KGI Financial Holding Co., Ltd. (2883) Earnings Call Transcript & Summary

[Interpreted] Dear investors and friends from the media. This is the spokesperson of China Development Financial, Richard Chang. I would like to first welcome you to the 2021 Q4's Investors Conference. We will first invite our CEO, Mr. Steve Bertamini, to speak about the overall performance of 2021 as far as the implementation status and progress of our ABCDE strategy and followed by our CFO and the CEO of subsidiaries to talk about the financial performances. And last, we will carry on with the Q&A. [Operator Instructions] Now I will hand over to our CEO, Steve, for the overall performance in 2021.

[Foreign Language]. Hello, everyone. I'd like to begin by giving you a brief update of our 2021 performance highlights. Last year, we recorded record net income of TWD 35 billion, up 177% over last year. China Life also became a wholly owned subsidiary of CDF at the end of last year. And for the second year in a row, we were selected to the Dow Jones Sustainability Index. China Life also had record performance, up 84% year-over-year, delivering TWD 28.5 billion in profits. They also increased their margins for VNB, increased the spread on their investment returns, further reduced their hedging costs from 153 basis points to 118 and continued to make progress in many areas. KGI Bank also had a very strong performance, improving both their NIMs as well as their CASA. Asset optimization also continued with strong growth in SME and P&L. Consumer Finance also had a very profitable first year, and you'll hear more about that in a moment. CDIB Capital also had a record performance, driven by the disposal of our building as well as recovering valuations. They upstreamed over TWD 10.5 billion in cash to help support the group, and there's good fundraising underway for both our private buyout and private credit funds. KGI Securities, another record performance, up 48% year-on-year, delivering 18% ROE and TWD 12.9 billion in profits. We maintained our #1 position in ECM and DCM and managed to increase our share from 8.8% to 10.7%. Also, our customer AUMs grew by 12% to TWD 361 billion. I'd like to now spend a moment talking about our ABCDE strategy. As you know, we have 5 main components: accelerating digital, becoming employer of choice, customer focus, driving growth and execution excellence. We hosted our annual kickoff meeting this year a few weeks ago with over 1,200 staff, 600 of which were in person in Taipei. We discussed our 2021 accomplishments. We gave an update on our 2025 strategy and also spoke about our 2022 deliverables. I'll briefly touch on some key focus areas for us this year. The first is we will continue to focus this year on building partnerships and alliances to build our ecosystems, particularly when it comes to lifestyle and health care. We also want to continue to digitize our customer journeys in order to become best in the market. In the area of employer of choice, we continue expanding our development and training programs and also empowering our staff to simplify processes with a goal of achieving higher engagement. Customer focus remains a key area for us. Last year, we installed NPS, and this year, we're taking it to the next level. We'll speak more about that in future conferences. We're also very focused on enhancing our financial solutions, particularly in the area of wealth. In the area of driving growth, a lot of progress remains to be done, but good progress so far on leveraging cross-sell and analytics. And as you saw last year, we'll continue to focus on improving our ROE and our margins. You might notice on execution excellence, we changed from enhanced IT infrastructure to transform IT infrastructure. We believe this focus on cloud will be transformative for our industry and particularly for us. And we maintain a very strong ESG leadership position. You can turn to the next page. I only want to briefly highlight a few of these because you'll be hearing from each president in key areas of focus for them. At a group level, all the websites were revamped, and we made a lot of progress in terms of creating the infrastructure to help us accelerate digital. We spent a lot of time developing a new talent curriculum in order to enhance our leadership and soft skills for our staff as well as launching a new MA program so that we can continue to attract the best and brightest talent in the market. I mentioned NPS before. The key focus for us as a purpose of the company is to enrich customer lives. We believe this allows us to differentiate from our competitors and focus our efforts on ensuring that everything we do is done from a customer lens. In the area of analytics, as I mentioned before, on driving growth, we've started working with machine learning models, and we're seeing much better response rates everywhere we deploy them. In the area of excellence, the cloud-based backbone will help us really excel and we've been working closely with Microsoft and recently with Google to ensure that we have the best technology to allow us to develop this critical infrastructure. Last year, we also rolled out a new CDF management operating system, which ensures consistent processes when it comes to financials, staffing as well as strategic initiatives across the group. And last but not least, you saw us make tremendous progress on ESG. We're the first holding company to announce zero emissions by 2045. And this year, we continue to ensure that we make strong progress towards that goal. I'll now turn it over to Stephanie to talk about some of China Life's strategic initiatives during 2021.

