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KB Financial Group Inc (KB 1.13%)
Q1 2021 Earnings Call
Apr 22, 2021, 3:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Peter BJ Kwon -- Head of Investor Relations

Greetings. I am Peter Kwon, Head of IR at KB Financial Group. We will now begin the 2021 Q1 Earnings Release Presentation.

I would like to express my gratitude to everyone for your participation. We have here with us at today's earnings release, KBFG SEVP, Hwan Ju, who is our Group CFO, as well as other executives from the Group. We will first hear SEVP Hwan Ju's presentation on 2021 Q1 major business highlights, and then we will engage in a Q&A session.

I would like to invite our SEVP to deliver 2021 Q1 business results presentation.

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Hwan Ju Lee -- Senior Executive Vice President and Chief Finance Officer

Good afternoon. I am Hwan Ju, CFO of KB Financial Group. Thank you for joining KBFG's Q1 2021 earnings release presentation.

Also, even in the middle of an unprecedented crisis brought on by the COVID-19 pandemic, I extend my deep gratitude to shareholders for your undivided support and kind patience.

Fortunately, during the first quarter, COVID-19 spread came under somewhat of a control, and there was vaccination rollout, which brought expectations for economic recovery. As such, Korean economy is displaying signs of improvement, driven by exports and capex investment. And as there were signs of uptrend in the market rate, more positivity was expressed for the sector and banking share prices outperformed the market first time in a long while.

But when optimisms abound, we, at KBFG, feel that it is important to focus on the fundamentals and think of ways to enhance corporate value and undertake bold innovations so as to respond to future changes.

First, we have placed foremost priority on profitability and soundness, thereby, focusing on improving fundamentals for sustainability. This quarter, driven by the Bank's core deposit growth and sophisticated loan pricing, we were able to improve NIM 5 basis points on quarter. And the insurance business, whose performance was relatively subdued last quarter, managed to recover margin supported by loss ratio improvement. Also, on stronger competitiveness of core businesses, including Trust, WM and Investment Banking, we expanded net fees and commission income of the Group. To overcome economic crisis triggered by the COVID pandemic, KB actively joined in on efforts toward soft landing of the financial system. We have also been quite rigorous in controlling the asset quality through a systematic monitoring of problem-prone exposures and reexamination of the portfolio.

Second, we issued KRW600 billion of hybrid bond last February, securing additional capital buffer against internal and external uncertainties. On top of reinforcing flexibility of the capital structure to realize shareholder value that fall in line with our capital adequacy levels, which is top tier in the industry, we are conducting in-depth reviews of the shareholder return policy as we speak.

Lastly, to make the leap and become a number one financial platform, KB Financial Group is steadfast at implementing its strategic tasks.

KB Star Banking application now has around 17 million customer base. And from convenience perspective, we are currently integrating Group's core services, thereby, upgrading to an earnings-generating and all-encompassing financial platform.

For the credit card business, Liiv Mate, which is the MyData platform, and KB Pay, an open payment platform, formed the basis for delivering product and services in connection with Group affiliates. And externally, we have expanded product partnerships with many other institutions and have bolstered our competitiveness as an open and comprehensive financial platform.

KBFG will boldly respond to impending crisis and risks and we'll do our utmost to prepare against future changes to further upgrade Group fundamentals and corporate value.

With that, I will now move on to Q1 2021 financial highlights. KBFG in Q1 2021 reported a net profit of KRW1,270.1 billion, which is a historical quarterly performance since the Company was launched, driven by our efforts to beef up competitiveness of Group's core businesses and the result of business portfolio diversification from our M&A efforts.

Also, quarterly figure reported a sizable increase of 74.1% on-year, which is attributable to solid core profit growth led by net interest income and net fees and commission income while, at the same time, there was large improvement in other operating income, which was impacted from sudden volatilities of the financial market in the first quarter of last year.

As can be seen from the upper right graph, KBFG meaningfully expanded earnings-generating capacity across all segments over the past year, while securing incremental earnings from the capital market and the insurance businesses. We also have proven our unparalleled capability in asset quality management, elevating the Group's earnings profile in a stable and robust manner.

