If we are able to reduce exposure in certain asset categories, we try to do that quickly to recognize loss quickly, to scale back exposure. And so that was our view. And so for some of our acquisition advisory assets, we did sell off and dispose of quickly. So it’s because of a combination of these 3 factors that we have lower performance year-on-year. In terms of future outlook, I think there are still remaining uncertainties out there. Rather than focusing on driving profits, we want to focus more on stability in terms of our prop trading business.
Operator: [Operator Instructions] From Goldman Sachs, Park Sinyoung.
Sinyoung Park: Now in the past quarter’s results then about the capital distribution plan then, there was growth, 6% and then 40% for shareholder return, then is there any long-term target for the shareholder return? And then also for AD [ph], they also mentioned about how they’re going to prefer shareholder buyback. So I wonder — for the time being, then I wonder what is the plan for SFG?
Unidentified Company Representative: Thank you very much for the question and I ask for your patience as we prepare our response.
Unidentified Company Representative: Thank you very much for the question. Now regarding the capital allocation and valuation which were the questions. So now first of all, the capital allocation, then as was mentioned earlier, yes, growth, 60%; and then shareholder return, 40%. So that remains the same. Now out of the capital allocation then, of course, in terms of the Basel III, so there are some special considerations to be made. But again, overall, it is going to be 60/40. And then about devaluation and the share buyback and cancellation as well as the shareholder return. So I would say that ours is also similar. In other words, the company valuation, then in terms of the — so compared to the peer groups in other countries and I would say that it is, let’s say, on a lower end.
So when we think about the appropriate valuation then, the ROE and also our capital ratios, then let’s say, even if our permanent growth rate is 0, then looking at our recurring ROE, then, at least — so you talked about KB at 0.8x but then we believe that it has to be higher for SFG. And — but for the short term, at this time, so we believe that the target should be at least 0.6x. And also under the PBR 1 level then — rather than dividend, share cancellation is going to have a higher benefit in terms of the shareholder return. But then again, in principle at PBR 1 level, then yes, it is going to be share cancellation. But if we go near PBR 1, then on an appropriate level, we would also be more actively allocating for growth as well as shareholder return.
Then also for the shareholder-earned target, so this also has been reiterated several times and we believe that for the longer term, we should reach 50%. But then our initial target would be 40%. And whether we will be able to meet that target within this year or not, there are a lot of factors that would affect this. But then again, our principle is to keep increasing the DSR and that is going to remain our direction. Thank you.
Operator: I think there is one final question from [indiscernible].
Unidentified Analyst: Congratulations on the results. Just one question for my end. [Indiscernible] so this quarter saw a decline Y-o-Y and some 30 bps is the credit cost. So is this the recurring credit cost we should see over the coming quarters as well? Or do you anticipate further reductions in the additional preemptive provisioning [ph]?
Unidentified Company Representative: Yes. Thank you for the question. Please wait just one moment as we’re prepared to answer your question.
Sang-Hyuk Jung: Yes. Thank you. Regarding credit cost, as of the first quarter, our nominal credit cost is 38 basis points and [indiscernible] over additional provisioning, our recurring credit cost is about 30 basis points. Relative to first quarter last year, there were nonrecurring items last year. So nominal level credit cost was about 29 basis points last year. So this year, first quarter, relative to last year, we are slightly higher than last year. Now in the slides I mentioned, given the various macro factors right now, we may see potential deterioration for the time being, in terms of the asset quality. In terms of the percentage or credit cost, we do expect it to perhaps increase some. But last year, our full year credit cost was about 57 basis points and recurring credit cost was about 38 basis points.
So given our loss absorption capacity that is currently available, our expectation for full year this year is somewhere around 45 basis points or under. We believe cautiously that we should be able to manage it under that level at a recurring level. So that is our internal expectation and internal target, if you will. Going forward, we will be very vigilant against any further deterioration of credit loss. So we will be preemptive in setting aside more provisioning to further bolster our loss absorption capacity.
Operator: Thank you very much for the response. At this time, we see no further questions. So let us wait until we have the next question. We will take the next question. Mr. Shim Jongmin from CLS Securities.
Shim Jongmin: This is Shim Jongmin from CLS. I have one question. So by the end of the year, the CET1 target, what would be the target for that? And then also, how can this be connected to the shareholder return policies? So as the CFO has explained earlier, in the fourth quarter, there may be more and larger shareholder buyback and cancellation then in terms of the CET1. Then and if it goes above a certain threshold, then — you mentioned that you would go with the option of shareholder buyback and cancellation. So the question is, overall, about the CET1 relation and also relation with the shareholder return policy.