[Interpreted] Thank you friends from online. This is the CEO of China Life. Now I will talk about China Life strategies as well as the progress. Today, I will highlight 4 parts. Let's first look about -- on the accelerate digital. I'm happy to share with you that last year, China Online was the first company obtaining the license for face recognition and more than 14,000 cases were signed by face recognition and remote insurance. Now we are going to expand this service to different -- more different channels. And next, I'll talk about treating customer fairly. For many years, China Life has been proactively promoting treating customers fairly. We are also embedding this into our culture. Starting from 2019, we have been recognized by the regulator for 3 consecutive year of treating customer fairly. And in the coming years, we will continue to try hard to listen to customers' need and become the most trustworthy insurance company in Taiwan. And then we also will continue to promote high-value products. China Life has been promoting the high-value products. And last year due to the pandemic, the insurance companies' regular paid products declined by 40%. However, China Life is still seeing a positive growth on this. And next, I'll talk about ESG. For years, China Life cares a lot about ESG and ESG has been a very critical issue. China Life introduced the TCFD framework to enhance our capability for climate risk management. And in 2022, we also obtained the TCFD conformity check and we have achieved Level 5 in excellence. And we -- in line with the 2045 zero commission -- zero emission commitment, China Life continues to take on firm actions, including enhancing the green investment as well as the engagement of our investee. In 2029 -- 2019, we obtained the first ISO-1407 (sic) [ ISO-14097 ] certification. We shall continue to implement low carbon transformation. Now I'll hand over the floor to CEO of KGIB, Amy.

[Interpreted] Thank you, Stephanie. Now I'll talk about the KGIB's strategic progress for 2021. If we look at a, accelerate digital, I would like to talk about, in January, we have launched our new official website. And in this official website, it doesn't -- the difference is not only in the appearance. Instead, we have added a lot of new data and technology. So since the launch in January, we found that we have 13.3% of new visitors and our click rates have increased to -- increased 12% because this is a self-owned media platform. So our data information is more accessible to the customers. And for our mobile banking service, we are also doing some adjustments. We focused on -- we prioritized on the customers' needs and requirements. Currently, this is still under testing and we plan to launch it in the first half of this year. And if you also look at data-wise, starting from last year, we have new approaches. We are using a more diversified way to activate our dormant accounts, and we are seeing very positive results. In January and February, it has contributed 25% to 35% of our fee income. We are also providing multiple wealth management products to our customers, wishing that through this kind of data analysis we will be able to provide to the customer products more aligned with their needs. And next, I'll go to our core business, which is our net interest income and our demand deposits. In the last year, our NIM increased 14 basis points to 1.33%. As you all know, by last year or the year before that, the Taiwan's interest market is flat and is relatively challenging. So the banking industry, in terms of net interest margin, it has been a very challenging topic for all the banking industry. And last year, because of the efforts of our colleagues, we are actually seeing progress in our NIM. And as for our CASA ratio, it is also a key to the increase of our NIM. Currency, our CASA ratio has improved to 40.5% and we shall continue to work on this and we hope that this year we will have even better results. And last thing I would like to share is the Suyin KGI Consumer Finance. It was the first operating year last year in March, and they delivered very fruitful results. The annual profit has reached RMB 16.6 billion. For a bank which started a business in the first year, it's a very remarkable result because when the bank is providing loans, they need to have the provisions for loans. And if they can achieve profit in the first year, it's actually very incredible. Although that there has been some differences in the markets in Taiwan and China, China where we are working very closely with Jiangsu Bank in China in terms of the business line as well as the risk control. We're doing it very steadily and robustly. We hope that in the market -- in the Chinese market, through such steady and robust strategy, it will be able to give us more good results as well as expanding the overseas income, which is aligned with the group strategy. I'd like to pass the floor to CDIB's President, William Ho.

