Shinhan Financial Group Co Ltd

KRX:055550

Earnings Call Transcript

[Cheol Woo Park, executive]

Hello. This is Cheol Woo Park in charge. Thank you to everyone who took the time out of your busy schedule to attend the presentation of Shinhan Financial Group's 2024 annual business performance. Group CFO, Sang-Hyuk Jung; group CSO Go Suk-Hyun; Group CRO, Bang Dong-Kwon; Group Future Strategy Research Institute Director attended today's performance. Also attendance this year are newly appointed Shinhan [indiscernible] Card CFO, Park Kyoung-Won, Investment Securities CFO, Life CFO Group Manager [indiscernible]

As in previous years, today's performance presentation will begin with a presentation on the '24 annual business performance followed by a Q&A session for those in attendance. Then there will be a presentation by Division Manager on the business performance.

[Sang-yung Chun, executive]

[Audio Gap]

The group's interest income grew 5.4% Y-o-Y despite the overall deterioration in profitability due to lower market interest rates. This was due to the fact that interest earning asset growth effect was maintained throughout the year led by the Korean yuan loans of the bank.

The bank's Korean yuan loans grew 10.3% annually, driving interest income growth. However, during the fourth quarter, household lending contracted by 0.9% due to regulatory issues, environment and seasonal factors and corporate loans grew only by 0.9% as well led by blue-chip companies.

The 2025 year plan is aligned with the group's corporate value enhancement plan and prioritizing capital efficiency and asset quality through real demand driven qualitative growth. Given grant RWA cap for the year, the bank will manage the portfolio with the enhancing the Group's ROCE and in particular, through the banks of funding-driven growth approach, the bank will continue to focus on efficient growth during periods of falling interest rate while defending profitability to the utmost.

Through the fourth quarter, the bank's NIM declined only 4 bps Q-o-Q to post 1.50% despite the impact of lower market interest rates. The bank's loan interest rate fell 14 basis points, reflecting lower market rates, but interest expense ratio improved by 10 basis points Q-o-Q driven by the repricing of time deposits and debt portfolio streamlining.

Going forward, based on flexible interest rate policies and the funding environment, strategic ALM operations will be leveraged to proactively defend against the NIM decline. Next, this is Page 8. The group noninterest income declined only by 5.0% Y-o-Y as we cope with the growing volatility in the capital market, backed by the solid growth in fee income.

Fee income grew 2.6% Y-o-Y despite the lower credit card-related income, owing to the higher marketing expenses. This was due to the continuing inflow of IBD throughout the year as well as the active financial product sales based on wealth management sales capabilities. However, gains on securities and derivatives decreased by 7.3% Y-o-Y due to increased capital market volatility and impairment of securities recognized during the year to secure future loss absorption capacity and the one-off loss Shinhan securities in the third quarter.

Increase of SG&A expense kept at 3.7% Y-o-Y. Despite the ERP program scale up and is being well managed and the group CIR posted 41.7% similar to last year with operating income before expenses increasing by 2.9%. The group's NPL ratio for the year improved 10 basis points Y-o-Y to post 47 bps despite proactive loss recognition related to real estate financing, among others, driven by preemptive additional provisioning and efforts to improve asset quality.

Next, moving on to Page 9, in terms of our indicators for asset quality, thanks to proactive write-offs and NPL sales indicators have been stable and under close monitoring. Our bank delinquency ratio has remained flat after improving past the first quarter. Card delinquency maintained downward trends throughout the year, but rose again to a level similar to the end of the prior year. Leading indicator for proved delinquencies is the 2 months delinquency migration rate for credit cards, and it showed improvement after Q1, but more recently has started to rise again. Despite 2 policy rate cuts in the fourth quarter of 2024, interest rates will remain high, and the economic recovery is also quite slow, which is will continue to be vigilant lens, maintaining conservative stance in the management of asset quality.

