Greetings. I am Park Cheol Woo, in charge of IR. It is now April with beautiful spring weather. Thank you, everyone, for participating in today's earnings release. And from now on, we will begin the 2021 Q1 business results presentation. From this quarter's earnings release, we are holding it earlier in the day so that the market can analyze our performance in more detail. We would like to ask institutional investors and individual investors for your keen interest. We have here with us at the earnings presentation our CFO, Roh Yong-hoon; CMO, Heo Young-taeg; CSSO, Park Sung-hyun; and CRO, Dong-kwon Bang. First, CFO, Roh Yong-hoon, will walk us through the 2021 Q1 business results and then engage in a Q&A session with you. I would like to invite CFO, Roh Yong-hoon, for 2021 Q1 earnings presentation.

Greetings. I am Shinhan Financial Group's CFO, Roh Yong-hoon. Thank you, everyone, for taking part in 2021 Q1 business results presentation. I will cover the 2021 quarters business highlights from Page 5 to 6 and explain about the details regarding our group's Q1 business results. Let's go to Page 5. 2021 Q1 nominal net income posted KRW1,191.9 billion, and the size of our recurring income considering one-offs recorded approximately KRW1,230 billion level and recorded the highest level ever since we were first established. What is more meaningful than the highest-ever quarterly earnings is that this was not just due to one-offs, but that our earnings is consistently expanding through our strong fundamentals, which is based on diversified recurring earnings, in particular, keeping in step with our bid to long-term strategic direction pursuing efficient growth. We are seeing even bank and nonbank income improvement. Noninterest income increased by 40% Y-o-Y and 55% Q-o-Q, respectively. Nonbank net income before reflecting ownership posted KRW620 billion, an 84% increase Y-o-Y, which is also a record-high quarterly income. Core profit also grew. NIM, which declined due to the low interest rate, rebounded in 2.5 years. And along with loan growth, group's interest income grew by 5.7% Y-o-Y. On the other hand, future uncertainty related to future expenses for LIME in 2020 and COVID-19 provisioning is greatly declining. On April 19, the Dispute Settlement Committee determined the compensation rate regarding the LIME CI Fund sold by Shinhan Bank and, on a pretax basis, KRW62.6 billion of compensation expenses related to investment products, including LIME CI Fund was recognized as nonoperating expenses. And with this, the ongoing Dispute Settlement Committee has all been concluded, and mentioned in the previous Q4 conference call, there is a very low possibility that we will need to additionally recognize the large…

[Operator Instructions]. We will take the first question from Hyundai Motor Securities, we have Mr. Kim Jin-Sang on the line.

I have two questions. First, regarding your operating income, it was very good, and the CIR is quite formidable. And looking at your G&A expenses, in Q2, I think there was an increase in employee-related costs, labor costs. And were there any bonuses that were seasonal or other one-offs? And can you tell us about what is your forecast for the G&A increase for the year that you have in your plan? My second question is about your card business, which showed very good performance. Overall, the figures are quite outstanding, and there was a readjustment of merchant fees that will also be taking place. And was there any pressure for you to readjust the merchant fees maybe? So could you tell us about your plans going forward? And give us some guidance related to readjustment of the merchant fees.

Thank you very much for your questions. I am the CFO. First, regarding the G&A question, I would like to explain. Regarding the increase of labor cost, it is true, we had two factors that led to the rise. First is for investment. Since we had good market environment, there was some sales-related, performance-linked pay that was given, about KRW20 billion, and there was the PS that went up as well because the stock market improved. So there was some PS-related expenses, which was about KRW35 billion. And those 2 led to the rise in labor expenses. For the G&A, according to our financial plan, we believe that there will be a slight rise compared to the previous year. It's because, as you mentioned, our CIR ratio is quite low. And we believe that we don't need to artificially push it down very hard, and we have new businesses related to digital and others. So because we were able to offset the expenses, we believe that the CI ratio would probably slightly increase this year compared to the previous year.

I am the CMO, and thank you very much for your questions. Regarding the card, for online and department stores, we are seeing more credit card sales, and you can see that credit card-related transactions have been going on steeply. And Shinhan Card is #1 in the market. So I think that was a big influence. Regarding the credit card-related fees. Looking at the costs, we are analyzing this, and from next year, we will apply this, and there is the federation. So we will look at the different costs and what is happening in the market, and we will, I believe, determine the fees for credit card. So we believe that for this year, we will not have an impact from our earnings because of the fees. Thank you very much.

We'll now take a question from KB Securities, please ask your question. Excuse me, from Citi Securities.

