Woori Financial Group Inc. - 2023 Third Quarter Summary
Business Context and Reporting Period
This Form 6-K filing covers the third quarter of 2023 (ended September 30, 2023) for Woori Financial Group Inc., a Korean financial holding company. The financial statements are prepared in accordance with Korean IFRS (K-IFRS). The filing includes consolidated results for the Group and its 175 subsidiaries, as well as separate financial statements for the holding company.
Key Financial Metrics
| Metric | 2023 3Q (Consolidated) | 2022 Full Year | Unit |
|---|---|---|---|
| Operating Income | 3,366 | 4,431 | Billions KRW |
| Net Income (Total) | 2,532 | 3,324 | Billions KRW |
| Net Income (Controlling Interest) | 2,438 | 3,142 | Billions KRW |
| Net Interest Income | 6,600 | 8,697 | Billions KRW |
| Impairment Losses (Credit) | (1,079) | (885) | Billions KRW |
| Total Assets | 485,917 | 480,474 | Millions KRW |
| Total Equity | 33,221 | 31,627 | Millions KRW |
| BIS Capital Adequacy Ratio | 15.72% | 15.30% | % |
| ROE (Excl. Non-controlling) | 10.81% | 11.54% | % |
| ROA (Excl. Non-controlling) | 0.67% | 0.66% | % |
Material Changes vs. Prior Period
- Profitability Decline: Net income attributable to controlling interests decreased by approximately 22.4% year-over-year (from 3.14 trillion KRW in 2022 to 2.44 trillion KRW in 2023 3Q). Operating income also fell by roughly 24% compared to the prior full year.
- Increased Credit Costs: Impairment losses due to credit loss rose significantly to 1.08 trillion KRW in 2023 3Q, compared to 0.89 trillion KRW in the full year 2022. This contributed to the decline in net income.
- Asset Quality Deterioration: The Non-Performing Loan (NPL) ratio increased to 0.39% in 2023 3Q from 0.29% in 2022. Substandard and below loans rose to 1.48 trillion KRW (0.41% ratio) from 1.08 trillion KRW (0.31% ratio).
- Interest Rate Environment: Average interest rates on funding sources increased notably. Deposit rates rose to 2.79% from 1.45% in 2022, and borrowing rates increased to 3.91% from 1.99%. Loan interest rates also increased to 5.06% from 3.73%.
- Capital Strength: Despite profit pressures, the Group's BIS Capital Adequacy Ratio improved to 15.72%, exceeding the prior year's 15.30%.
Outlook, Risks, and Unusual Items
- Liquidity Position: The Group maintains strong liquidity. The Liquidity Coverage Ratio (LCR) for Woori Bank was 101.29%, exceeding the 95% requirement. Foreign currency LCR was 147.02%, well above the 80% threshold.
- Dividend Policy: The Group paid cash dividends totaling 266 billion KRW for the 2023 3Q period (including Q2 and Q3 quarterly dividends), resulting in a payout ratio of 10.91% for the period.
- Subsidiary Performance: Woori Savings Bank reported negative ROA (-1.65%) and ROE (-12.50%) for the period, contrasting with positive returns from the main bank and other subsidiaries.
- Auditor Change: The independent auditor for the 2023 3Q review was KPMG Samjong Accounting Corp., whereas Samil PricewaterhouseCoopers served as the auditor for 2022 and 2021.
- Estimates: The filing notes that 2023 3Q capital adequacy figures are estimates and subject to change.
Investor Verification Checklist
- Credit Loss Trajectory: Verify if the increase in impairment losses (1.08 trillion KRW) is a one-time adjustment or indicative of a sustained trend in asset quality deterioration.
- Net Interest Margin (NIM) Pressure: Assess the impact of rising deposit costs (2.79%) versus loan yields (5.06%) on future profitability, given the competitive funding environment.
- Woori Savings Bank Performance: Investigate the specific causes behind the negative profitability of Woori Savings Bank and its impact on the consolidated group.
- Capital Adequacy Sustainability: Confirm the final audited BIS ratio figures, as the current 15.72% is noted as an estimate.
- Dividend Consistency: Review the board's guidance on future dividend payouts given the reduced net income and lower payout ratio (10.91%) compared to historical levels (26%+).