[Interpreted] In terms of digital innovation, we have been working proactively to develop our ecosystems. We have worked with 21st Century and it has been growing rapidly, contributing to our profit. And we have also worked with PChome and combining them together, we want to form a new fintech ecosystem. Continue combining with CDF, we will build a stronger ecosystem. And in terms of employer of choice, we focus on training and we have launched an investment -- a co-investment scheme. We want to increase employee's engagement. Through this initiative, it will benefit our growth and increase their return. So we think this will have a positive impact on our talent development. We continue to add value to our investees and limited partners. We encourage MA around the world, especially in the U.S. Through this MA, we can obtain better technology and better customer. This year, we are looking at another project to -- by another company in the U.S. so that we are -- they can have a broader range of products and services. And for driving growth, we continue to develop our AUM. Last year, we have a fund and it was established in last September. Due to cooperation, we can improve the supply chain of our fund and other partners. We have invested 3 projects and they have also seen good results. Last, we are proactively looking at ESG opportunities and we have spotted a green energy project. We want to contribute to carbon reduction in Taiwan. In terms of ESG, we will continue to do more. Now I would like to pass the floor to KGIS.

[Interpreted] Investors, good afternoon. I am William Fang. Next, I would like to talk about the ABCDE strategy of CDF, and what we have done over the past year and the strategic progress for 2021. And I have summarized into the following points. In terms of digital, in March, we have launched AI chatbots. We want to provide non-stop services to customers and we have gained 4.53 points out of 5 stars. And the 3-in-1 account opening online, customers only need to spend 6 minutes and they can open all 3 accounts in 1 sitting. And in terms of employer of choice, in June, KGI Futures and KGI Securities, we have gained ISO 45001 certification. In terms of workplace safety and security, we continue to work hard in this regard. And for customer-centric, we have rolled out U.S., Hong Kong stock investment dedicated section. Our members can use this section more conveniently. And last year, we had also won the 6 awards by Business Today. We are through -- customer AUM, the amount reached TWD 361 billion by the year-end. And we have launched multiple assets, including REIT and customer -- this is well received by our customers and it is popular among our customers. Last, in terms of execution, by the end of last year, we have simplified over 60 workflows. And in terms of our infrastructure, for the disaster recovery of our core systems, it is estimated that by the end of this year, all disaster recoveries will be completed. So these are some of the highlights from KGIS. And in terms of the financial figures, I would like to invite Jenny, our CFO, to elaborate in this regard.

