Greetings. I am Park Cheol Woo, in charge of IR. I would like to thank all participants in our business results presentation and begin the 2020 Q3 earnings release. From Q1 of this year, we have been having this earnings call with only voice in order to have the minimum number of staff due to COVID-19. We ask for your understanding. We have here with us our CFO, Roh Yong-hoon; CSO, Park Sung-hyun; CRO, Bang Dong-kwon; Head of Strategy Planning, Kim [indiscernible]; and Head of Finance Management, Kim Tae Youn. We will first hear the 2020 Q3 earnings presentation from CFO, Roh Yong-hoon, and then have a Q&A session. I would like to invite our CFO, Roh Yong-hoon, to walk us through the 2020 Q3 earnings.

Greetings. I'm Shinhan Financial Group's CFO, Roh Yong-hoon. Thank you all for taking part in the 2020 Q3 earnings release. With the weather turning cold, a second wave of COVID-19 pandemic is spreading around the world, and the speed of economic recovery is becoming delayed. With still a great amount of uncertainty regarding the economic recovery, while maintaining solid basic fundamental, it is an important juncture for us to prepare for the future. In particular, utilization of capital, the basis of activities of financial companies, will become an important yardstick that will decide the future competitiveness in an environment like in the current situation. Based on this diagnosis, Shinhan Financial Group in Q3 worked hard to continuously create conditions to generate capital and asset profitability even after the post-COVID era. I will briefly cover this from Pages 5 to 6 and then explain about the group's Q3 earnings. Let's go to Page 5. A characteristic of Q3 activities of Shinhan Financial Group is that we continued efforts to improve capital profitability. In particular, in the investment banking area with high capital and asset profitability, based on operating income, GIB rose 24% Y-o-Y and GMS rose as much as 128% Y-o-Y, a high-growth rate, respectively. Shinhan, in order to increase the profitability of investment banking and property asset management, has adopted the matrix operational system, the basis for cooperation between many subsidiaries. The experience of the matrix operational system accumulated for many years is showing its effect in a difficult situation like in the current situation. On the other hand, with the continuation of SME funding support in order to overcome the COVID-19 situation, the growth rate of corporate loans has grown 11.2% compared to late last year and is maintaining a high-growth rate from Q4 of this year. We will…

[Operator Instructions]. We will get the first question from Hyundai Motor Securities, Mr. Kim Jin-Sang.

Congratulations on your great earnings. I have 2 questions. First question is a simple question. Regarding your CIR, you mentioned it's 40.5% -- 42.5%, so it's quite good. And looking into the next 3 years, I'm sure that you have integrated-related costs as well and digitalization-related costs actually. So you think the numbers of CIR will be affected? And do you think the cost will be big in the beginning, and then your CIR is going to go down in the mid to long term? So the current level of CIR, do you believe it can be maintained? That is my first question. The second question is related to, excluding one-offs, on a recurring level, you had about KRW1 trillion, and in Q2 -- in Q3 actually, what were the special factors, outstanding factors? And regarding your recurring fundamentals, do you believe that it's sustainable? Last question, actually, regarding the government program, the deferral of interest payments. Or interest holiday seems to be most worrisome, so can you tell us about the situation? And what is the amount of principal, the interest based on the principal? So can you tell us about what impact this may have on your group?

