at a healthy level. Page 20 looks at provisions for credit losses and write-offs. The first provisions for the credit loss in Q1 is shown on the upper left-hand graph. The provisions are on a continued upward trend, increasing 0.11% from 0.67% to 0.78%. As was mentioned during the discussion of the income statement, provisions for the credit loss rose due to the bank's one-off items and the growth of credit cost for the Shinhan Card. The growth in the provisions is more due to additional credit cost accumulation for potential bad debts coming from the prolonged delinquency of collective loans than actual increase in the bad assets. Therefore, it is forecasted that the credit cost ratio will begin to stabilize beginning from Q2. During Q1, the bank has sold and written off a total of KRW 127.7 billion worth of debts. Write-off and sell-off amounts were KRW 52.9 billion and KRW 74.8 billion, respectively. Write-off for Shinhan Card in Q1 was KRW 146.5 billion. Provisioning in Q1 went up to KRW 86.7 billion as a result of drop in the recovery of written-off assets. Now on Page 22. Group's BIS ratio for the Q1 is expected to see an increase of 0.2% to post 12.7% due to simultaneous growth of income and slight decline in risk-weighted assets in Q1. Tier 1 ratio is expected to grow to 9.8%, thanks to income growth and risk-weighted assets decline. Shinhan Bank's BIS ratio for the Q1 is likely to dip a little to 15.7% due to increased credit risk-weighted assets from the increase of corporate exposure. Tier 1 ratio tentatively stands at 12.5%. Shinhan Card's adjusted equity capital ratio is 27.8%, allowing the card's capital adequacy to be on a sustained healthy trend. As the group's asset growth is expected to be led by certain assets and its profit-generating capabilities are expected to continue on a solid path, capital ratio for the group will see continued improvement in its equity capital ratio. It is -- and please refer to the remainder of the pages for the additional details on the subsidiaries' business results, major management indicators and loans to the SMEs. With this, I would like to conclude the presentation on the earnings results of Shinhan Financial Group for Q1 2013. Thank you.

[Operator:]

[Operator Instructions] First question from Hanwha Investment & Securities, Mr. Shim Kyu-sun.

[Kyu-sun Shim:]

Yes, I'm Shim Kyu-sun from Hanwha Securities. I have a couple of questions. First, your margin this quarter has been squeezed. So can you give us your quarterly margin forecast, and when do you think the margin will be stabilized? Secondly is for the one-off factors, and I couldn't catch what you said. Can you actually categorize it into costs and expenses for income and expenses? And I think that we have a lot of asset growth this year. So can you give us some background information?

[Unknown Executive:]

Thank you for your questions. Regarding your first question for the NIM, net interest margin, well, I will speak for the bank. In Q1, NIM for Shinhan Bank posted 1.78%. Compared to the previous quarter, 7 bps went down. The major factors behind this was because of the funding and lending. And, I think, currently, the margin squeeze was affected by the base rate cut last year. So this has been impacting us in the first quarter as well. Regarding the monthly margin, fortunately, 1.79% in January and 1.78% in February, 1.76% in March. So you can see that on a monthly basis, the margin decline is not accelerating. If it was accelerating, we would have been more concerned with the NIM decline. But I believe that the cost ratio of the funding -- if we could actually improve this for the funding cost, then the margin could be stabilized going forward. Regarding our LDR, conventionally, it was 97% to 99%. But as of end March of Q1, it's 96.6%. It has gone down to the 96% range. In -- if we push up 1 percentage point of the LDR, then our margin will be pushed up by 2 bp. We believe that this will be possible. Accordingly, regarding Q2 and Q3, if we actually slow down the falling margin, then we believe that the decline will not be steep. When we made our business plans for this year, we believed that the base interest rate will go up by 25 bp at least in the first quarter -- will go down by 25 bp in the first quarter or in the first half of this year. And we believe that if this happens, then the margin could be stabilized. To answer your second question regarding the one-off factors, in Q1 of 2013, we had many noninterest income-related one-off factors. Regarding the costs, we had some one-off factors regarding provisioning. For the noninterest income, what was the most sizable factor? Well, we had 2-plus factors. First, the sale of securities, SK Hynix, was pretax, KRW 34.5 billion, and for Visa card, 260,000 shares were sold, a partial sum of our total Visa ownership. So it was KRW 41 billion pretax. And I talked about KRW 34.5 billion for Hynix, which is also pretax. Regarding the provisioning, we had the collective loan delinquencies leading to more provisioning. The total amount is KRW 71.5 billion provisioning against collective loans. There is a company called SunStar, which is going under court receivership, and KRW 37.3 billion was provisions against that. STX Offshore & Shipbuilding, we had KRW 10.1 billion of provisioning. So we have many one-off factors in this quarter, which amounts to KRW 118.9 billion, which occurred in Q1. And that was an overview of our one-off factors in Q1. To continue, regarding the asset growth of our savings bank, in Q1, in the past, there was Shinhan Savings Bank and there was Yehanbyoul Savings Bank, which was a bridge to that. And we acquired this. Shinhan Savings Bank had now -- can cover the metropolitan and nonmetropolitan areas because we only had coverage in the Gyeonggi area, which is a non-savings bank, and we actually acquired the deposits lower than KRW 50 million by the KDIC -- from the KDIC. So I believe that the spontaneous asset growth is not very meaningful. Thank you.