[Interpreted] Thank you, William. I will talk about our financial performance. Please go to Page 14. Our total income is TWD 37 billion and mostly comes from China Life, which is TWD 13.4 billion at 36%. Next, KGIB, TWD 4 billion, taking up 28%. And then CDIB, TWD 9.7 billion, 26%, and mostly come from the disposal of our building. And KGIS, TWD 10.4 billion, taking up 11%. So starting from 2020, our revenue grew from TWD 20 billion (sic) [ TWD 12 billion ] to TWD 35 billion. And our -- the revenue -- our subsidiary's income also continued to increase and China Life increased by TWD 9.2 billion. In addition to China Life, in 2021, we increased our shareholding of China Life, and our investment income increased to 56%. This is also one of the reasons for this increase. And for KGIB, for the decrease of TWD 79 million, but if we look at the core business, it is growing steadily. So later, Amy will also elaborate on this point. For KGIS and CDIB, compared to last year, their performance has grew drastically. Going to Page #13 (sic) [ Page #14 ] in terms of balance sheet. In 2021, the total assets is around TWD 3.5 trillion. Compared to last year it's pretty much the same. Cash increased TWD 70 billion and financial assets decreased TWD 61 billion. It is because of interest rate increase, we have pooled more cash waiting for other investment opportunities. And in terms of liabilities. For deposit, the loans decreased 0.2%. It is because of the adjustment of loans KGIS. And in terms of liability, the biggest increase comes from reserve and this is the reserve for insurance. Next slide, please. CDF is dedicated to capital reallocation to increase our return. As you can see on this slide, within 5 years, our growth rate is 10%, around TWD 3.5 trillion. Our leverage ratio is also -- has reached 11.8%, and our ROE has also reached 11.4%. And compared to 6% to 7% in the past year, it has increased a lot. Page 17 talks about our stable capital. As you can see, our double leverage ratio on the upper left corner has reached 122%. And because China Life is now 100% owned by CDF, therefore, the figure has increased. It will maintain near the legal limit 125%. We are monitoring this continuously. And for KGIS, China Life, KGIB, their capital adequacy ratio, it's all very high because in 2021, their revenue increased. Therefore, the ratio has also increased in return. And I would like to take this opportunity to talk about the first 2 months of this year. CDF, the first 2 months, we have earned TWD 6.1 billion, a 22% increase. And this is number 4 in the financial sector and the 2 reasons are: first, KGIB revenue increased compared to last year; and for China Life, now we can recognize 100% of their income. That's why our income also increased accordingly. So these are the financial figures. Next, I would like to pass the floor back to Stephanie to talk about China Life's profitability.

[Interpreted] Thank you, Jenny. Now I will talk about China Life's operation in 2021. Please go to Page 19. Because of our investment management, our net income has reached 28.5 billion and it's an 84% increase. After considering the credit loss, our figure has reached TWD 8.5 billion and our net worth is supported by our income. Although the rate is increasing in 2021, our net worth remains flat compared to 2020. In 2021, our income has reached record high and our ROE has reached 16% and EPS is also TWD 5.8. Going in to Page 20. In 2021, because of the pandemic, our FYP has increased 2%. Our product strategy focuses on high-value products, especially for loan-paying products. Last year, the industry decreased 36%. However, we have grew 11% instead. In terms of our distribution, we value the development of all channels, especially our self-owned channel. In 2021, our agency channel hedge increased to 20%. Going to Page 21. In terms of the financial market, it has been affected by external factors. We continue to value VNB, value of new business, and the figures remained flat and we continued to focus on high-value policies. If we exclude ILP, our VNB margin of traditional products, as you can see, the figure is growing year-by-year. By 2021, it has reached 28.3%. VNB for the first 2 months have exceeded 20%. And for investment spread, it is still positive as it continued to widen. The customer liability has decreased to -- has decreased as well. And our return has gone up to 4.27%. And moving on to Page 22 of the slide. China Life values on the asset allocation and risk management. We focus on long-term investment return and our focus is on fixed income. On the interest rating cycle, we reserve more cash position so that we can address the investment opportunity of arising from interest rates. And in the low interest rate environment, we continue to allocate premium insurance services. We have increases in 2 real estate investments in Taichung and Taipei, so that we will have a more diversified portfolio. And next page. Because the low interest environment continues, our return has been affected. With a very prudent allocation of capital, we managed to have stable income investments. The pre-hedging recurring yield is 3.51% by 2021. As for the hedging structure and hedging costs, because we are running a very prudent structure, our hedging structure has 70% in FX and the cost of hedging has dropped 30 bps to 1.18% and the FX reserve balance maintained at TWD 3.3 billion. Next, I will hand over to Amy.

