Woori Financial Group Inc. (Woori Bank) - Form 6-K Summary
Business Context and Reporting Period
This Form 6-K, filed on November 16, 2018, incorporates the consolidated interim financial statements of Woori Bank and its subsidiaries for the nine months ended September 30, 2018. The statements are prepared in accordance with International Financial Reporting Standards (IFRS), specifically marking the first-time adoption of IFRS 9 (Financial Instruments) effective January 1, 2018. Comparative figures for 2017 have not been retrospectively restated. The Group operates as a commercial bank with significant subsidiaries in credit cards, investment banking, and international markets.
Key Financial Metrics (Nine Months Ended Sept 30, 2018)
| Metric | 2018 (KRW Millions) | 2017 (KRW Millions) |
|---|---|---|
| Net Interest Income | 4,197,149 | 3,901,876 |
| Net Fees and Commissions Income | 868,404 | 814,569 |
| Operating Income | 2,573,529 | 1,801,916 |
| Net Income | 1,920,852 | 1,392,441 |
| Net Income Attributable to Owners | 1,903,406 | 1,378,507 |
| Total Assets (as of Sept 30) | 329,801,636 | 316,295,461 |
| Total Equity (as of Sept 30) | 21,911,896 | 20,564,900 |
| Cash and Cash Equivalents (as of Sept 30) | 6,004,504 | 6,908,286 |
| Net Cash Provided by Operating Activities | 2,932,001 | (1,403,608) |
Material Changes and Analysis
- Profitability Surge: Net income increased by approximately 38% year-over-year (from 1.39 trillion to 1.92 trillion KRW). This growth is primarily driven by a significant reduction in impairment losses due to credit loss, which dropped from 501 billion KRW in 2017 to 55 billion KRW in 2018.
- IFRS 9 Adoption: The transition to IFRS 9 resulted in a cumulative adjustment to equity. Retained earnings increased by 177 billion KRW, while accumulated other comprehensive loss increased by 392 billion KRW due to reclassifications of financial assets and the recognition of expected credit losses.
- Asset Growth: Total assets grew by 13.5 trillion KRW (4.3%) to 329.8 trillion KRW. Loans and other financial assets at amortized cost increased to 278.7 trillion KRW.
- Cash Flow Reversal: Operating cash flow turned strongly positive (2.93 trillion KRW) compared to a significant outflow in the prior year (-1.40 trillion KRW), largely due to changes in operating assets and liabilities, specifically a decrease in loans and an increase in deposits.
Guidance, Risks, and Contingencies
- Accounting Policy Changes: The filing details the impact of adopting IFRS 9, IFRS 15, and amendments to IFRS 2 and IAS 40. The Group did not restate comparative periods for IFRS 9.
- Credit Risk: The Group utilizes a three-stage model for expected credit losses. As of September 30, 2018, the maximum exposure to credit risk was 426.6 trillion KRW. The Group maintains significant collateral, with 7.5 trillion KRW of assets subject to lien.
- Market Risk: The Group manages interest rate, foreign exchange, and equity price risks. Value at Risk (VaR) for trading activities averaged 5.8 billion KRW for the nine months ended September 30, 2018.
- Liquidity Risk: The Group manages liquidity through Asset Liability Management (ALM). Maturity analysis indicates a significant portion of liabilities (deposits) are due within 3 months, balanced by a large portfolio of liquid financial assets.
- Capital Adequacy: As of September 30, 2018, the Total Capital Ratio was 15.87%, well above the regulatory minimum of 10.63%. The Common Equity Tier 1 ratio was 11.35%.
Key Facts for Investor Verification
- IFRS 9 Impact: Verify the sustainability of the profit increase given the one-time reduction in credit impairment charges compared to the prior year's high provisions.
- Asset Quality: Review the breakdown of loans by credit stage (Stage 1, 2, and 3) to assess the quality of the loan portfolio under the new expected credit loss model.
- Segment Performance: Corporate banking contributed the largest share of operating income (1.5 trillion KRW), followed by Consumer banking (494 billion KRW).
- Hybrid Securities: The Group holds 3.16 trillion KRW in hybrid securities classified as equity, which may have different dividend payment terms compared to common stock.
- Foreign Operations: Significant exposure exists in China, the USA, and Indonesia; monitor foreign currency translation impacts on equity.