Yes. I have two questions, if I may. This is Yafei from Citigroup. The first question is on the net interest margin outlook. Congratulations for the sequential Q-on-Q expansion. Would it be possible to give us a bit more color how much further do you think the funding side improvement can go on in the coming quarters? And how much further upside are there for the net interest margin for the rest of the year? And secondly is I wanted to follow up on the fee income. So can you give us some update? Is it true that the LIME Asset Management-related issue is now being fully provisioned for, and there will be no further LIME-related cost that is going to be booked going forward? And consequently, looking at the trust-related fee income that you can see that the growth is somewhat behind peers. Are there any organizational changes that you're doing going forward to drive the strength of the trust-related sales to drive the fee income growth going forward?

I'm the CFO. Thank you very much for your question. Related to NIM, in Q1, we've seen a lot of improvement because of the improvement in the funding costs. And we -- there was an improvement of 5 bp in Q2. We're not so sure if we will see as much improvement as in Q1, but we do believe there will continue to be improvements. And in our case, LDR is relatively low. And therefore -- so we do have room for improving ALM, which is related to NIM. And your second question is related to LIME about additional provisioning, whether it's needed. Well, financially, related to LIME, we do not believe that there will be any financial impact because of LIME and because LIME-related effects have already been incorporated. And about other private equities, at every quarter, we do receive assessments from external organizations. And those reviews or assessments are incorporated in the financial numbers. In Q1, so excluding those numbers from a Dispute Assessment Committee, I don't think we do have to make any changes. And so once we do have a very objective and fair numbers from the external accounting front, we're going to be incorporating that.

And I'm the CMO. I'm going to talk about the fees. Noninterest income increased by 40% Y-o-Y, which is a significant increase, well, compared to the peers, our peers. And I think that's -- the baseline is different. Where we have the credit card fees and those core fees, I mean it is increasing quite healthily. And about trust product sales of fees, I think we're maintaining the same level in terms of sales of trust and as the same period of last year. And about the financial fund fees, it's also increasing at about 10%. And so we've seen a turnaround in terms of fees from the sales of funds and trust products. And about retail investors. Because the increase of retail investors, that is, as you know, impacting the market quite significantly here in Korea, and depending on such impact on the market, there could be a potential increase in the fees income. So we do expect the fees income to increase more than it is right now. And so in terms of fund and trust product fees, there have already been a turnaround and other types of fees are growing rather solidly.

It seems that there are no questions in the queue as of now, so we will wait for further questions. From DB Securities, we have Mr. Lee Byung Gun, the team leader.

I'm from DB Financial Securities. I am Lee Byung Gun. And I have some simple questions, and then I will ask about your dividend. I would just like you to confirm first, regarding your earnings for Orange Life, they were quite good. And I think there were some gains from sale of securities. And is it related to variable products? Or were there any other one-offs? And my second question that I would like to ask you is related to trust. It seems that your proportion of ELS is lower than others. And regarding the Consumer Protection Act, I know that you have some obstacles to sales from March. And do you think that will be influential on your performance related to dividends for interim dividends or for quarterly dividends? Do you think that will take place? You have a high -- do you think, even if your financial group has intentions to do so, there might be other external factors. So can you tell us about the possibility of interim dividends going forward?

Yes. Thank you. I'm the CMO. And regarding Orange Life earnings, strategically speaking, there was something there because in the long term, we are -- we have been also, at Shinhan Life Insurance, doing our best to focus on profitability. So I hope that you can focus on that fact. And looking at insurance, we had good results. And it is true that we had some gains from sale of securities because the market -- stock market was very good. But still, we have been focusing on strategy to push up our profitability even if it's had an impact on our market share going forward. So we had long-term strategies, I think, that worked. And regarding the trust-related fees. Regarding the Consumer Protection Act, Financial Consumer Protection Act, it is true that at the windows of our banks, there was some confusion at the tellers. But we can see that as time is passing, the confusion is winding down, and people are understanding. And we need to follow the Financial Consumer Protection Act, and I think the consumers are now getting adjusted to the new environment. We don't think that there will be a big impact to our financials due to the enactment of the Financial Consumer Protection Act.

I'm the CFO, and I would like to answer your question regarding dividend. From last year, as we have been mentioning, we have planned for quarterly dividends going forward, and we have reviewed the different aspects to it in different ways. And regarding the timing, it is true. It is evident that we have external factors. But regarding those external factors, we are conscious of the external factors. So we believe that in execution of our plan, those eternal factors will not be a big hindrance. And as you know, we had some dividend payout ratio that came, and we plan to take that into account when we do have quarterly dividends. And we believe that the ratio of shareholder return will be very dense so we are going to -- we'll match that. And we are -- we have to actually execute the plans going forward. That happened steadily last year. And there will be the expenses that will be added to it and in Q4, and that will add to our total dividend plan going forward.

