Compared to other countries, they have very strong internal demand economic structure and abundant resources and a middle-class increase. They have a very large population of 270 million. And we found that they have a lower utilization rate of financial service. So, we found that it’s a very attractive market. And we tried to enter into the local market very quickly through acquiring the shares of Bukopin Bank. And by acquiring this mid to long — mid to large bank with a large customer structure with very vast sales operations, we believe that we could have a differentiated move compared to other Korean banks that were pursuing organic growth. However, Bukopin Bank after — although we made many efforts to turn around Bukopin Bank, there was the COVID-19 situation that became prolonged, and the top-line growth that we had thought of in the beginning was actually delayed.
And there was the NPLs of the loans, so it went against our expectations in 2021 in November. There was the third-party allotment of capital increase. So, there was about KRW390 billion of the burden, and we had KRW640 billion of capital increase that we have determined as of now. And until now currently, we have three rounds of investment after getting the shares and total IDR, KRW982.2 billion, which is about KRW790 billion actually that we had invested as shares and the net asset value of Bukopin is IDR11.6 billion. And we had very conservative provisioning for Bukopin. So, I would like to emphasize that and for the Indonesian regulatory authorities, you can see the growth NPL ratios of Bukopin is 6.2% and NPR is KRW2.8 trillion. And on a consolidated basis as of end 2022, the total provision is KRW57 billion — KRW570 billion and compared to the NPL, you can see that provisioning is much higher than this amount.
So that is why this is very preemptive provisioning that we have implemented. For the additional provisioning this year, we believe that it is sufficient enough to absorb the future NPLs. So, we believe that we will not have more provisioning against future losses. And we believe that this will be the year 2023 to cut our ties with these NPLs so that we will not have any additional burden because of this. And I would like to ask Cho Nam Hoon, who is the CGSO to explain more about the situation.
Cho Nam Hoon: I am Global Strategy Head, Cho Nam Hoon. Regarding Bukopin and when it can add to the earnings of our group, well, because this is not normalized as of now, so we believe that we will need a bit more time for it to become normalized. And we are managing this situation with a long-term perspective. And as was mentioned by our CFO previously, compared to what we had planned, it is true that we have been delayed for two to three years for the normalization of Bukopin. And I am quite prudent — but because we had sizable provisioning this year, although it has not been normalized yet, I think prudently, we can estimate that by 2026, we can have — 2025, actually where we can make a profit. And we believe that by 2026, it can add to our ROE, at least not work against our ROE, and we are doing our best to faithfully implement our plans for normalization.
And for our other subsidiaries, for 2022, there was Cambodia PRASAC that we had acquired another bank, and there’s also other overseas subsidiaries that we had acquired and established. Then they are being managed well for asset quality. And for their earnings actually, they are actually quite positive even going over our expectations. So, it is not a burden to us in our earnings. And we believe that the contribution they can make to our earnings will become very positive going forward. Thank you very much.