Please refer to the size for breakdown of net income by and a status update on real estate PF loans. Next slide. As of the end of 2024, our tentative CET1 ratio is 13.03%, down 14 basis points Q-on-Q. The drop was due a KRW 5.8 trillion increase in group RWA due to growth in FX assets driven by depreciation of the yuan. In 2025, we will continue to manage RWA at appropriate levels and leveraging our stable financial performance, we are targeting a CET1 of 13% or more on a sustained basis.

In terms of shareholder returns, we'll explain again in greater detail when we take you through our 2025 outlook. Page 11 shows the current status of our global overseas business. In 2024, overseas net income was KRW 758.9 billion, up 38.1% year-on-year. Net income contribution from overseas reached a record high of 16.8%. This is possible not only due to the impact of FX rates, but also thanks to our long-standing efforts around localized sales and internal control, especially in Vietnam and Japan which has delivered sustainable results.

Based on a strategy of selective concentration and efficiency-driven growth, and we will continue to shape and deliver good performance from global as a new driver for growth. Pages 12 and 13 are on details of our digital and sustainable management initiatives. So please refer to those slides.

Page 14, let me move on to our outlook for 2025. First, I will invite Director Go Suk-Hyun from our Future Strategy Research Institute to present our outlook on the business environment.

[Go Suk-Hyun, executive]

Yes, good afternoon. In terms of the economic and business management outlook for 2025. I'd like to first touch upon GDP growth. Initially, we had forecast 1.8% growth in 2025. However, with the launch of the Trump administration, Canadian conditions have deteriorated. As you know, domestic political uncertainty is also escalating and is weighing on the domestic economic conditions very quickly.

These 2 factors will potentially weigh on economic growth, which is why we have adjusted our GDP growth projection to mid-1%. Under this outlook, loan or asset growth, the overall environment may be negative. Also in terms of asset quality, we expect a cautious -- more cautious period in terms of managing the quality of our assets.

Initially, in 2025, in the FX rates and the household loan issue, we had expected 2 gradual rate cuts in 2025. But because of the deterioration of the domestic economy, we think that potentially there may be additional rate cut for a total of 3. However, the timing and the intensity, the frequency of supplementary budgeting by the authorities can increase monetary policy volatility as well.

So we will have to observe developments in terms of the monetary policies. So NIM likely will become squeezed, but then nonbanking and on the asset management side, we do think that there will be more positive drivers supporting stronger performance. In 2024, on the financial markets, FX rates were very unstable. But in 2025, we are expecting more stable FX rate trends, depending on the monetary policies of the U.S. and to greater interest rate differential. There are different political risk factors surrounding the presidential elections, et cetera, in 2024. However, these variables have already been played out. So we do not think that they will drive depreciation of the Korean yuan this year. However, the dollar yuan is not likely to stabilize quickly below 1,400 given the strength of the dollar.

The Trump policies -- the U.S. first-type policies are likely to continue to support a strong dollar. So for the time being, we think that the $1 will likely trade around the KRW 1,400 range. However, what is positive is, as I've said, any dramatic depreciation of the Korean yuan, I think is unlikely, and this has been played out. Lastly, on the real estate market. By region, we are seeing differentiated trends, and we expect that going forward.

The economy being weak and lending conditions also not increasing the likelihood of any hike in pricing is low. However, given the inflationary pressure and in supply, the possibility of a significant drop in housing price is also unlikely.

Financial institutions struggled with PF loan exposure in 2022 as the construction sector declined and then 2023, '24 saw increase in distress. But I think we're past the peak, and we will be passing through the tunnel this year. The government provided the framework for PF loan restructuring, and this will kick in. And so we think that gradual restructuring will play out instead of triggering additional districts. So compared to 2024, we think overall, the source of uncertainty will be less in the real estate market than the prior year. So that is my quick outlook on the overall business environment.

[Cheol Woo Park, executive]

Yes, thank you for the presentation. We'll move on to our earnings outlook on Page 16 and also our capital management plans. 2025 will be the first year of executing on our corporate value plan in real terms. And we will place priority on achieving growth perspective return on capital. We're enforcing stronger activity budgeting among subsidiaries as well as tighter penalties to institutionalize more fundamental change. This will mean that our RWA growth path for this year, as you can see on the right, will likely unfold differently than before.

