Woori Financial Group Inc. — 2021 Form 20-F
Reporting period: Fiscal year ended December 31, 2021; filed May 16, 2022. This is an annual report, not a standalone fourth-quarter filing. Financial statements are consolidated and prepared under IFRS as issued by the IASB. Amounts below are in Korean won (₩); “bn” means billion and “tn” means trillion.
Business context
Woori is a Korean financial holding company whose largest business is Woori Bank. Its activities include corporate and consumer banking, cards, capital finance, investment banking, asset management and overseas banking. In 2021, the group acquired the remaining shares of Woori Financial Capital, making it wholly owned, and acquired Woori Savings Bank as a direct subsidiary.
Key financial and operating metrics
| Metric | 2021 | Prior comparable period |
|---|---|---|
| Net interest income | ₩6.986tn | ₩5.999tn in 2020 |
| Net fees and commissions income | ₩1.471tn | ₩1.014tn in 2020 |
| Net income | ₩2.762tn; ₩2.543tn attributable to owners | ₩1.515tn; ₩1.307tn attributable to owners in 2020 |
| Net interest margin | 1.74% | 1.65% in 2020 |
| Efficiency ratio | 49.70% | 58.01% in 2020 |
| Assets / liabilities / equity at year-end | ₩447.184tn / ₩418.379tn / ₩28.805tn | ₩399.081tn / ₩372.355tn / ₩26.726tn in 2020 |
| Loans / customer deposits at year-end | ₩336.800tn net loans / ₩317.900tn deposits | ₩302.794tn net loans / ₩291.477tn deposits in 2020 |
| Non-performing loans | ₩927bn; 0.27% of loans | ₩1.236tn; 0.41% in 2020 |
| Capital adequacy ratios | CET1 11.40%; Tier 1 13.27%; total capital 15.03% | CET1 10.00%; Tier 1 11.78%; total capital 13.84% in 2020 |
| Cash and cash equivalents | ₩7.566tn at year-end | ₩9.991tn in 2020 |
Operating cash flow was negative ₩1.801tn in 2021, compared with positive ₩3.606tn in 2020. Investing cash outflow was ₩10.667tn and financing cash inflow was ₩9.076tn. Cash declined by ₩2.425tn during 2021. Customer deposits remained the principal funding source, representing 80.9% of total funding; approximately 96.6% of deposits were payable on demand or matured within one year. The filing does not provide a bank-style free-cash-flow measure.
Changes versus 2020
- Net income rose 82.3%, supported by 16.5% growth in net interest income and lower credit impairment losses, which declined from ₩784bn to ₩537bn. Net interest income benefited from loan growth and lower funding costs; the average yield on interest-earning assets nevertheless fell from 2.62% to 2.47%.
- Net fee and commission income increased 45.1%, including higher lease-related fees following the financial-capital acquisition, credit-card fees and trust-management fees.
- Assets grew 12.1%, with loans up 11.2%; customer deposits rose 9.1%. Capital ratios strengthened, while the NPL ratio improved.
- Credit quality measures improved overall, but loan growth increased exposure: SME loans reached ₩112.696tn and consumer loans ₩148.361tn.
Outlook, risks, contingencies and unusual items
- Outlook: Management describes Korean and global economic prospects as uncertain. The filing provides no specific earnings, margin or credit-cost guidance. Strategy priorities include digital investment, revenue diversification, overseas expansion, acquisitions and maintaining asset quality.
- Credit and COVID-19: Loan-term extensions and interest-payment deferrals were expected to continue through September 2022, subject to review. Woori reported ₩2.596tn of loans, including payment guarantees, subject to the COVID-19 SME and small-merchant support program at year-end. Management cautions that borrower deterioration, policy extensions, rising rates and weaker collateral values could increase provisions.
- Concentration and market risk: SMEs represented 33.4% of total loans. The 20 largest corporate exposures totaled ₩64.683tn, or 12.2% of total exposures. Risks include Korean real estate, household debt, troubled industries, interest-rate and foreign-exchange moves, short-term deposit outflows, and benchmark-rate transition.
- Employee embezzlement: Discovered in April 2022, a Woori Bank employee had misappropriated ₩61.4bn in 2012, 2015 and 2018. The filing says the loss was recognized as a 2021 non-operating expense, but does not clearly state the amount of the provision or expected recovery.
- Legal and regulatory matters: Woori Bank had refunded customers ₩64.7bn for Lime trade-finance funds and ₩136.2bn relating to other Lime funds by year-end 2021; litigation and investigations continued. A ₩19.7bn fine and sales restriction concerning derivative-linked products were being contested. OFAC concluded its investigation of certain sanctions-related transactions with a cautionary letter; other U.S. government investigations were not formally concluded. After Russia’s invasion of Ukraine, the group disclosed a Russia subsidiary representing about 0.1% of assets and 0.2% of revenue, with exposure to sanctioned counterparties.
- Dividends: 2021 dividends totaled ₩900 per common share, including a ₩150 interim dividend; the final dividend was ₩750 per share. Future dividends depend on financial results, cash flow and other factors.
Most important facts for investors to verify
- Reconcile reported net income, owner-attributable earnings, and the effects of acquisitions and other non-recurring items.
- Review the 2021 credit-loss assumptions and overlays, including the ₩284.7bn additional allowance associated with deferred loans and the effects of the end of support programs.
- Seek clarification on the ₩61.4bn employee embezzlement, the 2021 expense recognized, recovery prospects and control remediation.
- Track liquidity and deposit concentration, particularly short-term and uninsured deposits, alongside regulatory liquidity ratios.
- Monitor outcomes and possible additional costs from Lime/DLF matters, sanctions-related investigations and Russia-related restrictions.
The auditor issued unqualified opinions on the 2021 IFRS financial statements and internal control over financial reporting. Expected credit-loss allowances were identified as a critical audit matter.