From Kiwoom Securities.

I'm Seo Young-Soo from Kiwoom Securities. Congratulations on your excellent performance. I have an additional question to a question that was already asked, and this is related to Financial Consumer Protection Act. Will this act essentially focus on the effect that people are more interested on the funds and the trust? But this act is also applied to all types of financial products, including the funds. And the act emphasizes principles. And so I think that the company will have to have a different strategy for different products. And I think it's very important to be able to face the customers properly. And -- but it seems that you are -- the companies are most focused on explaining the product to the consumers. And so I was just wondering how you're preparing, what your strategies are. And it's been about a month since the act has gone into effect.

And about this act, it's been about a month, as you said, since it has gone into effect. And as to the implications, well, it's not still clear. But as I said before, we are trying to adapt to changes. We have the private equity fund issues, and we've -- based on our experiences, we are very, very cautious when it comes to choosing the products that we're going to sell to our customers. And I think it's very important that we choose the products that we sell to our customers very carefully. And so that's -- so our strategy is to focus on selection of the product to sell. And about the implications of this act. When it was -- when this was -- well, since that, I think we have made improvements since the act first went into effect. And it's difficult to say that we have sufficient improvement, but I think we will make a necessary adaptation. Because not enough time was given to the financial institutions to prepare for the act, and so the company -- all the financial institutions had some difficulties. But they are -- have -- are now -- have reviewed the relevant act and are making necessary changes. So we do see those changes taking place. And about the fees from the sales side. The Asia Trust, we do see some fees. And this is not related to the act whatsoever. And this act, as you know, is still ongoing. It's difficult for me to say for sure exactly what impact is -- there is going to be. But we are making improvements, and we are moving towards -- on a very -- moving on a very positive path.

I'm the CSO. As was mentioned, when -- the deposits and the loans also are impacted by the Financial Consumer Protection Act. And about 70% of the deposits [indiscernible] loan are taking place online, especially with the younger customers. And So the Financial Consumer Protection Act procedure, it would be quite different from that of an off-line. So depending on the customers and depending on the channels, what we are monitoring, how we should implement the Financial Customer Protection Act definitely. We will provide you with further information later on.

From HSBC Securities, Director Won Jaewoong, you're on the line.

And looking at the earnings for the bank, it is good. You have good noninterest income as well. Your earnings is very even. And Shinhan, I think, has made many efforts for M&A going forward. So you have had good performance. So my question is, going forward, in the overseas or in your Korean subsidiaries, do you have plans to grow them? And if so, what are your detailed plans? Hana Financial Group also had KRW500 billion of increase -- a KRW500 billion capital increase. So -- in this direction. So regarding the COVID-19 environment, are you going to focus more on overseas or others? So I'm curious about your strategy for M&A in -- abroad.

Yes. Thank you for your question. And regarding M&A and the group's new business, I think they are quite aligned. And regarding our Korean M&A strategy, I think there is some part of the portfolio that we still want to add. So we are always keeping an eye on this, and we have our own standards. So the return on investment, ROA -- ROI, needs to be more than 10% and how much synergy we can generate with the M&A. So if we have additions to our portfolio that can accomplish the goals, it would be very welcoming. And regarding -- our other focus regarding M&A is fintech or other platforms that already have a user bases. So we are looking for the right fit with Shinhan, and we are always keeping an eye on these possibilities. For global, for Citibank, there was talk about the sale of retail in Asia. And for the advanced countries, regarding our strategy, well, we always think about balance, and we don't think that focusing on expansion is the right answer in some cases. So we need to concentrate on what we truly need. And for Southeast Asia, we also have an eye on different possibilities. So there could be Indonesia or Vietnam or other Southeast Asian countries where we have business. So we believe that if there are opportunities that can lead to synergy, it would be very welcoming. Thank you very much.

I am the CMO, and let me elaborate on 2 more points. We're talking about inorganic growth. And looking at the group subsidiaries for bank and nonbank, we have a business strategy focusing on ROE. So the CET1 ROE is the center of our assessment. So we want efficient division of our resources. We want our group subsidiaries ROE to grow. So that will be our strategy going forward. And I think we will make more efforts in that direction and execute our plan. Thank you.

Well, since that there are no questions waiting, but we'll wait just a moment before we conclude.

Since that there are no further questions, with this, we would like to conclude Q1 2021 earnings presentation of Shinhan Financial Group. We'll continue to improve our recurring earnings and try to differentiate ourselves. Thank you for taking part in today's call. And I hope you have a wonderful, beautiful weekend. Thank you.