There are many variables, but our basic assumption is 3 policy rates cuts. And we're expecting trend decline in bank NIM and weak interest in comp, but we will be responding strategically. For noninterest income, our loss absorbing capacity has improved last year, and we're expecting an even more significant improvement this year.

During a period of falling interest rates, we expect an increase in gains from securities, our revamped WM business will also boost retail fee income with wholesale fee income from the IB business also starting to gain full scale momentum.

Through efficient management of SG&A, we'll continue to strengthen our group-wide cost savings initiatives and maintain group CIR in the low 40% level on a continuous basis. Lastly, by maintaining a conservative risk management stance as we have, we seek to manage group credit cost against a target of mid-30 basis points, which is lower versus last year. By pursuing growth that takes into consideration return on capital and RWA and by boosting noninterest income from our wealth management and IB business, we will improve our underlying fundamentals and maintain group CET1 level stable, 13% or more as we have done so far.

Now moving on to Page 17, our shareholder return policy. Our shareholder return ratio for 2024 was 39.6%, reflecting KRW 1.1 trillion in dividends and KRW 700 billion in share buybacks. In 2025, our quarterly cash dividend of KRW 571 per share, combined with additional KRW 650 billion in share buybacks that were announced means KRW 1.75 trillion will be mobilized to fund shareholder returns.

We'll continue to carry out flexible share buyback policies depending on our capital ratio and expect to deliver stronger shareholder returns versus the prior year. Page 19 shows results our value plan assessment. While recovering the most important indicator measuring profitability has not yet materialized, 2025 will mark the groundbreaking year 1 in terms of our group value plan, it will actively mobilize the full capacity of the entire group to improve our key indicators.

As of the end of July last year, we preemptively disclosed a proactive corporate value program with a high degree of visibility and commitment. We have been taking the initiative to drive value add momentum on the cost and among financial stocks. In terms of implementation, we are committed to producing consistent and exemplary results, and we'll work hard to enhance value for all stakeholders and contribute to advancing Korean's capital markets.

Also, we'll be providing a new disclosure sometime after the first quarter to supplement our value plan further. In terms of detailed implementation plans, proposed improvements to our compensation, valuation schemes, et cetera. Please refer to Page 20 for details on the financial status of other group companies and other business metrics. Give your attention. This concludes our presentation, and we'll move on to the Q&A.

[Operator]

[Operator Instructions]

So we'll now receive questions. Yong Jin Seol from SK securities.

[Yong Jin Seol, analyst]

So on your performance, the nonbank subsidiary performance I have a question. If you look at our Q4 performance, there was a poor performance, especially I think security and capital as well as trust business, I think, software. What was the reasons for the sluggish performance?

[Cheol Woo Park, executive]

While we are preparing to answer to your question, please wait for a few seconds.

[Sang-Hyuk Jung, executive]

I'm the CFO in Jung Sang-Hyuk. The reason for the sluggish performance of the nonbank subsidiaries for internally. While looking back on the whole year last year, we looked at the performance of the nonbanking subsidiaries we found that quite regrettable, especially among the individual subsidiaries in the case of asset trust, as we have noted in our quarterly earnings presentation. As the completion guarantee type of trust, we continue to satisfy provisions, and no losses were incurred. And so the overall provisioning was said at the most conservative level. That was reflected because of that, the performance of the company as it is. It's about minus KRW 300 billion, as we noted in our presentation.