Let's now take a look at each segment in more detail. Q1 net interest income was KRW2,642.3 billion, driven by M&As, i.e., acquisition of Prudential Life and solid loan growth of the Bank, which led to 12.5% year-on-year increase, while an improvement in NIM, there was an increase of 2.5% versus last quarter.

Q1 net fees and commission income was KRW967.2 billion. There was a sizable increase of around KRW297 billion on-year and KRW179 billion on-quarter, which was driven by significant increase in fee income from securities business on the back of the bullish stock market. Also, there was recovery of trust sales, boosting trust income for the Bank. And then the recovery of consumer spending, merchant fees from the credit card business also recorded an increase. Particularly in Q1, Bank's trust income, which was somewhat muted for some time on the back of regulations and worsening market conditions, largely regained its level. And by bolstering market competitiveness of the IB business, for the first time on a quarterly basis, net fees and commission income came in at around KRW900 billion level, which attests to a more improved earnings capacity in the noninterest income businesses.

Next is on other operating profit for Q1. With the removal of securities and derivatives and FX-related losses of Q1 of 2020 and consolidation impact of Prudential Life, other operating profit was up KRW311.2 billion on-year.

For the insurance underwriting profit, for non-life insurances, there was a decline in auto accident rate. And on premium hikes, loss ratio improved mostly around auto insurance. And in terms of the life insurance, on base effect of year-end guarantee reserves and improved investment yield, there was performance improvement versus last quarter.

Next is on the Group's G&A expense. Q1 Group G&A was KRW1,722.8 billion, which is up 18.1% year-on-year, seeming to have risen quite significantly. However, unlike Q1 of 2020, following the acquisition of Prudential Life, Prasac, etc., KRW134 billion was booked as related expenses. And also, there was additional expense adjustments for employees' welfare fund and year-end special bonuses. So if we were to exclude such factors, we can say that G&A is being well controlled.

Next is on PCL. Q1 Group PCL was KRW173.4 billion. Despite Group's yearly loan asset growth of KRW37 trillion, PCL was actually down KRW70.3 billion year-over-year. And thanks to our continuous effort toward quality improvement of the loan portfolio and pre-emptive risk management, we are keeping asset quality at a steady level.

Next, if you look at the bottom-right graph, KBFG has been expanding its earnings capacity by driving up core competitiveness of each of its subsidiaries. And as a result, non-banking businesses as of Q1 account for 48.6% of the Group's net income. As such, Company's earnings profile has improved.

For the banking business, in order to overcome difficult business environment in the domestic market, we sought out for inorganic growth opportunities in the growth -- global market, reinforcing our earnings capacity. For the securities business, aside from brokerage services, we strengthened profitability across all of the businesses, including wealth management, capital market and investment banking. And while for insurance, by acquiring Prudential Life, we were able to increase its contribution to the performance of the Group.

On the next page, I will walk through key financial metrics. 2021 Q1 Group ROA and ROE each posted 0.85% and 12.5%, respectively. Through interest income and fee income-centered core earnings growth and Group level revenue diversification, we are improving profitability and maintaining sound earnings fundamentals.

Next, to elaborate on Bank's loans in won growth, as of March end 2021, Bank's loans in won posted KRW297 trillion and grew 0.4% YTD. Amidst this situation, household loans posted KRW163 trillion. Centering on Jeonse loans and prime unsecured loans, household loans grew 0.6% YTD. Considering the overall household debt level and loan portfolio mix, we are partially controlling the speed of growth compared to the previous year.

Corporate loans grew 0.1% YTD, a marginal increase. But it was because in the case of corporate loans, due to the revitalization of corporate loan issuing market, there was overall loan demand decrease. And in March, temporarily, there was a great increase of repayments leading to around KRW1 trillion decrease YTD. In the case of SME loans, centering on SOHO loans, it increased 1% YTD and is stably growing.

Next is the net interest margin. 2021 Q1 Group and Bank NIM posted 1.82% and 1.56%, respectively. And following the previous Q4, a growth momentum is continuing. And since it has already increased by a 5 bp to 6 bp level compared to the previous year's annual NIM, this year's solid interest income growth momentum has gained more visibility.

