Business Context and Reporting Period
This Form 6-K filing by Woori Financial Group Inc. (Woori Bank) covers the fiscal year ended December 31, 2014, and was filed on March 31, 2015. The report summarizes the bank's 2014 business performance, financial statements prepared under Korean IFRS, and corporate governance updates. A significant structural change occurred on November 1, 2014, when Woori Bank merged with its parent company, Woori Finance Holdings, to facilitate privatization efforts. The Korea Deposit Insurance Corporation (KDIC) remains the largest shareholder, reducing its stake to 51.04% following a partial sale in December 2014.
Key Financial Metrics
Profitability and Income (Consolidated)
- Net Income: KRW 1,207,969 million (2014) vs. a loss of KRW 713,435 million (2013). The 2014 figure includes KRW 661,769 million from discontinued operations.
- Operating Income: KRW 897,708 million (2014) vs. KRW 239,567 million (2013).
- Net Interest Income: KRW 4,493,018 million (2014) vs. KRW 4,492,022 million (2013).
- Earnings Per Share (Basic): KRW 1,621 (2014) vs. a loss of KRW 704 (2013).
Balance Sheet Highlights (Consolidated)
- Total Assets: KRW 270,157,219 million (2014) vs. KRW 340,690,382 million (2013). The decrease is largely due to the removal of disposal groups held for sale/distribution in 2013.
- Total Deposits: KRW 188,516,465 million (2014) vs. KRW 175,323,644 million (2013).
- Total Loans: KRW 223,370,135 million (2014) vs. KRW 211,912,373 million (2013).
- Total Equity: KRW 18,093,425 million (2014) vs. KRW 22,876,769 million (2013).
Liquidity and Capital
- Capital Adequacy Ratio (Basel III): 14.25% (2014) vs. 13.01% (2013).
- Local Currency Liquidity Ratio: 123.10% (2014) vs. 120.75% (2013).
- Loan-to-Deposit Ratio: 97.13% (2014) vs. 99.20% (2013).
Material Changes Versus Prior Period
Merger and Share Structure
The most significant change was the merger with Woori Finance Holdings on November 1, 2014. This resulted in the cancellation of 596,690,380 shares and the issuance of 676,278,371 new shares. Consequently, the KDIC's ownership percentage decreased from 56.97% (at merger date) to 51.04% by year-end due to a stake sale.
Asset Quality Improvement
The sub-standard and below loan ratio improved significantly to 2.10% in 2014 from 2.99% in 2013. The delinquency ratio (seasonally adjusted) also decreased to 0.88% from 1.14%.
Discontinued Operations
The 2013 comparative figures included significant losses from discontinued operations (KRW 966,006 million loss), whereas 2014 reported a gain of KRW 661,769 million from discontinued operations, contributing to the swing from a net loss to a net profit.
Guidance, Outlook, and Risks
Management Commentary and Outlook
The filing does not contain specific forward-looking financial guidance or numerical targets for 2015. Management highlights the successful merger as a step toward maximizing privatization possibilities. The bank continues to focus on asset quality improvement and expanding its international presence, including recent approvals to merge PT. Bank Woori Indonesia with Saudara Bank.
Risks and Contingencies
- Accounting Standards: Financials are prepared under Korean IFRS, which differ in certain respects from U.S. GAAP.
- Related Party Transactions: Significant credit extensions exist to major shareholders, including KRW 1.5 billion in loans and KRW 740 million in bonds to the Korea Deposit Insurance Corporation as of year-end.
- Asset Quality: While improving, the bank maintains provisions for credit losses, which totaled KRW 1,096,940 million in 2014.
Key Facts for Investor Verification
- Merger Impact: Verify the accounting treatment of the November 2014 merger with Woori Finance Holdings and its effect on the comparability of 2013 vs. 2014 financial statements.
- Discontinued Operations: Confirm the nature of the KRW 661 billion gain from discontinued operations in 2014 to understand the sustainability of the reported net income.
- Shareholder Structure: Monitor the KDIC's divestment strategy, as they reduced their stake to 51.04% in late 2014, signaling ongoing privatization efforts.
- Capital Adequacy: Note the improvement in the Basel III capital adequacy ratio to 14.25%, indicating a stronger capital buffer.
- Related Party Exposure: Review the specific terms and risk profile of the KRW 1.5 billion in loans extended to the Korea Deposit Insurance Corporation.