But if you look at the details, litigation-related provisioning, on a consolidated basis, there was that provision for litigation and also the tax effect. So actually, if we consider all that minus level for the asset trust is about KRW 150 billion. In the case of capital, there was a provision for real estate that was reflected. And because of the high interest rate, the funding rate has gone up. And also the biggest reason for the capital performance this time is because among all of its assets, about 40% it has investment assets for 40%. And among that assets, the investment management results combined with the market situation compared to the prior year, yes, the investment returns have fallen, that was reflected and the real estate PF provision, unlike these provisions as the market recovers, this is -- this can be recovered. In the case of securities, last year, we had one-off losses from ETF LP incident and also among our past investments, alternative investments, those losses were reflected in a conservative manner.

[Cheol Woo Park, executive]

We'll move on to the next question by Mr. Kang Seung-Gun from KB Securities. .

[Seung-Gun Kang, analyst]

Thank you for the opportunity to ask 2 questions. First, historically, on average, RWA growth was about 7% or so. This year, it was -- you said you want to manage it under 5%. So what -- will there be some parts that decrease? So what will be -- what parts of the business, the group will see reduced RWA this year? ROI or other capital ratios, we will have to look at the greater detail. So for card insurance, securities and capital, what is the total size of RWA? They are not disclosed at the moment. So as of the end of 2024, could you share the RWA for the different subsidiaries?

[Cheol Woo Park, executive]

Yes. Thank you. Please wait just one moment as we prepare to answer.

[Sang-Hyuk Jung, executive]

Yes, this is the group CFO. In terms of asset growth, so you asked about different drivers. And you also asked about RWA for the different subsidiaries. So let me cover the second question first. Very briefly, so if there are any inaccuracies in the data, I think we can check back with the IR team. But for the bank as of the fourth quarter, RWA balance was about total KRW 12 trillion, and then card was KRW 40.8 trillion, securities, that's KRW 34.9 trillion, capital KRW 18.3 trillion. And for further details, if you need more details, I think we can cover that later. I think you mentioned asset growth. In my view, it's not that we want to reduce assets, but it's a matter of shifting our growth path. So we want to follow a different RWA growth trajectory and the -- and have a strategy of selective concentration.

So for household and corporate loan due to the regulatory environment and also the macro environment, it will be quite difficult to expect any outsized growth like in the past. So even for corporate loans, because rates will likely go down, I think there will be reduced demand for bank loans, as they can access funding from the capital markets more. So internally, as a policy, the RWA penalties will be tightened and ROCE and other evaluation metrics will be clarified. And so asset allocation will be done based on ROC. And in that case, we can keep RWA under tight control in order to achieve our CET1 targets.

[Operator]

Next question is from an Won Jaewoong from HSBC.

[Jaewoong Won, analyst]

Shareholder return. It is after more aggressive than was expected. And thank you very much for trying to keep our promise to the market. However, the earnings have fallen. And so the shareholder return ratio has gone up because of that. As earnings go up, then I think it is very important that our shareholder return ratio goes up. In accordance with the growing earnings, but during the presentation, the credit cost was -- you said that you expect your credit cost ratio to fall to the mid of 0.3, but it's 0.47. So about KRW 400 billion gain expected, it goes up by 10 bps. So next year earnings outlook, you said that in terms of real estate, there is not much of provisions that need to size. So in terms of net income, can we have an optimistic view? In terms of NIM, what is your outlook? So I think this will be very helpful. Now estimating your earnings for next year.

[Cheol Woo Park, executive]

So please hold while we prepare the answer to your question.

[Sang-Hyuk Jung, executive]

Let me answer the question. You talked about shareholder returns. As you characterize it as aggressive, but we don't really see it as being aggressive last year, when we announced our corporate value plan, as we have noted, our plan is very intuitive. It's very visible. I've already said that.

And if you look at the plan, the target for shareholder return ratio was presented. And separately, a 3-year plan for share cancellation was also presented. So the path that we're taking right now is actually following the trajectory that was outlined in that plan. So as the market is well aware, this year, every year, the size of share cancellation is about KRW 1 trillion. I think that is the estimation. So I think we are moving in line with such expectations and plan.

With regards to NIM and loan growth and the asset growth and credit cost. So let me combine that with the outlook for the income. In the fourth quarter in the market, our income was less than the market expectations. And with regards to income potential going forward, I think there were some questions.