I am the CFO, Roh Yong-hoon. I think you gave us three questions. And based on that, first, related to digital innovation, we mentioned that for the next three years, about 10% of our group's net income. In the past, we didn't have a separate digital budget, and it was included in our ICT budget, but we mentioned that this will be separate so that we will accelerate digitalization. So we announced that after setting it as our plan going forward. And the 10% that we mentioned, well, it can include the recurring costs, but capital-related costs are included as well. With the digital innovation, regarding one-off expenses and costs, we are still getting material for next year's financial plan, so we cannot give you concrete details, but a sizable amount will be related to capital. So regarding the CIR ratio, even though we do have digitalization efforts, we don't believe that it will deteriorate in the next 2 to 3 years. And because of our increase of income regarding our raising of capital, we believe that the CIR-related factors that could push up the CIR a bit will not be that sizable. And in Q3, you mentioned one-offs. In Q3, what they are, the breakdown, and whether we can maintain the recurring level of fundamentals. Regarding the one-offs, there could be many factors. And looking at it conservatively, the biggest one-off is Shinhan Life Insurance's building that we have as a type of profitable security, but we sold this off. So we had a profit of KRW49 billion. So that is the biggest one-off factor. And then, we accumulated additional provisioning, but if that is not seen as one-offs, then the KRW49 billion will be seen as a one-off factor. Then in a quarterly recurring level, the fundamentals, well, it goes beyond KRW1 trillion. And for our recurring income, and in Q4 and in next year, we have a goal to push this up. And of course, we do believe that we have possibility of sustainability.

And regarding the interest holiday, I am the CRO, and I will answer your question about the interest holiday. And the amount of interest is about KRW6 billion, and principal is about KRW300 billion. And it is not a sizable amount, so we believe that it will not affect our robustness. And we believe that, as you know, for this year, well, if this becomes reflected into the financials next year, then there could be some marginal companies, marginalized companies that will be affected. But we are actively preemptively preparing for these possibilities.

I am Kim Tae Youn, Head of Finance Management. And just to elaborate on the first and second questions relate the digital expenses, we mentioned that we will invest more than 10% of our net income into digital innovation, but it is on a cash basis. So capital expenditure or capital type of expenses, well, that could be another type. And you can see that the expenses will just be for the -- of depreciated for the, 5 years going forward. And you also mentioned fintech companies. And in our collaborative efforts with fintech companies, there could be some capital going in, but this could be seen separately, so we believe that it will not have a great impact on CIR. So the depreciation because of capital-related expenses and others will be limited. So we will not have a big impact on CIR. And regarding the quarterly recurring income, whether it can be maintained at this KRW1 trillion quarterly level. Looking at last year's earnings, it was about KRW900 billion per quarter, and we believe that was realized. And regarding what has changed between last year and this year, you can see that Orange Life, 60% to 100% of the shares was acquired. So if they have more than KRW250 billion of income this year, then we could have about KRW100 billion of plus because of that. And we had capital increase of KRW660 billion for Shinhan Investment Corp. And related to those funds for Shinhan Investment Corp., they had -- Shinhan Investment Corp. accumulated KRW300 billion of provisioning, but they were able to realize sizable profit and income. So looking at those two factors, we believe that, financially, we already have reached the KRW1 trillion line, and we believe that it is indeed sustainable. Thank you very much.

[Operator Instructions]. The next question is from Kiwoom Securities, Mr. Seo Young-Soo.

I am Seo Young-Soo from Kiwoom Securities. Can you hear me well?

Yes. Please go ahead.

In Q2, because of the DLS incident, you had some difficulties. And as we had expected in Q3, there were no mishaps related to such misselling of PE products. But nonetheless, we are still concerned regarding other types of PE funds, including real estate funds going bad. Internally, what are your plans? Do you think this incident is over? And second question is about provisioning. Will there be additional provisioning? I think you mentioned that if there is a need, so maybe in Q4, applying the IFRS 9, will you be provisioning additionally? And will that be affecting the financial results? And going forward, applying the DSR is becoming a topic these days. And how are you getting prepared for DSR?

Yes. I am CFO, Roh Yong-hoon. I would like to take the question about the DLS and our outlook for the coming quarters. As for the PE-related products, the distributors, the bank and financial -- the investment corp., how we have been affected is what we are keenly looking out for. We need to do in-depth reviews, and we are still waiting for the decision coming from the FSS and the dispute settlement body. We have a contract with a foreign accounting firm, and they are doing a due diligence. So we have requested a due diligence to that accounting firm about the loss amount. And the result of the due diligence will be coming out in Q4. So depending on the result, we will decide accordingly how we are going to reflect it on our book by consulting with that foreign accounting firm. And we will recognize losses accordingly. What our expectation is, as for the Lime CI fund, we do have insurance against the losses, and so there is the possibility of the insurance payment. And we also have to watch out for the decision coming from the dispute settlement body, and so we will be reflecting that accordingly.

