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KB Financial Group Inc (KB) Q3 2020 Earnings Call Transcript

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KB earnings call for the period ending September 30, 2020.

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KB Financial Group Inc (KB -1.26%)
Q3 2020 Earnings Call
Oct 22, 2020, 3:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Peter Kwon -- Head of Investor Relations

Greetings. I am Peter Kwon, the Head of IR at KBFG. We will now begin the 2020 Q3 Business Results Presentation. I would like to express my deepest gratitude to everyone for participating in our call.

We have here with us our Group CFO and Deputy President, Kim Ki-Hwan, as well as other members from our group management. We will first hear the 2020 Q3 financial highlights from our CFO and Deputy President, Kim Ki-Hwan, and then engage in a Q&A session.

I would like to invite our Deputy President to walk us through the 2020 Q3 major financial highlights.

Ki Hwan Kim -- Senior Executive Vice President, Chief Finance Officer

Good afternoon. I am Kim Ki-Hwan, CFO of KB Financial Group. Thank you for joining KBFG's presentation on Q3 2020 business results.

Before presenting on the earnings, let me first brief you on the operational backdrop. As of end of August, KBFG completed the consolidation [Phonetic] of Prudential Life, Korea's top-tier insurer in terms of capital adequacy, sales capabilities and financial stability, as its 13th subsidiary. With that, we have finally completed the acquisition of a life insurer, which was a long harnessed aim, gaining a meaningful market position in the life insurance industry. With a perfected business portfolio, second to none in the financial industry, we are now able to further enhance the group's potential for sustainable growth and profitability.

Driven by robust earnings fundamentals, following the expansion in our nonbank portfolio and pre-emptive and precise risk management, once again, we were able to record a quite stable earnings in the third quarter. However, with the prolonged COVID-19 pandemic, overall business environment for the financial industry is turning unfavorable.

With social distancing and restrictions on economic activities, macro-outlook for the Korean economy continues to be negative. While financial support program for hard-hit SMEs and SOHOs have been extended by six more months, which deepened concerns over asset quality deteriorations and have once again put to test risk management capabilities of the Korean banks.

Firstly, I would like to affirm that under the crisis brought on by COVID-19, KB has kept its asset quality stable, underpinned by its rigorous risk management framework. With the extension of the financial support, i.e., moratorium on repayment, it is true that for some marginal companies there could be a carryover effect of deteriorations, which would eventually lead to erosion of asset quality. However, by taking basic financial information of the borrowers and cash flow projections, which factors in the COVID crisis, we are reviewing debt servicing capacity and possible liquidity issues holistically as we segment risk exposures accordingly. And through such sophisticated follow-up management, we are rigorously preparing against potential risks.

Also, credit quality for the Company has been improving over the years. And based on conservative forecast economic scenarios, we have made pre-emptive provisioning, maintaining a fundamentally robust risk management framework. As such, we expect possibility of asset quality deterioration, to the extent that it will erode our fundamentals, is quite limited.

In the meantime, COVID-19 has triggered the spread of the so-called untact [Phonetic] behavior, quickly shifting the center of gravity to digital channels when it comes to customer touch points. KB Financial Group even before the COVID pandemic had its focus on customer pain points, making improvements on convenience aspects on our platforms like Star Banking, M-able and Liiv Mate. And as a result, amid competitions with the big techs and other financial service platforms, our core apps are outperforming in terms of usage.

We will continue to strengthen our competitiveness in the untact channel. And by connecting with our existing powerful off-line channel, we will lead the efforts in starting a new chapter in channel competitiveness and develop into a future-proof platform with a key focus on customers and core of financial business.

With that, I will move on to the third quarter earnings results. For your information, Q3 group performance is based on 100% consolidation of Prudential Life. So please note that in light of the acquisition date, we reflected the earnings results for a single month of September. KBFG's Q3 net profit was KRW1.1666 trillion. On sustained growth of net interest income and net fee and commission income and a base effect of additional provisioning in Q2 as well as the negative goodwill benefit from Prudential Life, net profit was up 18.8% Q-on-Q. Excluding negative goodwill benefit of KRW145 billion and other one-off items, recurring basis net profit was in the upper KRW900 billion at a steady level, underpinned by core profit growth and asset quality management.