But as we have noted during our presentation, starting from Q1, we have constantly maintained that the potential loss burden that we had in the past, we will conservatively reflect that, that refers to overseas real estate and real estate PF, that's what I mean by that.

So up until Q4, through external valuation all-out inspection, we have actually sufficiently reflected all of that in Q4. And because of that, I think the earnings were less than what the market had expected. So this year, going forward, what is your earnings potential going forward than 47 bps credit cost ratio coming down 10 bps.

Well, one of the key reasons why our earnings growth were less than expected was because of asset trust and securities and capital unit was mentioned and the reason why our earnings were less than expected was because of provisioning. So capital and in asset trust is our normalization, not rebound. If there is no large one-off losses, this will create a significant base effect. And also, last year, there was an ELt loss for the bank if such one-off losses are absent this year, then I think the funnel will come to about KRW 1.4 trillion to KRW 1.5 trillion. So if that is considered, I think the earnings this year can improve significantly over last year.

So in that respect, I think we will be able to more efficiently manage our ratio and also through conservative growth, if we also manage the RWA as well, then starting from 2023, we have made a commitment that we will maintain the CET1 ratio to 13% and higher. I think we will be able to more than keep that promise this year. CET1 ratio is 13% for last year. There was the exchange rate issues as well as other variables. So internally, we are targeting a 13.1% going forward internally.

[Cheol Woo Park, executive]

We'll move on to the next question by Kim Do Ha from Hanwha Investment Securities.

[Do Ha Kim, analyst]

About the bank side. So according to -- well, I want to ask about something that noted on your presentation and then the fact sheets. So on the presentation, you mentioned some one-off items. So some impairment losses, KRW 250 billion on some investments, I think mostly it was on the banking side. So noninterest side, well, there was a decrease in some one-off costs, mostly from overseas alternative or derivative-type investments. So my question is fee income. Usually, we see from the nonbanking side, but I think this time it's not under the bank side. So is there anything in particular, that we should know about. And RWA, you said that the depreciating the Korean yuan led to an increase in FX-related assets and the overall impact was around KRW 9 trillion or so. So I think that also pertains mostly to the bank side. So the FX-related exposure of the bank, I thought it was not that big. But going forward, the level of sensitivity to FX rates, do you think it will remain at this type of elevated level? Or is there any other factor that can explain?

[Cheol Woo Park, executive]

Yes. Please hold as we prepare the answer. So I think you asked about one-off loss items from security investments by the bank. So the bank CFO will cover that question first. Regarding the bank, RWA and the CRO will follow up with some comments.

[Sang-Hyuk Jung, executive]

So thank you for the good question. My name is, I'm the bank's CFO. Relative to the third quarter, in the fourth quarter, securities and derivative investments on the bank side did lead to some loss that you asked about, overall relative to noninterest income in the third quarter in the third quarter. In the fourth quarter, there was a significant drop on a Q-on-Q basis for the bank. In terms of FX rates, before we had issued CVA -- regarding CVA provisioning with depreciation of the loan, there was about KRW 100 billion increase in provisioning for past-through securities, and there were some FICO-related contracts still in effect. So that also led to some exposure. So as FX rates went up overall, the size of gains on the derivative side actually did increase from for about KRW 100 billion or so. Now impairment loss in terms of principal protected trust contracts. So regarding noninterest interest income, so when I say securities, it's not our investments, but in the process of accounting for principal-protected trust, compared to the prior quarter, there was an increase in impairment loss.

So it was more of a one-off rather than being a recurring issue. In the fourth quarter, certain market indicators were weak. And so security in the PPL side did see a Q-on-Q decrease. But on a cumulative full year level for securities and dividends, overall gains increased slightly year-on-year.

On a full year basis, because of FX rates, there was a drop on the derivative side. So overall, the volatility in noninterest income for the pay is more muted versus elsewhere, but that's per usual. But in the fourth quarter, it was a little bit unusual that we had more volatility because of the FX rates. Regarding RWA, for currency assets compared to other banks, it's not significantly more or less than other banks.

