Woori Financial Group Inc. (Woori Bank) - 2016 Q3 Business Report Summary
Business Context and Reporting Period
This Form 6-K filing, dated November 14, 2016, summarizes the consolidated business and financial results of Woori Bank for the third quarter ended September 30, 2016. The report is prepared in accordance with Korean International Financial Reporting Standards (K-IFRS). The Bank operates as a major financial institution in South Korea with a global presence, including subsidiaries in China, Russia, Indonesia, Brazil, and the United States.
Key Financial Metrics
| Metric (Consolidated) | 3Q 2016 | 3Q 2015 | 2015 Full Year |
|---|---|---|---|
| Net Income (Millions KRW) | 1,117,179 | 853,894 | 1,075,392 |
| Net Income Attributable to Owners (Millions KRW) | 1,105,915 | 840,150 | 1,059,157 |
| Operating Income (Millions KRW) | 1,389,221 | 968,573 | 1,351,586 |
| Net Interest Income (Millions KRW) | 3,745,200 | 3,517,680 | 4,761,900 |
| Total Assets (Millions KRW) | 312,831,864 | 291,859,072 | 270,157,219 |
| Total Deposits (Millions KRW) | 220,465,585 | 209,141,826 | 188,516,465 |
| Total Loans (Millions KRW) | 208,173,527 | 203,109,346 | 184,307,275 |
| Capital Adequacy Ratio (Basel III) | 14.31% | 13.66% | 14.25% |
| Liquidity Coverage Ratio | 111.16% | 106.67% | 123.10% |
| Earnings Per Share (Basic) (KRW) | 1,421 | 1,048 | 1,301 |
Material Changes vs. Prior Period
- Profitability Growth: Net income attributable to owners increased by approximately 31.6% year-over-year (from 840.2 billion KRW in 3Q 2015 to 1.106 trillion KRW in 3Q 2016). This was driven by higher operating income and reduced impairment losses.
- Asset Expansion: Total assets grew by 7.2% to 312.8 trillion KRW, supported by increases in loans and receivables and financial assets.
- Asset Quality Improvement: The sub-standard and below loan ratio improved significantly to 1.05% in 3Q 2016, down from 1.47% in 2015 and 2.10% in 2014. The delinquency ratio also decreased to 0.58%.
- Capital Strength: The Capital Adequacy Ratio rose to 14.31%, exceeding the prior year's 13.66%, bolstered by the issuance of $500 million in contingent convertible bonds in September 2016.
- Deposit Growth: Total deposits increased by 5.4% year-over-year, with significant growth in foreign currency deposits and certificates of deposit (CDs).
Outlook, Risks, and Unusual Items
- Privatization Progress: A major development is the ongoing privatization of the Korea Deposit Insurance Corporation's (KDIC) stake. On November 13, 2016, the Public Fund Oversight Committee announced the sale of 29.7% of the KDIC's 51.06% holding to seven bidders, with transactions expected to close by the end of 2016.
- Capital Markets Activity: In September 2016, the Bank successfully issued $500 million in foreign currency denominated contingent convertible bonds, marking the first perpetual bond issuance of this form in Korea.
- Strategic Initiatives: The Bank continues to expand digital services, having launched the first bank mobile messenger service (WibeeTalk) and offshore Won-Yuan clearing services in 2016.
- Risk Factors: While asset quality has improved, the Bank remains exposed to credit risks in the corporate sector, particularly regarding shipbuilders (though the sub-standard ratio excluding shipbuilders is 0.97%). Interest rate fluctuations and foreign exchange volatility also present ongoing risks.
Key Facts for Investor Verification
- Privatization Timeline: Verify the consummation date of the KDIC stake sale to seven bidders, expected by the end of 2016, and the resulting change in the Bank's shareholder structure.
- Asset Quality Exclusions: Confirm the specific exposure to the shipbuilding sector, as the reported sub-standard loan ratio of 1.05% includes these entities, while the ratio excluding them is 0.97%.
- Capital Adequacy Adjustments: Note that the reported Capital Adequacy Ratio of 14.31% includes five newly consolidated subsidiaries; excluding them, the ratio would be 15.99%.
- Dividend Policy: The filing indicates no cash dividends were declared for 3Q 2016; verify the Board's decision on interim or final dividends for the full year 2016.
- Accounting Standards: Ensure all financial comparisons account for the use of K-IFRS, which may differ from US GAAP in specific areas such as impairment recognition and fair value measurements.