In terms of cumulative net profit up to Q3 2020, it came in at KRW2.8779 trillion, despite NIM being in a narrowing cycle from the rate cuts, supported by net interest income growth following solid loan growth and successful efforts to increase fee and commission income, this figure reported a 3.6% growth year-on-year. On a running basis, excluding the one-offs, such as last year's ERP expense and this year's pre-emptive and additional provisioning and negative goodwill benefit, the increase was 5.1%.

Moving on to more details by line item. Q3 cumulative net interest income was KRW7.1434 trillion, driven by loan growth from the bank and the KB Card and consolidation effects from PRASAC acquired last April. We saw a sustained growth of 4% year-on-year. Q3 cumulative net fee and commission income was KRW2.1705 trillion. Notwithstanding difficulties, i.e., economic recession and curtailed financial product sales, driven by growth in customer assets and efforts around IB business activation, there was sharp price in brokerage commissions, pushing up the income by KRW454 billion on year.

Also, Q3 net fee and commission income reported KRW789.2 billion, supported by improvement in commission performances from the brokerage financial business and trust income, which was subdued in the first half due to the regulatory impact on sales ceiling, saw improvements on better sales and higher ELS early repayment, posting a growth of 11% on quarter.

Next, Q3 other operating income posted a loss of KRW17.7 billion, which is a steep decline Q-on-Q. This is mainly due to the base effect of Q2, where financial market recovery has significantly pushed up gains from marketable securities and derivatives. And with August forming the trough, market rates started to rise, somewhat compressing valuation gains from bonds.

Next is on group's G&A expense. Q3 G&A expense was KRW1.606 trillion, a marginal increase Q-on-Q on the consolidation effect from Prudential Life. On a cumulative basis up to Q3, it reported KRW4.6462 trillion, which is up 4.3% year-on-year. Although it looks to be a sizable increase, taking PRASAC and Prudential Life impact aside, it is a 2.3% increase year-on-year basis.

Q3 PCL, provision for credit loss, was KRW214.6 billion. With additional provisioning impact in the second quarter removed, there was around 27.5% decline Q-on-Q, with quarterly credit costs reporting 0.22%. As such, costs are being well managed. Cumulative group PCL as of the third quarter increased significantly year-on-year on massive additional provisioning in Q2. However, credit cost continues to be at a lower range at 0.25%.

Next is on key financial metrics. 2020 Q3 cumulative group ROE and ROA respectively posted 9.76% and 0.70% and is maintaining sound fundamentals and profitability despite concerns over economic downturn. The recurring ROE, taking into account major one-offs, posted 10.01% on the back of group's core profit growth and conservative asset quality management.

I would now like to cover the bank's growth in won. As of late September 2020, bank's loans in won posted KRW292 trillion, an 8.6% growth YTD. In Q3, the focus was on quality growth centered on profitability and asset quality and grew 1.7% compared to late June. In the case of household loans, with the solid growth of Jeonse loans and prime unsecured loans, it grew 2.4% compared to late June. In the case of corporate loans, large corp loans decreased 1.9%. But on the other hand, SME loans grew stably by 1.3%, centered on SOHO. And as a result of conservative loan policy, it grew 0.8% compared to late June.

Next is the NIM. Q3 group and bank NIM each recorded 1.73% and 1.49%, respectively. And although there was a contraction in asset yields following the interest rate cut through efforts to increase low-cost deposits and through overall reduction in funding costs, we were able to guard the NIM, so that it only went down 1 bp Q-o-Q. Going forward, KB, based on outstanding sales capability, will focus on expanding low-cost deposits. And through a more precise and sophisticated loan pricing system, we will improve profitability and do our best to safeguard the NIM as much as possible.

Let's go to the next page. Next, I would like to cover the group's cost income ratio. 2020 Q3 cumulative group CIR posted 50.3%. And on a recurring level, excluding expenses, including digitalization-related costs, posted 48.3% on a recurring level. With sound top line growth and efforts to manage costs, the group's CIR is consistently showing a downward trend. With the realization of our groupwide cost cutting efforts, we forecast that it will improve to a mid-40% level in the mid-to-long term.