But as we expand our overall global business, our foreign assets have gradually increased. So due to the rapid rise in FX rates in the fourth quarter, RWA did increase in a more pronounced way. But with rising FX rates, despite the increase in RWA, there's a plus effect from the translation gains on FX investments. So there is an offsetting effect as well.

Regarding RWA, well, let me just supplement the comments by the CFO. Derivative loss, as the bank's CFO mentioned, basically, so grew regarding foreign currency assets and liabilities. Our is to hedge. So impairment loss or gain are not sizable from any changes in FX rates. However, there were some one-off losses booked in the fourth quarter.

And regarding foreign currency or FX-related RWA, we have said that sensitivity we've always been talking about that in the the sensitive of 6 basis points or KRW 100. And based on our account closing, we found that last year, there are different currencies. And relative to all currencies, if the Korean yuan is weaker, the impact from changes to the FX rates becomes ever more amplified. So actually, the sensitivity is more pronounced at 10 basis points per KRW 100. If you look at flows actively in the fourth quarter, the KRW 5.8 trillion increase in RWA mostly is due to the impact of higher FX rates and then other changes to other assets, RWA were largely flat in the fourth quarter Q-on-Q. CET1 compared to 13.1% was slightly lower than that because we had to provision more against different losses, more so in the fourth quarter than other orders.

[Cheol Woo Park, executive]

At present, we don't have any questions in the queue. [Operator Instructions]

[Unknown Analyst]

So let me ask just 1 more question. Flexible treasury stock policy was indicated, but let me just confirm. So KRW 500 billion of share buyback on a half year basis. I think that's quite sizable. Then in the second has -- can the quarterly amount be reduced depending on the earnings, should we take such a flexible approach to this?

[Cheol Woo Park, executive]

Thank you very much for the question. While we prepare the answer, please hold for a few seconds.

[Sang-Hyuk Jung, executive]

Thank you very much for that question. In the case of the treasury stock, the treasury stock policy was 150 in January and KRW 500 billion this time. So is there the first half, it's going to be KRW 650 billion. And as I said, on a yearly basis, it's going to be about KRW 1 trillion. So we started this approach in last year. And next year as well, without any gap, we're going to cancel our stock in the early part of the year. That's going to be our approach. So on a half yearly basis, we're going to announce or canceling policies. So in the first half, the second half and the January and February plans will also be included in those announcements.

When it is underpinned by strong earnings and when RWA is managed as planned, then I think we will be able to follow the trend that we are seeing right now. In our view, with regards to treasury stock, every year, we had a target of cash flow KRW 1 trillion. But depending on the market situation, stock prices, there can be slight variances and our VOD will be discussing these matters and then resolving them.

[Cheol Woo Park, executive]

From White Capital. Mr. Tesh Karen?

[Unknown Analyst]

I have 2 questions, if I may. One is regarding the life subsidiary. Could you help us understand what is the risk of rates affecting the income over there. Do we have a guaranteed yield annuities book, which might get affected if rates go down through spreads compressing or negative spreads? That's question number one. What is the outlook for the Life subsidiary as rates go down? And the second question is to help us understand whether property trading happens at all within the group? And if it does, in what subsidiaries should we expect that in the bank or the securities business? And what would be the sources of funding for this book? Those are my 2 questions.

[Cheol Woo Park, executive]

Simon Yes. Thank you for the question. Please hold while we prepare the answer.

[Unknown Executive]

So I think there were 2 questions. So it did take us a little bit of time to clarify the question. I'm sorry about that. Regarding the Life subsidiary, the CO for Shinhan Life will answer. And you asked about the prop trading in the second question. So I -- to the extent that I, no, I will provide an answer. And if required, we will try to follow up with additional answers.

First, I will ask the Life CFO to answer.