Going into detail, in the case of the Bank NIM, core deposits increased by around KRW6 trillion in this quarter. And with the proportion of low-cost deposits among the total deposits continuously increasing, alleviating the overall funding cost burden, Bank NIM increased by 5 bp Q-o-Q. In the case of the Group NIM, reflecting card asset yield improvement, centering on installment financing, coupled with Bank NIM improvement, Group NIM increased by 7 bp Q-o-Q.

Let's go to the next page. First, I would like to cover the Group's cost income ratio, the CIR. The Group CIR based on 2021 Q1 posted 47.3%, and efforts to increase core earnings and control costs is gaining visibility. On a recurring basis, excluding one-offs, including digitalization costs, it posted 46.1%. And even on a recurring CIR basis, it is showing a lower stabilization trend, which is gradual.

For your reference, taking into consideration the cost adjustment effect from employee welfare fund reserves in this quarter and year-end bonus expenses accrual, the cost efficiency improvement trend is gaining more visibility. And on the back of sound top-line expansion and groupwide cost control efforts, cost efficiency is expected to additionally improve.

Next is the credit cost. 2021 Q1 Group and Bank credit cost, as a result of our continued prudent lending policy and credit quality management, posted 0.20% and 0.08%, respectively, and is being maintained stably at a low level, proving KBFG's advanced risk management efforts. We are taking into account the situation where COVID-19-related uncertainty is being continued, and we are going to maintain pre-emptive and conservative asset quality management for the time being.

Next is the Group's capital ratio. As of end March 2021, the Group BIS ratio posted 16% and the CET1 ratio posted 13.75%, respectively, and grew by 0.72 percentage points and 0.45 percentage points, respectively, Q-o-Q. Based on our solid earnings fundamentals centering on CET1, we are maintaining the highest level of capital strength in the industry and we are also improving our capital structure flexibility through strategic capital management, including issuing hybrid bonds.

Let's go to the next page. From this page, I will cover KBFG's non-face-to-face or digital channel competitiveness. With the development of IT technology, platform models are evolving and service expediency and efficiency is rapidly improving. The population structure is changing with the increase of one-person households and the rise of the MZ generation, leading to a rapid increase of consumers preferring digital channels.

With the expansion of COVID-19, transition into the untapped generation is accelerating and the center of weight of financial transaction channels is rapidly moving from face-to-face channels to digital or non-face-to-face channels. KBFG, which has been pre-emptively responding to these changes, as of late last year has secured more than 10 million digital customers, which is around 44% of the Group's total active customers.

In addition, in the case of Bank's KB Star Banking, which is our Group's representative digital platform, we have secured around 8 million monthly active users, MAU, as of now, and is maintaining the industry's leading position. As a result of customer-centered UI/UX reorganization and diverse product offerings, customer convenience has improved in an innovative way leading to rapidly growing MAU each year.

Looking at the financial transactions through the Group's digital channels, in the case of major investment products, including time deposits and fund, around 50% of new accounts are being transacted through digital channels of just Internet and mobile banking. In the case of loan products, in the past, there was a smaller proportion of digital channel transactions relatively, but as a result of online product lineup alignment and focus on process simplification, it is growing at a fast speed. In particular, in the case of unsecured loans in 2017, the size of digital channel new loans was only KRW400 billion per annum. But last year, it grew to around KRW3 trillion level and is rapidly expanding.

In addition, I would like to elaborate on some of the major efforts we're making to bolster our Group's non-face-to-face or digital channel competitiveness. In January of this year, among our subsidiaries, Bank and Card subsidiaries acquired MyData business license, and we are doing our best to prepare for service launch in August.

The Bank subsidiary through KB Star Banking, with the goal of establishing the Group's integrated comprehensive financial platform, is advancing seamless wealth management services through converging wealth management know-how and specialized data connection technology. Card subsidiary plans to offer optimized, customized financial product solution by utilizing Liiv Mate 3.0, which connects information from around 130 financial institutions as an externally open comprehensive financial platform.

In addition, KB Mobile Certificate, which received attention from the market by being the industry's first private digital certificate as a local financial group and the only public sector digital signature pilot provider among financial companies as a result of securing definite competitive edge in customer convenience and security, in just one year and eight months after launching, has surpassed 7.3 million registered users. We expect the competitiveness of these mobile certificates to contribute to expanding the Group's customer touch points and customers' convenience.

