Business Context and Reporting Period
Company: Woori Finance Holdings Co., Ltd. (Woori Financial Group Inc.)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Nine months ended September 30, 2010 (filed November 2010)
Business Overview: A financial holding company under the Financial Holding Company Act. Its primary income source consists of dividends and equity method earnings from subsidiaries, including Woori Bank, Kyongnam Bank, Kwangju Bank, Woori Investment & Securities, and Woori Aviva Life Insurance. The company does not engage in direct banking operations.
Key Financial Metrics (Non-Consolidated)
| Metric | 9 Months Ended Sep 30, 2010 | 9 Months Ended Sep 30, 2009 | Full Year 2009 |
|---|---|---|---|
| Operating Revenue | W 1,291,049 million | W 1,096,062 million | W 1,326,855 million |
| Net Income | W 1,040,956 million | W 869,246 million | W 1,026,024 million |
| Earnings Per Share (Won) | 1,291 | 1,078 | 1,273 |
| Total Assets | W 18,287,328 million | W 17,545,128 million | W 17,545,128 million |
| Total Liabilities | W 3,896,590 million | W 3,824,206 million | W 3,824,205 million |
| Shareholders' Equity | W 14,390,738 million | W 13,720,922 million | W 13,720,923 million |
| Debt Ratio (Liabilities/Equity) | 27.08% | 27.87% | 27.87% |
| BIS Ratio (Group) | 12.28% | 12.35% | 12.35% |
Note: All figures in Korean Won (W) unless otherwise stated. Cash flow from operating activities for the nine months ended Sep 30, 2010, was W 205,973 million.
Material Changes vs. Prior Period
- Profitability Increase: Net income for the nine months ended September 30, 2010, increased by approximately 19.8% compared to the same period in 2009 (W 1.04 trillion vs. W 869 billion). This was driven primarily by higher gains on valuation using the equity method of accounting (W 1.26 trillion in 2010 vs. W 1.08 trillion in 2009).
- Revenue Composition: Operating revenue rose to W 1.29 trillion, up from W 1.10 trillion in the prior year period. Royalties contributed W 17.8 billion in 2010, whereas there were no royalty revenues in the comparable 2009 period.
- Asset Growth: Total assets increased by W 742 billion (4.2%) year-over-year, largely due to increases in investment securities accounted for using the equity method.
- Dividend Payout: The company paid cash dividends totaling W 80,601 million during the nine-month period, compared to zero in the same period of 2009.
Guidance, Outlook, Risks, and Unusual Items
- Privatization Plans (Material Event): On October 30, 2010, the Korea Deposit Insurance Corporation (KDIC), the majority shareholder owning 56.97% of the company, announced plans to dispose of its stake in Woori Finance Holdings, as well as the shares of Kyongnam Bank and Kwangju Bank held by the company. The disposal will be conducted via an open bidding process. This is a significant subsequent event affecting future ownership structure.
- Acquisition of Hanmi Financial Corporation: In May 2010, the company entered an agreement to acquire 175 million newly issued shares of Hanmi Financial Corporation (holding company of Hanmi Bank, USA) for $210 million. Control was obtained following regulatory approvals.
- Accounting Standards Transition: The company is preparing to adopt Korean International Financial Reporting Standards (K-IFRS) effective January 1, 2011. Significant differences from current standards include consolidation scope, goodwill evaluation, and financial instrument classification.
- Management Improvement Plan: The company and its three major bank subsidiaries are subject to agreements with the KDIC requiring specific financial ratio targets (BIS, ROA, NPL rates). Failure to meet these could result in capital adjustments, mergers, or business closures.
- Credit Ratings: The company maintains high credit ratings, with multiple AAA ratings from Korean agencies (NICE, KIS, Korea Ratings) as of late 2010.
Key Facts for Investor Verification
- Ownership Structure: Verify the status and timeline of the KDIC's privatization plan to sell its 56.97% stake, as this will fundamentally alter the company's governance and capital structure.
- Subsidiary Performance: Woori Bank contributes the majority of income (76.3% of net income in the first nine months of 2010). Verify the specific financial health and NPL ratios of Woori Bank, Kyongnam Bank, and Kwangju Bank.
- Deferred Tax Liabilities: Note that significant deferred tax liabilities related to temporary differences in investment securities (approx. W 9.17 trillion) were not recognized because the company controls the timing of reversal. The KDIC's planned sale may trigger the recognition of these liabilities.
- Equity Method Accounting: The company's financial results are heavily dependent on the equity method valuation of subsidiaries. Verify the underlying performance of these subsidiaries to understand the sustainability of reported earnings.
- Regulatory Compliance: Confirm the company's progress in meeting the financial ratio targets mandated by the KDIC management improvement agreements.