Next, I will cover the credit cost ratio. 2020 Q3 credit cost posted 0.22% and 0.25% on a cumulative basis and is still being maintained at a stable level. In addition, excluding one-offs, including Q2 additional pre-emptive provisioning and sizable write-backs, the cumulative credit cost posted a 0.20% level and is maintaining a low level despite the COVID crisis and concerns over an economic downturn, proving our asset quality management capability.

With various financial support programs being prolonged, there are some spreading concerns over asset quality. However, we have been pre-emptively preparing for these possibilities. And since we have been strengthening management of NPL exposure, we believe that we can stably manage asset quality going forward in the future as well.

Next, I would like to cover our group's capital ratio. As of end September 2020, the group's BIS ratio posted 14.69% and CET1 ratio posted 13.08% and is still maintaining the highest level of capital adequacy in the Korean financial industry.

Even after the acquisition of Prudential Life Insurance, BIS ratio on the back of stronger capital through net earnings increase and hybrid bond issuance, as well as the RWA reduction effect. Following the early adoption of Basel III, BIS ratio rose 45 bp Q-o-Q. For your reference, KB has applied the Basel III credit risk calculation revision plan that the Financial Services Commission decided to adopt early in March. And accordingly, we assume that the group BIS ratio has been pushed up by around 130 bp.

Let's now go to the next page. From Page 5, I would like to explain about the management strategic direction related to Prudential Life Insurance, which became integrated as a group subsidiary from late August and the synergies we expect. Through acquiring Prudential Life Insurance, we were able to acquire a life insurance company that we had yearned for a long time. In the recent low interest environment, it is an undeniable reality that there is a bigger burden to guard life insurance company's profitability. Capital management burden is also increasing with the upcoming accounting standard and capital regulation changes. However, as aforementioned, we believe that it can be an opportunity for solid life insurer. And in this vein, we believe that Prudential Life can be a good partner that can develop along with our group. As you are fully aware, Prudential Life Insurance has the industry's highest level of financial soundness and tied agent channels.

The RBC ratio as of late June this year posted 456.4% and is much higher than the industry's average and is being recognized as the safest and most solid insurer from the perspective of RBC. We believe that even after the adoption of IFRS 17 or K-ICS, the highest level of RBC solvency in the industry can be maintained. In the case of major financial indicators of life insurers, the persistency ratio and loss ratio in the 13th month as of end June, each posted 87.9% and 51.8%, respectively, and is maintaining a market financial soundness compared to the industry average.

In addition, the organization of tied agents, aka, life planners are recognized fully in the market at having outstanding capabilities. Prudential Life Insurance is called the Insurance Consulting Officer Training School and has a great strength in its systematic and professional training system and has around 2,000 tied agents that have received the training of the highest quality. The 13th month agent retention ratio is 52.8%, which is an overwhelmingly high level compared to the industry average. The ratio of certified insurance consultants is 32.5% and has been maintaining Number 1 in the industry for 13 consecutive years, proving that the sales agents are outstanding in many ways.

Next, to explain about Prudential Life management strategy in order for the smooth settlement of Prudential Life Insurance into the group and to stabilize business, we will operate Prudential Life Insurance independently without merging with KB Life Insurance for the time being, while the group will continuously support Prudential Life so that it can exert its unique competency as much as possible. In the mid-to-long term, with Prudential Life outstanding Life Planner channel, we have plans to establish a premium sales model, converging the diverse financial services of KB Finance and offer differentiated customer service through digital innovation.

In addition, with the acquisition of Prudential Life, the group's business portfolio has been further strengthened and the position of the insurance company within the group has been heightened. The nonbanking sector contribution to the group's net profit rose from around 31% late last year to around 40% based on the current portfolio. And based on the sum of net profit of Prudential Life and KB Life Insurance, our group's life insurance has become Number 5 in the industry.

Apart from these results, we are setting up strategies from the group perspective to create synergy and value in all areas, including product, channel, organization. And just to mention a few, we will utilize the outstanding Prudential Life Insurance agent organization as our group's WM outbound marketing channel to promote more cross-selling opportunities between subsidiaries. We will expand diverse financial and asset management services, including real estate, tax and legal services to Prudential Life's 650,000 customers, with a high ratio of affluent customers and create new value in the WM business.