[Operator:]

So we'll now take a second question. And the second question is from Mr. Lee Byung Gun of Dongbu Securities. Mr. Lee?

[Byung Gun Lee:]

I have 2 questions. Question number one is this. You talked about NIM, but I have bit of concerns. Compared to other financial banks that have presented their earnings, it seems that in terms of funding that Shinhan did quite well, but when in comes to lending rate, I think that you have the lending rate decreased 5 bp more than other financial groups. But then your assets did not grow that much either. So I have to say there is another reason for a decline in the lending rate more than other financial groups. So if you could talk about that. And second, it seems that for the Shinhan Card, before -- that in the bank, you had one-off items. So we were expecting to see the decrease in the income. But the Shinhan Card, compared to other credit card companies, while the provisioning increased for them -- and so the investors are worried about this increase and provisioning for the bad debts -- or just the increase in bad debt. So could you also give us some forecast about the bad debt trend for the Shinhan Card?

[Unknown Executive:]

And related to margin, if I make additional explanation, yes, it's true. When it comes to lending, there were some pressure in terms of lending rates and there are 2 reasons. And one is that in Q1, if you look at the bank, well, the loan assets increased by KRW 855 billion. So compared to the end of last year, it's an increase of 0.9%. However, if you look at the details of this growth, well, reasonably -- well, our lending to the SOHO, which -- the corporate sector, has been increasing. And in Q1, SOHO lending grew by 2.2%. And this growth is -- well, the margin is decreasing because of fierce competition. So there is this competition factor. And the second reason is this. As we grow, we have been growing, centering on a rather higher risk of customers. So that could bring -- see an improvement in margins. But now -- we are now focused on the SOHO customers with the lower risks. And so that will be leading the increase in our assets. But if you look at the risks for the mortgage, it's decreasing. The mortgage loans, that's decreasing. However, the high-quality individuals -- the loans to these individuals, well, we'll have a continued increase. But because of competition, we've seen the squeezed margins. So the margin, despite the growth, has not been able to improve significantly. So that is the current circumstances. And as for your second question, I think that was related to the Shinhan credit card. That was the bad debt cost. It was about KRW 86.7 billion in Q1. That was an increase from the previous quarter. But I think we have to look at 2 things here. That is the delinquency rate. So for Q1, the delinquency rate is about 2.53%. And as for the NPL ratio, in -- compared to Q4 of last year, there was a growth of about 11 basis point. So the asset quality did not deteriorate by much, but the provisioning increased, however. As I mentioned in the previous earnings report, the recovery from the written-off assets, there is going to be a decline of 10% as compared to last year. It's going to be about KRW 250 billion. So the collection -- or the recovery from the written-off assets is going to decline, and that is going to impact the provisioning amount despite the fact that our asset quality did not get worse by much. And in Q1, we had a very conservative provisioning policy for the Shinhan credit card in Q1. So compared to other quarters, we had more than average provisioning accumulation. So in terms of credit cost, on an annual basis, we are expecting about 150 basis point. And because of KRW 86.7 billion in Q1, well, whether it's going to increase or not for the remainder of the year, it's not very clear. So in Q2 and Q3, if we could maintain the current asset quality, then the provisioning would not increase by much as you have expressed some concerns about.

[Operator:]

Next question from Standard Chartered Securities, Im Gi Hun [ph] . Mr. Lee [ph] ?

[Seong-Jin Kim:]

I am actually Kim Jin-Seong, sorry. I have 2 questions. First, regarding SME loans, you have seen some growth comparatively. Is it because of reclassifications? Or is it just a 2.2% increase? I know that although you target SMEs that are quite sound, on a long-term basis, if SME loans increase and if collateral loans decrease, then maybe the margins will improve. So it would -- should have helped the margin, but I haven't seen those movements. Is this a one-off phenomenon or do you think this will continue? Secondly is for the collective loans. Many other banks had issues and they were collateralized or securitized. So they did not have a lot of provisioning. But I see that for Shinhan -- I know that you have a conservative position, but your amount of provisioning is quite sizable. So can you give us background information regarding this? Do you have any possibilities of this being written back? And can you give us some forecast for the delinquencies, what will happen going forward?

