At this point in time, in terms of the methodology and the introduction timing, it has not yet been confirmed, but together with the DCP entities, the — currently the authorities are in talks. Now if we look at these DCP entities, including the countercyclical buffers, the CET1 — based on CET1, it will be 9%. And if you were to overlay stress capital on top of that, then it’s going to then change. We still have about 400 basis points of buffer, so even if considering for a countercyclical buffer, we believe that in terms of the CET1 ratio, we will be within what is appropriate. Going forward, in terms of the timing of adoption of methodologies for stressed buffer application, we will come back to you and provide you with more detailed information.
Peter Kweon: Thank you very much for the answer. We have no questions in the queue, so we will wait. We apologize that we had some technical issues leading to some communication issues. So we apologize for those difficulties. We will wait a little longer for any other questions to join us in the queue. We will take the next question from JPMorgan. We have Cho Jihyun on the line.
Cho Jihyun: Thank you very much for the opportunity. Can you hear me?
Peter Kweon: Yes.
Cho Jihyun: So in the beginning, I think we had some technical issues. So maybe I didn’t hear well, but this is a question about overseas real estate investments and assets. So I think people are wondering about what kind of exposure you have globally? And regarding the different colors for different areas, geographies and for different industries and for the lagging indicators. Can you tell us about what is the current situation? And do you have any areas for concern also for other evaluation or other areas that can be reflected. Can you give us some more information? And regarding the government I believe that the government is trying to change the dividend policy, so that we can — people can know about beforehand and then invest. Can you tell us about what is the situation in the regulations for dividends? And going forward, if we could have the confirmed dividend for future investors.
Scott YH Seo: Thank you for your questions. I would like to answer the question regarding KRW5.9 trillion of overseas real estate investment we have 5 point — CRE and it’s in Europe and in some — in NA and other areas. We have office and multifamily for households, which is about 60%. And for the different subsidiaries, we have two-thirds that is owned by the Bank. But regarding the characteristics of the Bank, it is the subordinated — it is for the senior debt, so it’s very secure. And regarding the senior debt, it’s more than 70%. So we have substantial loss absorption capability. So we believe that we will have a lot of room for losses. However, we do share with you that you may have some concerns, but we have the different TFDs for different subsidiaries, and we are looking into the situation in detail.
So we have the different TFD for subsidiaries for different properties and sites. And we are looking at the exit plan for each area. And regarding the vacancy rate and for the stress test, we are looking at the current situation. But overall, it seems that we do not have any outstanding issues. And we have some issue assets that are a minimum 1% or less. And we are looking into what we will need to do. So for risk and for the evaluation or review, we are looking into it in detail. And for KB regarding CRE, for the losses for overseas, commercial real estate, we believe we have very small possibility of losses. I would like to continue with your question related to the government improvement plan for dividends, the Korean government, as you’re well aware, is trying to improve the dividend policy system so that the policy could be changed, so the dividend could be confirmed beforehand.
And for KB as well for 2023 year-end settlement dividends from 2024, it is we are trying to reflect the changed policies. So we already changed our AOI as of March of 2023. However, for the quarterly dividends, we need to change the Capital Market Act. The law needs to be changed. So if there is a change in the Capital Market Act at the end of this year, we believe that there will be another AOI revision as of end March next year. And we will need to change the speed of revisioning of the law. But if all goes on smoothly, we believe that from Q1 quarterly dividend of next year, we will be able to reflect the improved government policy for dividends. Thank you.
Peter Kweon: Next question, please, from HSBC, Won Jaewoong. Please go ahead. It’s currently, in the English channel it is not receiving any feed. So please bear with us, we’re having technical issues. The English channel is not receiving any feed at this point. Once again, apologies the English feed is not being received by the interpreters, so we are unable to interpret at this point.
Scott YH Seo: Yes, I’m the CFO. I will respond to both of the questions. And then in terms of the maintenance margin I provide you with my answer. I will then hand over to the bank CFO. First question regarding the dividend policy, as I previously mentioned. And I think because the connection was that you were unable to hear my previous answer. The financial holding company will continue to adopt a progressive dividend payout policy. And as I mentioned before, we will continuously increase the absolute amount of the dividend paid out. Now there will be cash dividend payout as well as share buyback. We’ve repeated this on numerous occasions that in terms of the EPS, the cash amount that is being paid out, we have no intention whatsoever to reduce that size.
We will actually overlay on top of the cash dividend payout and conduct share buyback and cancellation. As I mentioned before, price to book is 0.4 times for our company. So from the shareholders’ perspective, share cancellation is a way for the shareholders to benefit, especially compared to increasing the cash dividend because of the capital gains tax, we believe that share cancellation is a better policy or a more positive policy and further improving the corporate value. Second question was on NIM. The maintenance margin. As mentioned during the presentation. Just looking at Q4 NIM, the maintenance margin we are in the context of many difficulties. And in Q3, from a big picture perspective and also if you look at the NIM in Q3 and Q4, I can tell you that the NIM will be more or less flat, not very different.
I will now turn it over to our bank CFO for further elaboration.
Unidentified Company Representative: As mentioned during the opening presentation. In Q3, NIM dipped 1 basis point compared to the previous quarter. Going forward, in light of the high interest rate, as well as asset growth, we expect that funding costs will continuously go up. Currently, the loan-to-deposit ratio, the spread NIS is going down. So in light of these drivers, we expect NIM to further dip. However, because we think that high interest rate environment will continue for the time being, we think that dip is not going to be that significant. Meaning in Q4, I believe that decline to be around 1 basis point. And then if you look at bank’s NIM in 1.83% in Q3, then in Q4, the NIM on a cumulative basis will stay at that same level at 1.83%. And then if you look at 2024 on a Y-o-Y basis, every quarter, we’ve seen — we expect there to be a 1 basis point dip on a quarterly basis. So there will be a low single digit NIM, once we reach 2024.
Peter Kweon: Thank you very much for your question. It seems that there are no questions in the queue, we will hold. In the beginning of the conference call we had some technical difficulties so we apologize for the difficulties. And if you have any further questions, please contact our IR team, and we will do our best to answer your questions. We will hold. And if we have no other questions coming in the queue, we will conclude today’s business results presentation. We will take one more question from Goldman Sachs, Park Sinyoung.
Park Sinyoung: Yes, I’m Park Sinyoung from Goldman Sachs. I have two questions and my first question is about shareholder return policy and regarding treasury share buyback regarding your structure. So maybe you’re going to make it routine so that you’re going to have a share buyback per quarter or such possibilities — with the time line going forward, do you have any possibilities of that? And secondly, regarding provisioning in the previous quarter, I think you talked to us about an annual guidance, and we are during the end of the year. And regarding LGD, there is a talk about some details related to it. And can you tell us about whether it can affect — actually have an effect on your guidance that you aforementioned?