In addition, Card has launched KB Pay, which has strengthened competitiveness compared to other existing app cards to expediently respond to the rapidly changing settlement market.

Insurance, KB Insurance, based on customers' health information, plans to offer ultra-customized comprehensive digital healthcare service. And we plan to secure a newly elevated level of competitiveness.

Last, but not least, KBFG plans to not only bolster digital channel competitiveness, but also for wealth management, loan consulting and other areas where face-to-face channels' importance is high, we plan to offer services that are elevated through centering on a more specialized consulting and differentiated products. Through seamless connection between digital channels and face-to-face channels, leading to maximizing customer convenience and satisfaction, we will work hard to grow as the solid leading financial group even amid the future financial industry's paradigm change.

From the next page, there are detailed pages regarding the earnings that I have covered so far.

With this, I will conclude KBFG's Q1 2021 business results presentation. Thank you for listening.

Questions and Answers:


We will now begin the Q&A. [Operator Instructions] Yes, we will take the first question from Samsung Securities, Mr. Kim Jae-woo. Please go ahead.

Kim Jae-woo -- Samsung Securities -- Analyst

Good afternoon. I am Kim Jae Woo from Samsung Securities. I would like to ask you three questions. First question relates to dividend. There's high level of expectation and people are looking forward toward quarterly dividend. I understand that KB is willing to pay out on a quarterly basis. Do you have plans to do so? And also, when we talk of quarterly dividend, I feel that in terms of interim dividend payout may be most optimal. So what's the possibility of that?

And also, secondly, according to press articles, I think the major banks are also talking about Internet-based bank. What is your policy or stand vis-a-vis the online banking? For instance, Kakao and other -- and since you also have certain shareholding at Kakao, I would like to understand what your position is with respect to the online dedicated banks?

And also, my last question is that your performance this quarter was quite good. Had there been any one-off items?

Peter BJ Kwon -- Head of Investor Relations

Thank you for the questions. We'd like to respond to the questions. Just give us one moment.

Hwan Ju Lee -- Senior Executive Vice President and Chief Finance Officer

Thank you, Mr. Kim, for those questions. You asked about quarterly dividend payout. At this point in time, we are looking into and reviewing different options. When it comes to dividend payout and shareholder return, I understand that the market has quite a bit of interest. And as I've mentioned during the IR session at the year-end of last year, if I may, just once again summarize what our position is as follows.

In terms of payout ratio, as you know, we've adopted a progressive dividend payout policy. This is something that we have been quite steadfast at. Basically, from mid- to long-term perspective, increased the payout ratio to around 30%.

Second point is that in the second half of this year, we expect uncertainties around COVID-19 pandemic to alleviate and also the capital ratios and our earnings stability and the quality of our assets and asset quality and soundness of our assets. In light of all of these elements, we are going to do our utmost to actually regain and recover to the previous payout level. And also, we will balance and consider different aspects, such as a need to retain earnings for M&A purposes and also interim payout as well as share buybacks. And other shareholder return enhancement options are being, at this point in time, deliberated by the Company. Of the Korean financial institutions, when it comes to shareholder return and dividend payout, we've been quite pre-emptive. If you look back at our track record, you would be able to see that. And we've been quite aggressive and progressive. And lastly, together with the supervising authority, we will also engage in very close communication with respect to this item.

The second question will be responded by our CSO. And the third question on any of the one-offs, on the expense side, the welfare fund. Basically, Q1 or Q2 of last year, there were some reserves. So there's not been anything that's quite significant. And also, we haven't really made any, I guess.

Chang Kwon Lee -- Senior Executive Vice President and Chief Strategy Officer

Yes. I am Lee Chang Kwon, the CSO. As you have mentioned, Mr. Kim, when it comes to the Internet dedicated, the online bank and launching of that business, there's a lot of interest. And currently, the association of banks currently is talking to the FSC and is in discussions as to allowing financial holding companies to gain an Internet online bank license. If there are any changes in the direction of the regulation by the FSC, we will, of course, be in line with those direction and review the potential possibility. I think it would not be appropriate for me to specify any specific business model per se today at this point in time.


We will move onto the next question. Mr. Kim Jin-sang from Hyundai Motor Securities. Please ask your question.