[Unknown Executive]

My name is. Thank you for your question. As you said, in terms of guaranteed yield annuity products. We do not have a big book of those types of products. So almost no impact from lower interest rates.

Even if there is a temporary rate cut because we mostly are invested in fixed income or bonds I think it will hold steady. But then the liability cost, if anything, will go down. So typically, when interest rates go down, actually, we see a slight increase, if anything, in terms of our earnings.

And then you asked about the earnings outlook for Life this year. There will be some institutional change that led to a slight drop in P&L this year, but that will fade out next year. So overall, we think that there will be improved earnings versus the prior year.

And then regarding the trading question, as a group overall, FPPL bonds, we have KRW 37.3 trillion in holdings. So for FPPL, the Shinhan Bank and Shinhan Securities hold about half, half each. And FVOCI is -- the total is KRW 78.1 trillion. Shinhan Bank holds KRW 41 trillion. Life holds about KRW 34 trillion. If you look at interest rate sensitivity, dropped by 10 basis points for FPPL, there's a movement of KRW 19.8 billion. And in OCI, the valuation on bonds is about KRW 51.6 billion. In terms of duration, for FPPL, the duration is about 0.53 years, for OCI, about 6.5 years. And if you have any further questions, perhaps you can ask and we will follow up to supplement the answer.

[Cheol Woo Park, executive]

We thank you very much for the answer. We'll wait for further questions to come in. So I think we have received all the questions rather securities, Mason is online.

[Unknown Analyst]

Can you hear me well?

[Cheol Woo Park, executive]

Yes, please ask your question.

[Unknown Analyst]

I have a question. 13.03% is the CET1 ratio. In the bare case scenario, is a chance deteriorate further would be the impact on our RWA. So are you coming up with any plans to more effectively manage the RWA? And what is the size of the buffer to RWA? That was my question.

[Cheol Woo Park, executive]

Well, we are preparing to answer to your question. Please hold for a few seconds.

[Sang-Hyuk Jung, executive]

I'm sorry, I was not able to hear your question. Well, the CET1 ratio is rather tight. And so or you're asking whether we have measures in place to manage our RWA in this context. In the case of CET1 ratio, we are making estimations by quarter. So our earnings also plans for RWA management. I do believe that by the quarter, we will be able to achieve the 13.1% level of CET1 ratio. Other than CET1 -- other than RWA, there are some plans that will allow us to put the capital on the surplus, especially in the first quarter, as because of equity securities will lead to a temporary increase. And these will be some of the factors that will lead to a plus for our capital. And also -- and in our view, if the RWA situation becomes tight, then the sell-down of IB and sales are included in our contingency plans, and we can lever them.

And our CRO will add to this answer.

[Unknown Executive]

So I'm CRO, as the CFO had mentioned. So with regards to RWA management optimization of PF capital ratio from that perspective, high-quality growth will be the focus. Already in the fourth quarter, we have experienced already portfolio changes were affected and the risk weight of each assets fell, we referenced that already. So we're going to continue with the same approach. And for distressed PF, we will be addressing them very promptly and in a speedy manner. And RWA transfer or reduction approaches for these goals the sell-down that was mentioned by the CFO and the asset securitization and also what we are considering is risk participation, credit transfer transactions are some of the options that we are considering RWA transfer or RWA reduction for this, we are preparing several tools.

And if RWA is managed in this manner than as we have noted, the previous year, what we have experienced -- sorry, from what we have explained then, we believe that we will be able to undertake additional reduction of the RWA. I hope this has provided a sufficient answer to your question.

[Cheol Woo Park, executive]

Our time is almost up. We don't have any further questions in the queue. So if we don't have any additional questions, then with this, we would like to conclude the 2024 for your earnings presentation for Shinhan Financial Group. So with this, the 2024 full year earnings presentation of Shinhan Financial Group is concluded, not only the earnings presentation, but through various routes, we will be communicating with investors, shareholders and the market participants in order to further your understanding of our group. What has been presented today will be uploaded to our homepage as well as our IR YouTube. Thank you very much.