Woori Financial Group Inc. - 2020 Third Quarter Business Report Summary
Business Context and Reporting Period
This Form 6-K filing covers the third quarter of 2020, with financial data presented as of September 30, 2020. Woori Financial Group Inc. is a Korean financial holding company established in January 2019 via a comprehensive stock transfer. The group operates through 11 first-tier subsidiaries, including Woori Bank, Woori Card, and Woori Investment Bank, and 14 second-tier subsidiaries. Financial statements are prepared in accordance with Korean IFRS (K-IFRS).
Key Financial Metrics
| Metric | 2020 3Q (Consolidated) | 2019 Full Year (Consolidated) |
|---|---|---|
| Operating Income | KRW 1,848 billion | KRW 2,800 billion |
| Net Income | KRW 1,296 billion | KRW 2,038 billion |
| Net Income (Controlling Interest) | KRW 1,141 billion | KRW 1,872 billion |
| Total Assets | KRW 380,839 billion | KRW 361,981 billion |
| Total Equity | KRW 26,209 billion | KRW 25,492 billion |
| Net Interest Income | KRW 4,428 billion | KRW 5,894 billion |
| Impairment Losses (Credit) | KRW 587 billion | KRW 374 billion |
| ROA (Annualized) | 0.46% | 0.57% |
| ROE (Annualized) | 7.82% | 10.11% |
| BIS Capital Adequacy Ratio | 14.23% | 11.89% |
| NPL Ratio | 0.36% | 0.40% |
Material Changes vs. Prior Period
- Profitability Decline: Net income attributable to controlling interests decreased by approximately 39% year-over-year (from KRW 1,872 billion in 2019 to KRW 1,141 billion in 2020 3Q). This was driven by a significant increase in impairment losses due to credit loss (KRW 587 billion in 2020 3Q vs. KRW 324 billion in 2019 3Q) and higher general and administrative expenses.
- Asset Growth: Total assets increased by KRW 18.8 trillion (5.2%) compared to the end of 2019, primarily due to growth in loans and other financial assets at amortized cost.
- Capital Strength: The Group's BIS Capital Adequacy Ratio improved to 14.23% from 11.89% in 2019, reflecting the adoption of the IRB Approach and Basel III credit risk framework.
- Asset Quality: The Non-Performing Loan (NPL) ratio improved slightly to 0.36% from 0.40% in 2019, despite higher absolute impairment charges.
- Liquidity: The Liquidity Coverage Ratio (LCR) for Woori Bank was 93.46%, below the standard 100% requirement but compliant with temporary regulatory easing measures due to COVID-19 (reduced to 85%).
Outlook, Risks, and Management Commentary
- Regulatory Environment: The filing notes that the Liquidity Coverage Ratio requirement for banks was temporarily reduced to 85% until March 2021 under plans to ease financial regulations in response to COVID-19.
- Accounting Standards: The 2020 3Q figures reflect the adoption of the Basel III credit risk framework and the IRB Approach for capital adequacy calculations, which differs from the Standardised Approach used in 2019.
- Dividends: There were no board resolutions regarding dividends during the 2020 third quarter.
- Auditor Change: The independent auditor for the 2020 3Q review was Samil PricewaterhouseCoopers, whereas Deloitte Anjin LLC served as the auditor for 2019.
Key Facts for Investor Verification
- Impairment Trends: Verify the sustainability of the increased credit impairment losses (KRW 587 billion) and their impact on future earnings, particularly in the context of the economic recovery post-pandemic.
- Capital Adequacy Methodology: Confirm the impact of the shift from the Standardised Approach to the IRB Approach on the reported BIS ratio and future capital requirements.
- Liquidity Compliance: Monitor the Liquidity Coverage Ratio (LCR) as temporary regulatory easing measures expire in March 2021.
- Shareholder Structure: Note that the Korea Deposit Insurance Corporation (KDIC) remains the largest shareholder with 17.25% ownership.
- Accounting Basis: Ensure all comparisons account for the fact that financial data is prepared under K-IFRS, which may differ from U.S. GAAP.