Kim Jin-sang -- Hyundai Motor Securities -- Analyst

Greetings. Congratulations, and thank you for your earnings. As the CFO mentioned, your Q2 NIM has surpassed the level of the previous year and it's quite outstanding. And can you give us a breakdown of the NIM? I know that the commercial interest rate has gone up. And I know that your low-cost deposit has come in. So if you can give us a breakdown, it will be very helpful. And including the next quarter, if you can give us an estimate of your forecast of quarterly trend, it will be very helpful.

My second question is about your Group's digital or non-face-to-face channel plans. I know that you have a platform and you have many advantages, and I am sure that you will be quite profitable. But can you tell us about what is your forecast for earnings? If you have any simulated numbers, it will be very helpful.

And we see banks going online, and there is the Internet and the existing sales channels that are becoming divided. And I believe that the banks need to make the existing channels more efficient. So can you tell us what you're doing in that direction?

Peter BJ Kwon -- Head of Investor Relations

Thank you very much for your questions. We will soon answer them.

Hwan Ju Lee -- Senior Executive Vice President and Chief Finance Officer

Thank you very much, Mr. Kim Jin-sang, for your questions. Regarding the NIM question that you first post, as you just aforementioned, compared to the previous quarter, largely, there will be the volume effect and rate effect related to profitability and the low-cost deposits or portfolio change impact that has added to this improvement. Regarding the concrete numbers, I don't have them with me now, but I'm sure that our IR team can get back to you about the details.

Regarding the NIM, talking about the forecast, looking at what the market has said until Q2, there are estimations that the NIM will go up, but there will be a floor out [Phonetic] later. So I think that is the main gist of what people are mentioning now. But regarding our annual earnings presentation, I mentioned that, on an annual level, we will safeguard the NIM at about 1.51%. And as you have seen in our presentation materials, the interest environment and the funding costs have been rapidly changing, and we are seeing the NIM that has actually improved by a large scale. We had 5 bp improvement in this quarter as well.

And looking roughly at the reasons, first, we had efforts to increase low-cost deposits. And core deposits have increased by KRW6 trillion, and it led to our funding cost burden going down. And relatively speaking, for the time deposits, you can see that there was a portfolio effect because it contracted. And regarding the rollover of our deposits, you can see that there was an impact as well. So overall, we had a alleviation of the funding burden, which led to this positive trend. We put the prudency first, and we said we want loan growth based on conservative trend. So we believe that also added to the NIM improvement.

And in Q1, regarding low-cost deposits, we had the increase and we had the time deposits that went down. So it led to funding cost decrease. So we believe that, on average, balance effect, this trend will continue going forward, and we plan to have a prudent loan policy going forward. And we believe that in the 1.5% level for the Bank NIM, we believe that will be what we're forecasting. And in -- when the NIM -- we had a 1 bp NIM improvement in the previous quarter, so we believe that we will be doing a very detailed management so that we can have the best NIM level going forward.

Your second question was about the platform and what type of benefits that we are looking at and looking for. The market environment, as was mentioned in my presentation, is gearing toward an untapped economy. So we believe that it goes without saying that we need to bolster the digital channels or non-face-to-face channels. And regarding the indexes for digitalization and indicators, we are actually creating them and we are assessing them as we speak. So internally, we are currently organizing them and aligning them so that we can actually talk in more detail about it at future IRs if possible.

Thirdly, you mentioned about the digital channels -- you mentioned about the face-to-face channels, and although we have more percentage of the non-face-to-face channels, but -- or offline channels, there are many things that we need to do. And for the offline channels and online channels, we need hybrid seamless connection for the customers and we need to satisfy the customers, so this can be well and seamlessly connected. So we need to work in that direction. And we need to have upskill and reskill of our employees so that they can gain more professionalism in this area. So we are working toward that as well.

Next, in 2014, looking at our channel numbers and its breakdown. For the channels and the employees, we have seen a contraction of about 20% for both of them. So it means that we are becoming more lean and we are becoming more muscular so that we are gaining more efficiency, and we plan to work toward that end as well. Thank you.

Peter BJ Kwon -- Head of Investor Relations

Thank you for your answer. We will take the next question.


From Cape Investment, Kim Do-ha. Please go ahead with your question.