In addition, through Prudential Life, since we have better economy of scale and bargaining power from the group, better deal sourcing will be possible, and we expect that the group's asset management competitiveness will get stronger. We are aware of some concerns in the market about cannibalization with KB Life Insurance. But since we have a strong bancassurance channel at KB Life Insurance and an outstanding Life Planner or insurance agent organization at Prudential, we are pursuing a strategy to maximize synergy at the sales channel.

Through the acquisition of Prudential Life, KBFG has solid competitiveness in all areas of core business, including securities, nonlife insurance, capital and now life insurance, and we will leap forward once again as a leading financial group.

Please refer to the following pages regarding the details of the earnings that I have mentioned so far.

With this, I will conclude 2020 Q3 earnings report by KBFG. Thank you for listening.

Questions and Answers:


[Operator Instructions] From Hyundai Motor Securities, Mr. Kim Jin-Sang.

Jin-Sang Kim -- Hyundai Motor Securities -- Analyst

First of all, thank you very much for a good earnings this quarter. I would like to ask two questions. First is on the loan growth and NIM. I see that the trend is favorable, in line with your guidance. Loan growth is higher than your projection, and you're defending the margin quite well. What is your year-end projection for loan growth and for NIM in the second half and next year? What is your outlook?

And I also have a question on M&A. Since you've talked about the Prudential and also you have acquired products, and also from Cambodia, I feel that your acquisition efforts, and organic efforts have really helped with your growth. Do you also have any additional M&A plans?

Unidentified Speaker

Yes. Thank you. We would like to prepare. Give us a moment, so that we could respond to your questions. Just one moment, please.

Yes, Kim Jin-Sang, thank you very much for your question. In terms of the loan growth and NIM outlook, I will be responding to your question. And for the M&A-related question, Lee Chang-Kwon, who's in charge of our strategy, will be responding to that question.

Now coming back to the loan growth and NIM growth. As you know, in the first half of this year, the unsecured loans and large corporate loans have increased quite significantly. Policy loans and financial-aid program had also been extended. As a result, the growth rate outperformed our initial projection. And also from the third quarter, we really focused on profitability and soundness, and we have moderated the growth rate around the corporate loans. By end of the year, basically, in light of the sales and write-off of the loan receivables, we believe that in Q4, the loan growth is going to be quite moderate. So on a per annum basis compared to September -- end of September, we think that there will be only a slight marginal increase.

Looking at household loans, basically, there has been more stricter requirement on the new origination. So I think -- and as we enter into the Q4, the growth rate is going to be moderated. In terms of the corporate loan, we will continue to employ lending policies that focus on profitability and soundness. And at the end of the year, companies -- there's a seasonal effect as they increase their repayment. So when it comes to corporate loans, I believe that the growth rate is going to be quite flat as compared to the end of September for corporate loans.

Moving on to our NIM outlook for the future. In the third quarter, because of the rate cut, asset yield had additionally declined. We [Technical Issues] our low-cost deposits, which we really expanded and through various other strategies, we were able to just defend our NIM decline at 1 basis point on a Q-on-Q basis. Basically, there was an impact from the policy rate cut as well as market rate movement. In light of these, we think that in Q4, NIM is going to be under about 1 or 2 basis points downward pressure.

We are going to focus our efforts in increasing low-cost deposit as much as possible and also be very selective and precise in employing our loan policies that focus on profitability and prudence. So we are doing our best to safeguard that NIM compression as much as possible in Q4. So I think at minimum per annum, our NIM is going to be capped at 1.5%. That is our objective.

In terms of the NIM outlook for next year, we are currently in the process of writing up our business plan. So it's quite difficult to provide you with the details. But under the current interest rate backdrop, basically, the impact from rate cut is going to be fully considered. In light of that, we think that there will be more sustained downward pressure on NIM. However, we believe that the market rate is moderately and gradually showing an uptrend. And through funding and financing efforts, we are going to try to adjust the portfolio. And also, we are going to do our best to make sure we actually limit that NIM erosion.

I'd like [Phonetic] to now turn it over to Lee Chang-Kwon.

Chang Kwon Lee -- Senior Executive Vice President, Chief Strategy Officer, Head of Global Business Unit

I would like to comment on the M&A strategy and turn to -- and to overseas markets that you asked about KB, so far, has been trying to garner sustained growth drivers and a balanced portfolio and to expand our business, we have been working very hard. And as the CFO has mentioned, as a result of our efforts, in 2014, we only had 20% of nonbanking profit contribution. But in Q3 of this year, it has gone up to 40%. Bank and securities, life insurance, non-life insurance, credit card, in different areas, we now have a solid portfolio. So in the industry, we have the most balanced and most stable portfolio.