[Jung Kee Min:]

Regarding the SME loans, as was mentioned by Mr. Kim, for SMEs, strategically, we are continuing to extend SME loans. So this is a part of our strategy going forward. For your information, last year, in the SOHO category, there was 9.7% growth last year. And the year before last year, in 2011, there was 14% growth for SOHOs. Accordingly, in Q1, in the case of SOHO, it's 2.2% growth. So if we just calculate with this on a yearly basis, this is a 9% growth trend on an annualized basis. This year we haven't had any major changes in our strategy to extend more loans to SOHOs, but we're trying to maintain our asset quality, and for those borrowers who, we believe, will have more demand for our loans, well, we will provide the loans to them. You also asked about this helping the margin, but regarding the mortgage loans, if we compare this to the mortgage loans, it does not help the margin much. However, in the corporate side, as was mentioned before, it has the highest margin in this category, as was mentioned in my statements in the beginning, because of heated competition. And in the case of Shinhan, when we look at the industry standards, we have a high concentration in several sectors, including real estate lease or real estate rental. Secondly is wholesale and retail and manufacturing, and next is lodging and restaurants. So we have seen growth in these 4 categories. When we look into these categories in more detail, other banks are accelerating growth in these categories as well. So that is why we are seeing the margins squeezed down slightly.

[Unknown Executive:]

And about the collective loans, as for the collective loans to the Shiksan zone, I've started introduction of IFRS. The calculation method for the bad debts have changed. Actually, it has become more rigid. Well, if we -- in the past, we could proactively accumulate provisions for the bad debt in anticipation of the bad debt. However, at the point of 10th month of delinquency is when we start cumulative provisioning. So that's why we are -- cumulative provisioning of about KRW 30 billion per quarter. And as for the loans for the Shiksan zone, I think that there is some sort of preservation of the loans or the bonds. So that does not help. It's collateralized. And for the Shiksan zone, it's about -- the cumulative provisioning is about KRW 71.5 billion. And we're trying to sell off step-by-step this year. So it may be in Q1, we -- so we expect this about 40% to 50% of the profit we accumulated in Q1 to be written back or returned. And as for the Shinhan Bank, the collective loan is about KRW 5.6 trillion. And the delinquency rate -- most of the delinquency rate comes from the Shiksan zone. So the -- excluding that, the delinquency for the Shinhan Bank is not that large. So for the Shinhan Financial Group, in Q1, the credit cost is about 78 basis point, and one-off is the 71.5 billion of -- from -- excuse me, bp from the Shiksan zone. And the remaining is about 65 bp. So -- but that is similar to our average for the past 5, 6 years. Of course, we'd like to see lower numbers, but large corporates -- many large companies are experiencing some difficulties. So for this year, we may have the same numbers as the average for the past 5, 6 years. And so I don't see much improvements being made in terms of collective loans.

[Operator:]

Next question from KB investment, Mr. Shim Hyun Soo. Mr. Shim?

[Hyun Soo Shim:]

Yes. Regarding the conforming loans, after Q2, what is the limit that you have remaining? I'm also curious about the conforming loans that probably have been securitized and taken off your books. But taking into account the limitations and the securitizations, can you give us the growth forecast for conforming loans? And secondly, could you give us a -- some background information about your asset growth strategy going 3 years into the future, some guidance? And we had the impairment characteristics for Q1, and it seems that the profit for credit card should be on a climax for this quarter. So can you give us some background information regarding this?

[Unknown Executive:]

Regarding the conforming loans, currently, as of end March, conforming loans' balance stands at KRW 690.1 billion. Securitized portion is KRW 276.1 billion. Accordingly, for the handled balance, as of end March 2013, it's KRW 218.5 billion. The limit for this year that we received is KRW 1.3 trillion. We haven't been very active in growing our conforming loans because even if -- and if there is loan demand, then we will try to have stable growth in conforming loans. Regarding the total securitized amount for this year, it may reach KRW 1 trillion at the maximum. That was our forecast. With this background, when we look at the current growth trend seen from our total loans, 2% to 3% growth for conforming loans probably is expected. Regarding corporate loans that you mentioned, it includes large corporations and SMEs. And in the case of corporate loans, 3% to 4% of growth, we believe, will be possible. We had the comprehensive business plan for 2013 and regarding our loans at KRW 1 growth, we believe that it will fall along the same lines. Regarding credit card, you were right. It is true that there was the merchant fee revision and cut. So it is true that our -- that income will be squeezed. And on an annualized basis, the merchant fees, if it is 1.85% fee ratio, then on an annualized basis, we thought that it would amount to KRW 100 billion to KRW 120 billion. But in Q1, it is actually surpassing KRW 30 billion on a pretax basis. So after taxes, we believe that our burden for each year will be about KRW 100 billion. Regarding our P&L, as was mentioned in Q1 for Shinhan Card, we will -- we had very conservative provisioning and the business days in Q1 were not numerous, so on a revenue basis, KRW 32 trillion. So in Q1, if we take into consideration those factors, in Q2 and Q3, if we have normal operations, then we would not have a lot of impact to our P&L. We will have some improvements. In the case of Shinhan Card, we could preserve some of the income because we could sell off our Visa card shares. As you're well aware, in Q1, we were supposed -- we were going to sell only more than threefold, the 260,000 shares we sold off. So if we sell off the remaining Visa shares, then Shinhan Card income will be maintained at a more stabilized pace. It seems that there are no further questions waiting for us. So with this, we would like to conclude the earnings release for Q1 of 2013. So once again, I'd like to thank you for joining us.