Kim Do-ha -- Cape Investment & Securities -- Analyst

Thank you. I am Kim Do-ha from Cape Investment. I have two questions. First is on your fee income line item. Compared to my forecast, actually, there was a quite big surprise. If you look at last year, I have been looking at the banking-related fees. But because of difficult circumstances on the trust as well as sales through the bank branches, there's been a decline. But if you look at other banks, which did earnings last -- yesterday as well as KB, if you look at trust, on a Q-o-Q basis, there's a 60% increase. So you've really regained your previous level. So out of the front end, how do your people actually assess this in terms of trust fees as well as sales-related commissions? Do they feel that this trend can continue in Q2 and Q3 as well? So, that's my first question.

Second question, if you look at the Bank and if you look at the credit cost, I think it's only 7 basis points. So compared to the past, there must have been some reversals or write-back. So in terms of the reserve that you booked last year to respond to COVID, when do you think it's going to be the cycle or the time line for us to see a significant write-back from those reserves?

Peter BJ Kwon -- Head of Investor Relations

Thank you. Just give us one moment to answer that question.

Hwan Ju Lee -- Senior Executive Vice President and Chief Finance Officer

Thank you, Ms. Kim Do-ha, for your question. You asked two questions. First, for the commission income, you've mentioned trust income. So, let me just provide some overall explanation on the fee and commission side.

As I said before, the first aspect is at the Group level, if you look at the stock market and the bullish stock market, we've seen brokerage fee income increased quite significantly. And if you look at the IB business, basically, we've seen our market competitiveness strengthen and also out of the trust business because of some of the regulatory impact as well as despite the fact that we're still in the middle of the pandemic. There has been some recovery in the spending of the consumers, and the merchant fees have gone up. So overall, we have seen fee and commission income actually improved across the board.

Now -- but is this sustainable? That is the question that you have asked and also is an aspect that we are looking into. In our view, our customers for the WM and also strengthening-related assets, that will be our priority. And also, if you look at DCM and ECM and M&A, so corporate advisory businesses, we want to be able to expand our sales-related capabilities. And if we could really leverage our sales capabilities, I believe that we can bring about a double-digit growth on an annual basis. So that would be the answer to the first question that you asked.

Second question, regarding COVID, yes, we have pre-emptively made some reserves, and you asked about any reversals of those reserves. At this point in time, if you look at this year, we're still in the middle of the pandemic and some are also talking about a possibility of the fourth wave of pandemic coming. And government support, financial support, is still ongoing. So in light of all these circumstances, I think it will be too premature to talk about a reversal of the reserves. Only when the whole circumstances are normalized, maybe then we may have a possibility to think about a write-back. I say that with caution. Thank you.


We will take the next question from DB Securities, Lee Byung Gun. You're on the line, sir.

Lee Byung Gun -- DB Securities -- Analyst

Hello, thank you for your good earnings results. I have two questions. First, compared to your loan growth plans at the early part of this year, well, I think there was a difference. And thinking about the corporate loans, that was lesser, even still, I think it is a bit low. So can you tell us about your growth after Q2? So I think your plan was 5%, but can you tell us your forecast? Do you think it will be met in Q2, Q3 going forward or not?

My second question is about trust, which has gone up, which is quite encouraging, but there has been a reinforcement of customer protection laws. So at the tellers or the windows, it might be more difficult in the trust area. So, in late March and in April, can you tell us about the atmosphere at your banks physically? So, do you think it will have a negative impact, the strengthening of the law? Thank you.

Peter BJ Kwon -- Head of Investor Relations

Thank you for your questions. We will soon answer them. Please hold.

Hwan Ju Lee -- Senior Executive Vice President and Chief Finance Officer

Thank you very much, Mr. Lee Byung Gun, for your insightful questions. Regarding loan growth, I would like to talk about what we believe will happen after Q1, our forecast. And regarding the Consumer Protection Act, our CFO will answer your question.

As was aforementioned, in Q1, Bank's loans in won was a bit low at 0.4%. And regarding the household loans and corporate loan status for this year, in the case of household loans, there was 0.6% growth YTD, which was KRW1 trillion of growth. And at our annual earnings release for the whole year, I mentioned mid-single-digit loan growth goal for this year. And compared to that goal, Q1 growth was somewhat relatively low.