Regarding the additional M&As going forward, for the time being, rather than focusing on new M&A opportunities, we will work hard, so that we can perfect our merger with Prudential and with PRASAC, so that it can be safely settled. And to create new values, we are currently working on PAA -- PAI. So we are going to focus all our efforts on the smooth settlement. However, if there are good opportunities that can help our value, then our profitability -- if it can help our profitability and financial effect and if we can have a value up, we were going to comprehensively view them, so that we can look into those opportunities with prudence.

In the case of overseas entries -- entrants, there are the country risks and other characteristics, cultural characteristics and linkage with our company. So we're going to consider all facets, so that we can make prudent decisions.

Unidentified Speaker

Thank you very much for your answer. And we will now wait for the next question.


Next question from Hana Financial Securities, Mr. Choi Jung Wook. You are on the line sir.

Jung-Wook Hong -- Hana Financial Securities -- Analyst

Hello. I'm from Hana Financial Securities. My name is Choi Jung Wook. It's a little bit early, but I would like to ask some questions about dividends. The market is very much interested in your dividend plan going forward. And recently, the authorities, because of COVID, they have asked to refrain from giving out dividends. And I think in the news, we have heard about that. And KB has had very good earnings until Q3. And compared to last year, it seems that your, actually, earnings and performance could be better. And if that happens, then there could be some dividend impact. So could you actually give us your take on what is going to be the direction of dividends going forward? And not only this year, but in the mid- to long-term, can you tell us about your dividend plan and shareholder plan because you have mentioned that it's going to go beyond 30%? But we -- if you can tell us in more detail about your mid-to-long term dividend plans, it would be very helpful. Thank you.

Unidentified Speaker

Please bear with us, and we will soon answer your questions. Thank you.

Thank you very much, Mr. Choi Jung Wook, for your question. This year, due to COVID-19, we have had some economic downturn. And regarding management of capital adequacy, there has been higher requirements. So I know that people have growing concerns over dividend payout contraction. And just to give you our position, because of COVID-19, the global economic crisis is now becoming a reality. And in the financial authorities of major countries of U.S., Europe and Australia, they have been recommending that the bank's dividend and share buybacks will actually need to be toned down. And Korea's financial authorities also are asking the banks for conservative capital management.

And in our side, we also have been making thorough and strict preparations. But we also have very solid capital capability. So we are trying our best to meet both ends. For this year's dividend payout ratio, I cannot give you very concrete details at this point. But since there are some concerns about the prolonged economic downturn following COVID-19, and because of the economic uncertainties, we need to be fully prepared. We can say that very aggressive dividend payout expansion could be a little bit challenging in the current environment. And for this year's dividend payout ratio, we need to take into account management environment and management strategy and to make a final decision.

For the Korean banks, their dividend payout ratio is in the mid-20% range and total shareholder return ratio is at about 30% rate. So compared to the banks in the U.S., Europe and Australia, it is markedly low. And the Korean banks have stability in strong earnings and capital adequacy and very solid asset quality. So taking into these factors, we believe that we can -- it can work positively in the dividend payout ratio. So we believe that we are going to do our best, so that our dividend payout ratio can be maintained at least to a similar level of last year.

And regarding the future dividend payout ratios going forward, we have been consistently maintaining 30% rate that we want to push it up too, and we are going to actually keep on that trend. But regarding the treasury share buybacks or cancellations, we cannot give you a final say at this point. But at the current stage, we believe, in the current environment, it will be quite challenging. But from next year, taking into account economic environment and other factors, we could make other decisions. Thank you.

Unidentified Speaker

Thank you for that. We will move on to the next question.


Next question is from Kim Jae-Woo from Samsung Securities.

Jae Woo Kim -- Samsung Securities -- Analyst

Hello. I would like to ask two questions. First question is on COVID-19 related financial aid, which was supposed to end in September, it got extended. So there's concern that there could be further deterioration after the program actually ends for marginal companies and that could actually impact your equity price. I would like to understand what your assessment is on the quality and the credit worthiness of the relevant loans in question?