[Interpreted] Thank you. Please go to Page 25 of the slide. In the following 2 slides, I will talk about the profitability in 2021 for KGIB. Here, you can see on the left-hand side in terms of net revenues, 2021, we are having a similar performance as in 2022, but as in net income, we are seeing a decrease of 2% compared to last year. As Jenny, our CFO, mentioned, you can see in Q4 the decrease is more significant. This is due to -- in the Q4 and the Q3, we wanted to -- we have the expectation of market volatility. Therefore, we adjusted some of the position in our financial transaction department to reflect some of the losses. And this was a one-off loss. It's not recurring. And it also will be beneficial for our business growth and development. At the lower chart, you can see our spread and NIM. As I mentioned, in terms of spread and NIM, we are actually growing by quarter and by year. And as for our NPL ratio and NPL coverage, the loans in KGI Bank is very stable and our NPL ratio is increasing by the year. And next page, I will -- I would like to talk about KGIB's loans and deposits. For last year and the year before that, we are not seeing great changes in terms of loans and deposit base. But starting from 2019, we have been adjusting the structure of loans as well as the customer we serve. In the SMEs and mortgage, we are seeing 11% of growth. As for our corporate customer, we are expanding the coverage of large corporations. Over year, we have more than 500 addition of the new corporation customers. We want to continue to develop on this and grow together with our customers. On the next chart, you can see our deposit movement year-on-year. Although the total deposit remained similar, but in our demand deposit, we're seeing a 12% growth. As for time deposits, we will dynamically manage that in accordance with our management policy. And next I will turn over to CDIB for William Ho.

[Interpreted] Thank you, Amy. Move on to Page 28. On the left-hand side, you can see our net income. In 2021, the net income is TWD 9.8 billion. Actually in 2021, there were 2 things [indiscernible], the disposal of the CDF building and the recovery of valuations. 2021 is actually a very profitable year for us because we have done well in various assets in terms of investing in new cases, our investment basis as well as the advance have broken record high. And we have also disposed some old cases. The amounts and number of cases are both high. And then for our funds, such as health funds and renovation funds, we have already completed a structure and the [ NYC ] has also increased. And for example, the RMB-denominated health care funds and Taiwanese dollar-denominated health care fund, it has been -- it has taken us to 2 years for return, but we are seeing -- we're yielding good results. As for the new buyout, such as private credit and so on, we are also having more and more cases. Our teams have been very occupied and busy. We have a lot of patience in terms of [ ILP ] and private credit. We are doing fundraising and we hope that we can bring you good news very soon. And also take a look at our ROE. Last year, after deducting the one-off disposal amounts, the ROE is 28%. And as for our total assets last year, we had TWD 40 billion. And now this year, we have TWD 42 billion. In Q3, we are actually having TWD 48.9 billion assets, but that is including a one-off disposal. And that's why the Q4 result is different, it's TWD 42 billion. And as for our total equity, it has reached TWD 35 billion in Q4. And next page is -- reflects our continuous transition to asset management. In the upper chart, you can see our AUM. AUM has been growing continuously starting from 2017 to now we have around 7%. As for the overseas composition, it still remains similar because our 2 international overseas funds are the same. In China, we have seen some decrease in the health fund, but the growth in Taiwan actually comes from the growth of InnoLux Fund. If you look at the pie chart on the right-hand side, international cases takes on 48% and Taiwan takes up 28%, while China take up 23%. If we look at the composition of the credit funds, we will increase the international positions. And the lower pie chart is the existing investment we have. Starting from 2017, the principal investment composition grew from -- a decrease from TWD 43 billion to TWD 28 billion because we have been disposing a lot of legacy investments and capitalizing. And the growth we're seeing here is because of some deals are done in China and Hong Kong. And Taiwan's amounts grew from TWD 11.8 billion to TWD 13.7 billion. This is because of the distribution. We want to do greater investment. Therefore, we're going to expand our value as well. The pie chart for principal investment composition, Taiwan takes up around 48%. Because of that, we should grow in Taiwan and then gradually expand to overseas. Now I will hand over to William Fang for KGI Securities.