And for Jeonse loans and for more -- because of the mortgage loan regulations, there were -- the demand for Jeonse, which went down, so 4.3% growth YTD. So, there was a steadfast growth. And there was 1.7% growth for unsecured loans as well for household loans. But for the mortgage loans, there has been the regulations that were quite influential, so we had about 1% decrease compared to the previous year-end. And there was 1.7% contraction for collective loans as well. So we had a downturn for household loans as a whole. There have been policies to cut down or curb household loans. And we believe that for the Jeonse loans and for the high-quality unsecured loans, we believe that there is still very strong demand.

And for our this year's goal, mid-single-digit growth, we believe that it will be quite achievable, and they will not be challenging. And I talked about the non-face-to-face or digital phase improvement, and we will improve our digital capabilities, so that we will solidify our market position. And for Jeonse loans and for the prime unsecured loans, we are going to have appropriate growth that are quite profitable.

In the case of the corporate loans, there was 0.1% increase YTD. And related to this, for the SOHO and SME loans, because of those that have large exposure to COVID-19, we had improvement in pre-emptive exposure. And compared to other financial institutions, we had some repayments. So that is why, YTD speaking, 1.2% growth for SOHO loans and we had about 0.2% for SMEs. And for the large corporates, because of the corporate loan situation, we had a decrease of YTD as well, and we had more repayments in March, so this also had an impact as well.

But for the SOHOs and SMEs, the loan demand is quite solid each year. And in Q2, in April, it seems that the numbers are quite different from Q1 numbers. So if we actually respond very flexibly and with resilience, we believe that we can have better performance. So the mid-single-digit goal that we have mentioned to you early this year is quite achievable, and I have been mentioning this repeatedly. And for KB, we believe prudence and conservative -- asset quality is of utmost importance. So that will be our steadfast direction going forward.

Unidentified Speaker

Thank you very much, Lee Byung Gun. And I am [Indecipherable], the Bank CFO. In March, we had the Customer Protection Act that was -- came into effect. And it takes about 30 to 40 minutes to explain at the teller window. So there was some confusion. And customers and employees had a hard time adjusting in the beginning. That is why in the beginning, we had lower numbers. But in April, we are seeing that, with mutual understanding improvement, the numbers are improving. So we believe that due to Customer Protection Act, we will not have a negative impact on our performance.

And the government has given us a six-month grace period. And the government said that they will receive opinions from the banks so that they can make this process more reasonable for everyone. So if that happens, we are sure that Customer Protection Act will not have a negative impact on our performance. Compared to other banks for the last year and the year before that, we had less problems involving PF loans. So we believe that we are seeing more fee income. And for ELS as well, you can see that we had almost 100% early redemption, leading to new demand. So taking that into consideration, the trust-related fees for this year, we believe that it will not worsen compared to Q1 of this year.

Peter BJ Kwon -- Head of Investor Relations

Thank you very much. It is already 4:50. And because we don't have enough time, we will take one last question, and please contact our IR team, and we will answer your questions. Thank you.


From J.P. Morgan, Cho Ji-hyun. Please go ahead.

Cho Ji-hyun -- J.P. Morgan -- Analyst

Thank you. I would like to ask three questions. First question is because of COVID-19, things were quite difficult. But if you look at credit card fee, because of the government-provided support and benefit, I was expecting that the number would be quite good. If you look at credit card profit, basically, is actually higher than my forecast. Basically, because the government has paid out the so-called disaster subsidies via the credit card, I mean would that be a one-off impact that had an upward impact?

You mentioned that CIR, 0.4%, was driven by digitalization since you're doing ERP and you're doing digitalization, digital transformation, it doesn't seem that the CIR improvement is all that significant. So the investment that you're making into digital transformation or digitalization in terms of the size and sustainability of this investment, how valid is that? So what's your budget plan? And when can we see a more meaningful improvement in your CIR ratio?

My last question is, most recently, at National Assembly, they've adopted a modification on providing support to the vulnerable class. And basically, they have requested about KRW100 billion of funding from the banking sector to provide financial support to a low-income class. And it seems that the government may come up with additional requests or measures to engage the banking sector more. So in terms of setting up the budget or being -- needing to provide such financial support, what are your plans or measures to do so?