And also, what's your outlook for provisioning for next year? Second question, last month, Korean government announced the Korean new deal plan. I understand that Korean banks are also taking part in that initiative. I understand that KB is committed to investing KRW10 trillion up to 2025. Can you be a little more specific as to what types of projects or businesses you would be investing in?

Unidentified Speaker

Give us one moment, and we will soon respond to your questions.

Thank you, Mr. Kim Jaewoo, for your question. The first question relating to the financial aid package and what negative impact it may have on our asset quality and its implication on our provisioning going forward, and we will also respond to the Korea new deal that was announced by the government.

In terms of the financial support, now COVID-19 has become much more prolonged. And basically, the program is now extended to March of next year. So for SMEs and SOHOs and small merchants who are hard hit by COVID-19, are qualified to receive such support. And that triggered a concern about carrying over effect of the deterioration of the asset quality. Now at this point, KB, including such financial program, we have been very pre-emptive and also being precise in managing the asset quality. We have segmented the borrowers, and we have adopted a very phased and gradual approach in managing them. And most of the financial program, basically, there is a guarantee element to it. So if you look at the actual volume itself, it is not as significant as one might be concerned of.

So in terms of the soundness aspect or the prudential aspect, one may not be overly concerned. We believe that this could be well kept under control. To provide you with more specifics, when it comes to new loans that's been extended, the guaranteed portion and prime loans are very high in terms of their portion out of the total new origination. And most of the loans are all collateralized. It is secured with payment guarantees and properties [Phonetic]. So basically, these are types of loans that are quite stable.

In terms of the interest moratorium, which I believe is triggering the biggest concern, as of September, the principle that's subject to this deferment program is about KRW400 billion. If you look at April, that was the peak, that was when COVID-19 impact was the highest. After that point in time, people filing for this loan had declined. And recently, we see the outstanding balance being quite flat. It's not actually increasing. So in terms of the total volume of this loan and the trend, we do not believe that this is going to trigger a significant deterioration in terms of the credit quality.

Now having said that, after this program is rolled back, there is concern that the asset quality deterioration may happen and that it would trigger nonperforming loans. So what we are doing is, we have a very strong monitoring against these borrowers, and for those segments we think that are most vulnerable, we are being very pre-emptive in employing our risk management approach. Also internally, when it comes to workout and rebalancing borrowers, we've identified them, and also, we are making sure that there is self-lending if there is any deterioration or migration in the level of the asset quality.

So if you look at other prudence asset quality related indicators, things are well under control. And also even after this point in time, we will be also very precise and sophisticated in managing these assets, so that it will not erode our asset quality. In terms of provisioning, the credit cost for this year is going to be around 25 basis points to 30 basis points. For next year, COVID-19, if there is a resurge of COVID-19, there may be an increase in credit cost. But if you look at the current portfolio structure as well as other elements, we believe that next year's credit cost is going to be managed at around 30 basis point level.

Most recently, we've done scenario analysis. And if COVID-19 continues to aggravate and if the overall scenario actually turns to the worst, so if we assume worst-case scenario, we will still be able to keep our credit cost at around 40 basis point level. Now KB in terms of asset quality management, we have been quite good in keeping a good level of prudence. Based on our pre-emptive risk management, we will continue to manage our asset quality in a very steady manner.

Moving on to your next question about the new deal and our involvement or participation in this initiative. Now with COVID-19, we've seen a significant growth in untapped culture, and there has been heightened interest on ESG as well. So in the post-COVID world, I believe that we will live under an economic order that is completely different from what we are used to in the past. Korean economy in the past had strength in shipbuilding, heavy industries, etc. But under the new deal regime, it's a -- focus is more on digital, green, safety net, moving away from shipbuilding, construction and steel. We believe that these new deal industries, through the shift and transition, are going to lay the basis for future growth.

In that sense, we believe and we completely agree with the rationale behind the Korean's new deal initiative. For your information, KBFG has selected digital and ESG as our key word for our future strategy. And over the past year, we have really focused on implementing projects toward -- in these segments. Basically, in August, we have announced that by 2030, we will reduce carbon emissions by 25% of 2017 level, and that we will increase the sale of ESG-related products and loans to KRW50 trillion. Now this was part of KB Greenway 2030, which we announced.

