Business Context and Reporting Period
Company: Woori Finance Holdings Co., Ltd. (Woori Financial Group)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Nine months ended September 30, 2006 (filed November 13, 2006)
Business Overview: The registrant is a financial holding company incorporated under the Financial Holding Company Act of Korea. Its primary business is the acquisition and ownership of shares in financial service companies and the governance of such subsidiaries. The company does not engage in direct banking operations; its main income source consists of dividends and equity method gains from subsidiaries, primarily Woori Bank, Kyongnam Bank, Kwangju Bank, Woori Investment & Securities, and Woori Credit Suisse Asset Management.
Key Financial Metrics (Non-Consolidated)
All figures in millions of Korean Won (KRW) unless otherwise noted.
| Metric | 9 Months Ended Sep 30, 2006 | 9 Months Ended Sep 30, 2005 | Full Year 2005 |
|---|---|---|---|
| Operating Income | 1,580,701 | 1,637,665 | 1,867,488 |
| Net Profit | 1,597,156 | 1,500,034 | 1,688,221 |
| Net Profit per Share (Basic) | 1,982 KRW | 1,866 KRW | 2,099 KRW |
| Total Assets | 13,248,583 | 12,031,783 | 12,031,783 |
| Total Liabilities | 1,858,773 | 2,314,419 | 2,314,419 |
| Shareholders' Equity | 11,389,810 | 9,717,364 | 9,717,364 |
| Debt Ratio (Liabilities/Equity) | 16.3% | 23.8% | 23.8% |
| Won-denominated Current Ratio | 1,052.08% | 609.85% | 609.85% |
Material Changes vs. Prior Period
- Profitability: Net profit for the nine months ended September 30, 2006, increased to 1.60 trillion KRW from 1.50 trillion KRW in the same period of 2005. This growth was driven primarily by gains on valuation using the equity method of accounting (1.57 trillion KRW in 2006 vs. 1.63 trillion KRW in 2005, adjusted for prior period corrections).
- Capital Structure: Shareholders' equity increased by approximately 1.67 trillion KRW year-over-year, reaching 11.39 trillion KRW. This increase is largely attributed to retained earnings and capital adjustments.
- Debt Reduction: Total liabilities decreased by approximately 456 billion KRW compared to the prior year, reducing the debt ratio from 23.8% to 16.3%. This was achieved through the repayment of debentures (450 billion KRW repaid in 2006 vs. 100 billion KRW in 2005).
- Subsidiary Restructuring: On May 30, 2006, the company sold 30% of its shares in Woori Asset Management to Credit Suisse Asset Management International Holdings. The subsidiary was renamed Woori Credit Suisse Asset Management. This transaction resulted in a gain of 34.6 billion KRW recorded in capital adjustments.
- Accounting Adjustments: The company corrected 115 billion KRW of net unrealized gains previously recorded in capital adjustments to net income in 2006, following guidance from the Financial Supervisory Service regarding the timing of recognizing gains on available-for-sale securities.
Guidance, Outlook, and Risks
- Management Improvement Plan: The company and its three major banking subsidiaries (Woori Bank, Kyongnam Bank, Kwangju Bank) are subject to agreements with the Korea Deposit Insurance Corporation (KDIC). These agreements mandate improvements in financial ratios (BIS capital ratio, ROA, ROE, non-performing loan rates). Failure to meet these targets could result in KDIC-mandated capital changes, mergers, or business closures.
- Dividend Policy: The company paid cash dividends of 322.4 billion KRW in 2005. The propensity to cash dividends was 19.10% in 2005. No specific forward guidance on dividend amounts was provided in this filing.
- Stock Options: The company has a stock option program for directors and management. As of September 30, 2006, the company recorded 4.17 billion KRW in stock-based compensation liabilities, settled in cash rather than equity.
- Accounting Standards: The financial statements are prepared in accordance with Korean GAAP, which differs from US GAAP. The company adopted new Korean accounting standards (SKAS) in 2006, including related party disclosures and lease accounting.
- Unusual Items: A significant portion of the company's income is derived from equity method accounting on subsidiaries. The company does not generate operating revenue from its own operations other than interest income and gains on investments.
Key Facts for Investor Verification
- Major Shareholder: The Korea Deposit Insurance Corporation (KDIC) owns 77.97% of the company's common stock (628,458,609 shares).
- Primary Income Source: Approximately 98% of the company's net income is derived from the equity method valuation of its subsidiaries, primarily Woori Bank (contributing 79.3% of net income).
- Debt Obligations: The company holds debentures totaling 1.85 trillion KRW as of September 30, 2006. All convertible bonds issued previously have been converted.
- Subsidiary Performance: Woori Bank reported net income of 1.24 trillion KRW for the nine months ended September 30, 2006. Woori Investment & Securities reported net income of 188 billion KRW.
- Stock Price: As of September 2006, the domestic stock price ranged between 18,950 KRW and 19,950 KRW. The ADR price on the NYSE ranged between $58.57 and $63.08.
- Non-Performing Loans (NPLs): The filing refers to the annual report for specific NPL data of subsidiaries. However, the allowance for possible loan losses for the holding company itself was 425 million KRW against 85 billion KRW in loans (0.5% provisioning ratio).