WF

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, 2009 (3Q 2009)
Filing Date: November 17, 2009
Business Overview: The Company is a financial holding company whose primary income source consists of dividends and equity method valuation gains from its subsidiaries. It does not engage in direct banking operations. Key subsidiaries include Woori Bank, Kyongnam Bank, Kwangju Bank, Woori Investment & Securities, Woori Financial (consumer finance), and Woori Aviva Life Insurance.

Key Financial Metrics (Non-Consolidated)

All figures in millions of Korean Won (KRW) unless otherwise noted.

Material Changes vs. Prior Period

• Revenue Growth: Operating revenue increased significantly by approximately 64.5% year-over-year, driven primarily by a gain on valuation using the equity method of accounting (W 1,084,483 million in 2009 vs. W 1,262,331 million in 2008, though total revenue was higher due to other factors).
• Net Income Decline: Despite higher revenue, Net Income decreased by approximately 22.3% to W 869,246 million. This was largely due to a decrease in valuation gains from subsidiaries compared to the prior year and higher interest expenses.
• Asset Base Expansion: Total assets grew by W 1.69 trillion (10.8%) to W 17.31 trillion, primarily due to increased investment securities accounted for using the equity method.
• Debt Structure: Borrowings increased to W 3.76 trillion, with debentures comprising the majority (W 3.69 trillion). The company issued new debentures in 2009 to refinance maturing bonds.
• Loan Loss Reserves: The allowance for possible loan losses increased to W 950 million (0.5% provisioning ratio) from W 850 million in the prior year.

Guidance, Outlook, and Risks

• Subsidiary Performance: Woori Bank remains the primary contributor to net income (71.1% of total contribution in 9M 2009). Woori Financial and Woori Aviva Life Insurance reported negative contributions to net income for the period.
• Accounting Standards Transition: The Company is in the process of transitioning to Korean International Financial Reporting Standards (K-IFRS), with full implementation planned for 2011. This may impact consolidation scope and fair-value accounting.
• Management Improvement Plan: The Company and its three major bank subsidiaries are subject to agreements with the Korea Deposit Insurance Corporation (KDIC) to meet specific financial ratio targets (BIS, ROA, NPL rates). Failure to meet these could result in capital adjustments or operational restrictions.
• Subsequent Events: Following the reporting period, the Company acquired additional shares in Woori Financial (reaching 52.5% ownership) and Woori Asset Management (reaching 100% ownership) in October 2009.
• Risk Factors: The filing notes that financial statements are prepared under Korean GAAP, which differs from US GAAP. The Company's income is heavily dependent on the performance of its subsidiaries.

Key Facts for Investor Verification

• Major Shareholder: The Korea Deposit Insurance Corporation (KDIC) holds 72.97% of the Company's common stock.
• Primary Income Source: The Company generates income almost exclusively through dividends and equity method valuation adjustments from subsidiaries, not direct operations.
• Debt Maturity: Significant debenture maturities are scheduled between 2010 and 2014; verify the refinancing strategy for these obligations.
• Consolidation Scope: Verify the impact of the K-IFRS transition on the consolidation of subsidiaries, particularly those with minority interests.
• Subsidiary Health: Review the specific non-performing loan (NPL) ratios and capital adequacy of the three major bank subsidiaries (Woori, Kyongnam, Kwangju) as they are critical to the holding company's valuation.