And last month, for the first time in Korea, we've decided that we will stop participating in PF and also underwriting of bonds that's related to any fossil fuel and power generation projects, both in Korea and abroad. So the blueprint for Korean government's new deal project is well aligned with the strategic direction that our group has been pursuing over the years. I believe that this will be a good opportunity for us to further leapfrog into the future in terms of developing our business opportunities, and we will fully live up to our responsibility as a leading financial group.

There are 10 major projects that were selected under Korea new deal plans. Of those 10, we have selected five as key areas that align with our endeavors; Green Smart School, Safety SOC Digitalization, Green Remodeling, Green Energy and Green Future Mobility. These are five areas that we have selected. And by 2025, we will be investing around KRW10 trillion. Recently, up to date, we have invested about KRW1.2 trillion on these different areas, in light of that progress, and we think that we are well under way to meeting our objective.

In terms of the participatory new deal fund, basically, government is going to guarantee the sub debt aspect -- element, which will reduce the risk. And also when BIS capital ratio is calculated, there's going to be smaller risk weight, and also there is tax-related benefit. So we will be fully utilizing the benefits of this new deal fund, so that we can create various different business opportunities. Thank you. I believe that we have had a lengthy Q&A session, and it is -- it has been nearly 50 minutes. I know that we may have other questions on the line, but please ask our IR department directly afterwards, and we will take one last question.


We will take the last question from Cape Investment Securities, Kim Do-Ha. You're on the line.

Do Ha Kim -- Cape Investment Securities -- Analyst

I'm from Cape Securities. I'm Kim Do-Ha. Thank you very much for the opportunity. It might be an overlapping question, but I have two questions. The first question is about mid-dividend payout. And I know that some things are having short-term dividend payout and some others have other types. And I know that you have very strong capital. So do you have any plans for short-term or midterm dividend payout? If you do, please share with us your interim payout plans. And for provisioning, do you believe that you will need Q4 provisioning to prepare for COVID-19 possibility? In Q2, you had some pre-emptive provisioning. And I am curious whether you have other plans for pre-emptive provisioning against COVID going forward in Q4?

Unidentified Speaker

We will soon answer your question. Please hold. Thank you.

Thank you very much, Kim Do-Ha, for your questions. Regarding dividend, we have actually given some answers, and you're asking questions about interim dividend. And for interim dividend, actually they're in the regulations or AOI of the listed companies. And you need to change the AOI if you were expecting some changes. But for KB, we have interim dividend payout possible in our AOI. So we do not need to make any changes to our Articles of Association -- Incorporation, AOI. So we have that possibility.

For the bank, we have had some limitations in the growth. So we know that there is a higher demand for dividends in the market. And I know that many banks have short-term or interim dividend payout. And regarding interim dividend payout, we do not yet have confirmed details. But in order to improve shareholder value and increase shareholder value, we believe that it is a possibility that we could consider. So regarding interim dividend payout, if there are more details that we will confirm going forward, we will share these in the market.

You also asked question about provisioning and to prepare for COVID-19 effect, you asked about any preparatory provisioning that we might accumulate in Q4. We have had some economic forecast and for forward-looking. And taking forward-looking into consideration, we do need to provision for this year. The economic forecast rate is low. But for next year, because of this year's base effect, it could be within the range of plus/minus 3% -- plus 3%, actually. So for forward-looking, if we assume we provision, we believe that the amount of provisioning will be an amount that we are currently calculating, and there could be a possibility that the provisioning amount is not sizable.

So regarding the vulnerable industries of COVID, so you will not have an overlay -- it will not be overweighed. And in order to prepare for the future economic environment and other possibilities, we are going to maintain our plan of preparedness. And in Q4, we are going to prepare going forward.


[Operator Closing Remarks]

Duration: 50 minutes

Call participants:

Peter Kwon -- Head of Investor Relations

Ki Hwan Kim -- Senior Executive Vice President, Chief Finance Officer

Unidentified Speaker

Chang Kwon Lee -- Senior Executive Vice President, Chief Strategy Officer, Head of Global Business Unit

Jin-Sang Kim -- Hyundai Motor Securities -- Analyst

Jung-Wook Hong -- Hana Financial Securities -- Analyst

Jae Woo Kim -- Samsung Securities -- Analyst

Do Ha Kim -- Cape Investment Securities -- Analyst

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