And the next questions were DSR. Yes, this is the CRO, Bang Dong-kwon. As for the DSR, we have adjusted the RC for the sector, and we have provisioned additionally. In Q3, in stage 2, there was additional positioning. In Q4, there could be some more. And there will be RC forecast in Q4 for the next year. In Q4, probably we won't be provisioning as much. The amount will be less. And as for the marginal companies, looking at the growth trend, we will be working on a selective basis, and we will move conservatively. And the next question about DSR, there is the overall bank average. Maybe it could be done on a region basis or on individual basis, individual company basis, and we plan to apply differentiated DSR on a conservative level.

I am Kim Tae Youn, Head of Financial -- Finance Management, and I would like to add some comments. And as was mentioned by the CRO, in Q3, for selective companies, KRW22 billion of additional provisioning was set aside. And as for the PE-related funds, KRW40 billion of provision was set aside for Lime fund. In Q2, we had a sizable provision. But starting from the end of last year, if you watch closely, the provision was around KRW50 billion every quarter. And so it was quite a sizable amount. In Q4, what will be the size of provision in Q1 and 2 and 3, we had continued to provision. Of course, there won't be as large provision as in Q2, and things could change. But we don't believe any future big shock will be there.

I am Park Sung-hyun, the CSO. As to the private equity fund, in Heritage, we had the provision for, and we had made the payment to -- for the Lime fund. And in August, we had provisioned by agreeing to the terms that 100% payment will be made out. Of course, depending on the macroeconomic situation next year, we cannot say for sure that the PE issue can all be taken care of, but we do believe that the major issues have been taken care of. And if there are some minor issues that remain, they can be handled at the bank level and at the investment corp. level, and it will not make a huge difference. Thank you.

Next question from KTB Securities, Kim Han Lee.

I'm Kim Han Lee from KTB Securities. I'm curious about dividends. And you mentioned about growth regarding raising of capital. And I think this was something that many people were wondering. And I have a question regarding your top line because it's very good for the group and for Shinhan Investment Corp. as well. And can you tell us about whether this is sustainable for next year? And you mentioned the matrix organization and the review, but when you are drawing a business plan for next year, are you going to be conservative in certain areas? Can you tell us about what they are? And how conservative are you going to be? I think that will help us try to understand next year's financial forecast.

I am Roh Yong-hoon, the CFO. Thank you for your question. For next year, we are actually setting forth our business plans, our management plans. And GIB and GMS are very important. And while having sales increase, RWA will increase. But we already have a capital increase so that is not going to be a big issue. But regarding GIB and GMS, through this noninterest income expansion, we believe will follow next year, and it needs to follow. And we're going to drive that. However, for PE fund or trust, when we sell it in our channels, we can be impacted in the sales commissions and fees. So we believe that those targets will not be very high. So income and -- we will increase fee and commissions through GIB and GMS and interest income expansion. Thank you. Noninterest income expansion, actually. Thank you.

Regarding the matrix, we did have some good results this year. And for GIB and GMS, we have some realizations that did not occur because of foreign circumstances abroad. But through this system, we have a very good inner system as well, internal system as well. So we believe that on a recurring level, growth and sustainability will be possible. And for GIB and GMS, actually, even when interest rate falls, we believe that it can be complemented, so we can maintain the recurring income. For WM for this year, we had some difficulties because of the PE fund issues, but we believe that the direction is very positive. And we believe that for the other accounting factors, it is very positive on a recurring level. So the level of income, we believe that we will have growth going forward, and it will be maintained.

So that was our CSO, Park Sung-hyun. We have no other questions in the queue as of now, so we will hold. This concludes Shinhan Financial Group's 2020 Q3 earnings release. We will continue to work hard for better results to make a difference in the valuation. Thank you for your participation in today's quarterly earnings call, and we wish you the very best. Thank you.