[Interpreted] Thank you, William. Next, I will summarize on the profitability of KGIS. In 2021, benefited from the robust market momentum. KGIS 2021's income grew to a historic high with TWD 12 billion, grew 48% compared to last year. And the Q4 net income is TWD 2.7 million. It is a decrease of 13% comparing quarter-on-quarter. As for the net income composition, the overseas subsidiaries contributed 8.9%. And as for our ROE, the lighter green means KGIS. In 2021, we're seeing record high and our ROE 18% is actually also a new high. Our ROE performance is outdoing the industry average. In our assets, customer assets, AUM increased 12% year-on-year. Next, the KGI Securities revenue. The net revenue of KGIS in 2021 is TWD 20 billion. And the Q4 is TWD 4.8 billion (sic) [ TWD 5.2 billion ], increased 19% year-on-year. And because 2021's Taiwan stock market is doing very great, a lot of deals are done. Of course, in addition to the income from brokerage, the net investment income, interest income and net underwriting fees are all seeing substantial growth. So comparing the 2021 and 2020's performance is actually very similar. And on the left-hand chart, you can see that in the net brokerage commissions and net investment income, we're seeing great increase. We have a 10.7 increase in the market share. In terms of underwriting, we are still maintaining our #1 in [ mortgage ] industry. If we will turn to the right-hand part, we have seen a 19% increase of net revenue. We have seen growth in net brokerage commissions as well as net interest income. Next I hand over to our spokesperson. If you have any question, you can raise them. Thank you.

[Interpreted] We have briefly gone through the performance of each subsidiary. [Operator Instructions] And now we will go into Q&A. Thank you, JPMorgan Jemmy. You are asking about this year's outlook, our operating outlook. So first, I would like to pass the mic to Steve to talk about this year's operating outlook.

[Interpreted] Thanks, Richard. So first of all, my main comment would be that despite the more challenging global macroeconomic and political environment, we remain cautiously optimistic. For China Life, we aim to have high single-digit growth in VNB and FYP. For the bank, as rates rise, we expect to see some improvement in NIMs as well as continued growth in fee income as well as loan growth in the single digits. And as I think you saw, China Life remains well hedged and maintains very good ALM management of their book. There's also a question on equities, and I'm going to give that one to my friend, William.

[Interpreted] For equity, the consensus is that this year, we think the risk will increase. However, overall speaking, we still believe that the volatility will increase this year. However, if you look at Taiwan's stock market and the profitability of some of these companies, and now is still doing quite well. We won't be very pessimistic. We are optimistic, but we are cautiously optimistic. So this is our outlook on the stock market.

[Interpreted] Okay. Next question is related to our dividend. So I would like to direct this question to Jenny. So there are 2 questions. First is [ Mr. Zhang ] is asking when will we announce our dividend payout. Second is Bloomberg is asking our dividend for 2021, so can we start to elaborate on that?

[Interpreted] I will answer the question. Currently, for dividend, it will be discussed in the Board meeting in April. And after that, we will make an announcement. And for our dividend, I will give you a direction. In 2021, our profitability compared to 2020, it has increased a lot. And currently, we are planning to reflect our revenue increase. So the figure will be higher than the past. However, it is still dependent on the contribution of each subsidiary and also by the judgment -- the decision made by the regulator. So this is my response. Thank you.

[Interpreted] Next question is related to China Life. There are a few questions. [ Mr. Jun ] is asking, in terms of the rising interest rates, what will be the impact? And another question, for the Russian-Ukraine war, what is the impact on us? The third question is regarding our hedging strategy. So these 3 questions, I will direct it to Stephanie.

[Interpreted] Regarding the rising interest rates, our take is that in the long term, we focus on ALM, asset liability management. Our duration is around 15 to 16. When the interest rate changes, it still remains stable. We think it is beneficial for our recurring yields and it will be beneficial for our long-term yield. And our products, the decline rate of our policy will also increase. This will add momentum to ourselves. So overall speaking, I think our growth will remain stable. And for the Russian issue, our Russian bond is TWD 14.7 billion. The trading has decreased. And based on the regulation, we have allocated TWD 1.5 billion for the reserve expected credit loss and we will continue to monitor the situation and to look at the overall liquidity to make investment changes to see whether we should sell the position. And for hedging strategy, our swap and NDF is around -- as and has and the figure in February is TWD 4.9 billion. And for our hedging strategy, we will continue to monitor the FX market to look at the hedge cost. We will make dynamic changes accordingly. So this is my response. Thank you.