Hwan Ju Lee -- Senior Executive Vice President and Chief Finance Officer

Give us one minute. Thank you for the questions. You asked three questions. Responding to your question on CIR, let me respond to that. And we have CFO from KB Card who will respond to that. And also we have the Bank CFO who'll respond to the third question.

Now overall, on a recurring basis, if you look at the trend of CIR, it is showing a downward stabilization trend. So, in terms of the biggest factor, year-end, if you were to include the ERP expense, we consider that ERP expense as a investment for the future. And we believe that within five-years' time, we will be able to recoup that investment.

And in terms of digitalization -- and I've mentioned in the presentation, if you were to exclude digitalization, but basically digitalization is an inevitable investment for us to respond to future changes. If we miss out in the opportunities, then there will be bigger negative impact. Hence, there needs to be a pre-emptive investment into digitalization, and we will be bold at it. However, we will be mindful of efficient investment. We want to rid ourselves of any redundant investment. We will have internal process to allow for that. From a mid- to long-term perspective, the CIR ratio, we believe is -- we are going to have a target that is downward, stabilizing and controlling that level at a steady state.

Unidentified Speaker

Thank you for the question. I'm from KB Card, I am the CFO. You mentioned credit card fee income, on a year-over-year basis, there's been a significant increase. And you've asked whether there's any one-off non-recurring impact, and also the government-provided COVID-19-related allowances and whether that had an impact.

Now just to tackle those issues one by one. Overall, the government allowances that were given last year, there was one that was done by the Gyeonggi Province. And the amount that was given out as an allowance was around KRW100,000. Of all of the credit card companies, our market share in terms of sending out or doling out those allowances, we -- it was about 22%. So, there's been just maybe a slight upward increase. And one of the reasons why the credit card fee income had gone up is because, compared to the previous year, basically, the total payment volume had gone up significantly. Basically, there's KRW2.4 trillion increase in payment volume. And as a result, we've seen significant increase in terms of merchant fee income.

Aside from this, you also asked about any other one-off items. But these are not one-off, we expect that this is going to be a recurring item going forward. If you look at end of last year and if you were to compare with Q1 of 2020, basically, if you look at the reserves for credit loss, there's been a significant decline compared to Q1 of last year. Last year, we did about 52 -- KRW59 billion of additional reserving, and we've been quite conservative in our reserving policies. So KRW37.2 billion, there's been a decline. And also for sub-standard ratio as well as delinquencies for second and third cycle, all of these soundness-related indicators are showing an unprecedented level. After Q2, if you look at Q3 figures as well, in our view, if we make the comparison in Q1, there is no big of a one-off. It's just that our asset quality and soundness is at a quite positive level.

Unidentified Speaker

I'm the CFO of the Bank. I am [Indecipherable]. Thank you for your question. Now the government have tabled or had adopted a legislation on providing financial support to the low-income class. And the article have said -- press article has said that the banking sector will bear about KRW100 billion, and KB is expected to probably bear about 20% of that. So, these were featured in the press. But since we are still in the process of improving our profitability and we are generating good earnings, so it's not a significant burden to our institution.

And as a member of this society, as we live in this very difficult period during the COVID pandemic, we feel that we are a responsible entity and a member of the society. We do a lot of social corporate responsibility activities, and we also provide donations as well. So we will consider all of these different elements thoroughly and come up with appropriate budget. And going forward, if there are more demand for our Bank, we will also, going forward, think hard as to how we could respond to those expectations.

Peter BJ Kwon -- Head of Investor Relations

Thank you. And if you have further questions, please contact our IR team, and we would be more than happy to answer them. With this, we will conclude our earnings presentation. Thank you for your participation.

Duration: 59 minutes

Call participants:

Peter BJ Kwon -- Head of Investor Relations

Hwan Ju Lee -- Senior Executive Vice President and Chief Finance Officer

Chang Kwon Lee -- Senior Executive Vice President and Chief Strategy Officer

Unidentified Speaker

Kim Jae-woo -- Samsung Securities -- Analyst

Kim Jin-sang -- Hyundai Motor Securities -- Analyst

Kim Do-ha -- Cape Investment & Securities -- Analyst

Lee Byung Gun -- DB Securities -- Analyst

Cho Ji-hyun -- J.P. Morgan -- Analyst

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