Woori Financial Group Inc. (Woori Bank) - Form 6-K Summary
Business Context and Reporting Period
This Form 6-K, filed on August 14, 2018, reports the consolidated financial results and business overview for Woori Bank for the first half of 2018 (January 1 to June 30, 2018). The bank operates under Korean IFRS and is a major financial institution in South Korea with a global network of 410 branches as of June 2018. The reporting period covers the interim results following the implementation of a new core banking system ("WINI") in May 2018 and the acquisition of a local financial institution in Cambodia in June 2018.
Key Financial Metrics
Revenue and Profitability (Consolidated):
- Operating Income: KRW 1,807.7 billion (1H 2018) vs. KRW 1,484.2 billion (1H 2017).
- Net Income: KRW 1,316.3 billion (1H 2018) vs. KRW 1,109.0 billion (1H 2017).
- Net Income Attributable to Owners: KRW 1,305.9 billion.
- Earnings Per Share (Basic): KRW 1,828.
- Net Interest Income: KRW 2,764.5 billion.
- Net Fees and Commissions Income: KRW 602.7 billion.
Balance Sheet and Liquidity:
- Total Assets: KRW 326.6 trillion (as of June 30, 2018).
- Total Deposits: KRW 237.9 trillion.
- Total Loans: KRW 222.9 trillion (Consolidated).
- Total Equity: KRW 21.0 trillion.
- Cash and Cash Equivalents: KRW 5.9 trillion.
Capital and Asset Quality:
- Capital Adequacy Ratio (BIS): 15.26% (1H 2018) vs. 15.40% (2017).
- Liquidity Coverage Ratio (LCR): 101.60% (1H 2018).
- Foreign Currency LCR: 119.32% (1H 2018).
- Sub-standard and Below Loan Ratio: 0.51% (1H 2018) vs. 0.83% (2017).
- Delinquency Ratio: 0.33% (1H 2018).
Material Changes vs. Prior Period
- Profit Growth: Net income increased by approximately 18.7% year-over-year, driven by higher operating income and improved asset quality.
- Asset Quality Improvement: The sub-standard and below loan ratio improved significantly from 0.83% in 2017 to 0.51% in 1H 2018. The delinquency ratio also decreased from 0.34% to 0.33%.
- Balance Sheet Expansion: Total assets grew by KRW 10.3 trillion compared to the end of 2017, with deposits increasing by KRW 3.2 trillion.
- Impairment Losses: Impairment losses due to credit loss were recorded as a positive adjustment of KRW 28.4 billion in 1H 2018, compared to a loss of KRW 283.8 billion in 1H 2017, indicating a reversal of provisions or lower credit costs.
Guidance, Outlook, and Risks
Management Commentary and Developments:
- The bank successfully implemented its new core banking system, "WINI," in May 2018.
- Global expansion continued with the acquisition of WB Finance (VisionFund Cambodia) in June 2018, bringing the total global network to 410 branches.
- The bank launched "WiBee Homes," a comprehensive real-estate information platform, in February 2018.
Risks and Contingencies:
- Accounting Standards: Financial information is prepared under Korean IFRS, which differs in certain respects from US GAAP.
- Related Party Transactions: Significant loans and bonds exist with the Korea Deposit Insurance Corporation (KDIC), the largest shareholder (18.43% stake), totaling KRW 779.999 million in loans and bonds as of June 30, 2018.
- Regulatory Compliance: The bank maintains liquidity ratios above regulatory minimums (LCR minimum 70% in 2018, rising to 80% in 2019).
Key Facts for Investor Verification
- Shareholder Structure: Verify the continued reduction of the Korea Deposit Insurance Corporation's (KDIC) stake, which stood at 18.43% as of June 30, 2018, following a long-term privatization process.
- Asset Quality Trends: Confirm the sustainability of the improved sub-standard loan ratio (0.51%) and the reversal of impairment losses compared to the prior year.
- Capital Adequacy: Monitor the Capital Adequacy Ratio (15.26%) to ensure it remains well above regulatory requirements amidst asset growth.
- Dividend Policy: Note that no cash dividends were declared for the first half of 2018; the last recorded cash dividend was for the full year 2017 (KRW 600 per share).
- Related Party Exposure: Review the exposure to the KDIC and other affiliated companies (Woori Card, Woori Investment Bank) detailed in the related party transactions section.