[Interpreted] Thank you, Stephanie. For the rising interest rates, they are also asking the impact on CDF. So I would like to direct this to Jenny.

[Interpreted] For the rising interest rate of our bond position and policy -- or the effect on policy sales, Stephanie has already covered that. And for the bank if interest rate increased 25 bps in Taiwan and U.S. then the NIM will increase to 1.38%, increase 5 bps accordingly.

[Interpreted] Another question. Last year, for KGIB, what's our income driver? And what's the outlook for this year? This is a question from Pacific Securities Inc. The question is in 2020 our fee income, what is the driver for our fee income growth and what's the outlook this year?

[Interpreted] Just like what we said, for fee income, starting from last year to this year, this is the part we want to grow. We hope to have a 2-digit growth, but it's not easy. I think it will be around 10% to 15% growth.

[Interpreted] Okay. Thank you, Amy. Let's see more questions. Let's see what are some of the other questions being raised. While we are waiting, I would like to invite KGIS, William Fang, can you elaborate on our overseas conditions?

[Interpreted] In terms of securities, our overseas development, this year, we will have a greater focus on developing our existing customers. We are now building, including Hong Kong, Singapore and future even further to Indonesia and Thailand this asset management platform so that for our customers it is more user-friendly and to provide cross-regional products. And of course, it takes some time to build the platform for overseas. In addition to building this platform, we will also acquire more customers. So this is also one of our focus moving on. So cross-markets to increase our presence and increase trust and to acquire more customers, this is the main task this year for us. Thank you.

[Interpreted] Thank you. [ Sina ]from President Securities. For KGIB, there is a follow-up question regarding our loan mix. How can we optimize our loan mix and maintain growth? What is our focus moving forward? And also, collection of loans and also our credit cost outlook. So Amy, can you address the question?

[Interpreted] Regarding this question, first, for our loan growth, just like what we briefly mentioned this year, our loan book will remain stable this year. So of course, we will see growth, but it will be within 10%. And for the mix, starting from last year, we have made some adjustments and this year we will continue the adjustment. We focus on consumer loans and also SME loans. And for a large corporation, unless the recovery is very apparent or else large corporations is we'll maintain the status quo and we will continue to deepen our relationship with our customers and to look for growth from other areas. By the end of this year, I hope our asset portfolio and our NIM and our spread can grow. And for our loan recovery for the bank, currently our NPL ratio is quite positive and quite low and it has remained there for many years. So there is not much to recover, to be frank. In addition to consumer banking, there are some bad debt normally, but the ratio is very low. So in terms of loan recovery, I think it's -- it will still be very low and for credit -- credit cost, I think, it's also related to the last question and I have also covered that. And it is the interest rate increases just like what Jenny said. So we will go towards that direction and other peers have similar response as well. Whether Taiwan or the U.S. increased 1 bit or more, I think the expectations remains similar. We are not sure the correct direction, but I think that increase of interest rate will be positive for KGIB.

[Interpreted] Thank you, Amy. And there is additional question from [ Sina ] for China Life are -- on investment in Europe. She would like to know more about this. Please, Stephanie.

[Interpreted] China Life [indiscernible] up 30%.

[Interpreted] Thank you for your questions. We're seeing a lot of questions raised today. We hope that our answers can cover your questions. But if you have any further questions or comments you would like to tell us, you are welcome to inform us and we can provide you with more insight. Thank you again for participating in today's investor's conference. And later, we will update in our IR section in our official website, we will upload the deck as well as the recording. And if you have any questions, you're welcome to call us or e-mail us. That ends today's investor conference. Thank you for participating. [Statements in English on this transcript were spoken by an interpreter present on the live call.] [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]