Business Context and Reporting Period
Company: Woori Finance Holdings Co., Ltd. (Woori Financial Group Inc.)
Filing Type: Form 6-K (Summary of 2003 Year-end Business Report)
Reporting Period: Fiscal Year Ended December 31, 2003
Submission Date: March 30, 2004
The Company is a financial holding company established in 2001 to manage a group of financial institutions originally restructured with public funds from the Korea Deposit Insurance Corporation (KDIC). The group includes Woori Bank, Kyongnam Bank, Kwangju Bank, Woori Credit Card, Woori Securities, and various asset management and securitization subsidiaries. The KDIC remains the controlling shareholder with an 86.8% stake as of year-end 2003.
Key Financial Metrics (Consolidated)
| Metric | 2003 (Won Millions) | 2002 (Won Millions) |
|---|---|---|
| Total Assets | 128,767,720 | 114,843,534 |
| Total Liabilities | 123,069,420 | 109,528,767 |
| Total Shareholders' Equity | 5,698,300 | 5,314,767 |
| Operating Revenue | 10,403,445 | 9,623,990 |
| Operating Expenses | 10,261,111 | 8,908,732 |
| Operating Profit | 142,334 | 715,258 |
| Consolidated Net Profit | 56,279 | 591,588 |
| Net Profit Margin | 0.54% | 6.15% |
| Debt Ratio (Liabilities/Equity) | 216.0% | 206.1% |
Note: Non-consolidated Net Profit for the holding company was 202,565 million won in 2003, down from 589,214 million won in 2002.
Material Changes vs. Prior Period
- Significant Profit Decline: Consolidated net profit dropped by approximately 90% to 56.3 billion won, primarily due to massive provisions for loan losses and impairment charges on securities.
- Impairment Charges: The group recognized significant losses on impairment of available-for-sale securities (270.4 billion won) and held-to-maturity securities (63.8 billion won). Additionally, provisions for possible loan losses totaled 2.68 trillion won.
- Asset Growth: Total assets increased by 12.1% to 128.8 trillion won, driven by loan growth and securities holdings.
- Dividend Payout: Despite the profit decline, the company declared a cash dividend of 100 won per share (2.0% of par value), totaling 77.6 billion won.
Outlook, Risks, and Contingencies
- Subsidiary Merger (Woori Credit Card): A major restructuring is underway. Woori Credit Card Co., Ltd. (WCC) resolved to merge into Woori Bank, effective March 31, 2004. A portion of the credit card business previously acquired from Kwangju Bank will be transferred back to Kwangju Bank. The holding company plans to inject 800 billion won into WCC prior to the merger to maintain capital adequacy.
- Credit Risk Exposure (LG Card): Significant exposure to LG Card Co., Ltd., which is undergoing restructuring. The group holds 279 billion won in loans and various securities. Allowances for credit losses of 80 billion won were recorded, but actual losses may vary based on the restructuring outcome.
- Credit Risk Exposure (SK Networks): Woori Bank holds 177 billion won in loans and 89 billion won in securities related to SK Networks. An allowance of 106 billion won was provided, with potential for further loss depending on restructuring results.
- Convertible Bonds: The company has outstanding unsecured convertible bonds (Series 6-1 through 6-5) totaling approximately USD 92 million plus 20 billion won, which may dilute equity upon conversion.
Investor Verification Checklist
- Merger Execution: Verify the completion of the Woori Credit Card merger into Woori Bank and the capital injection of 800 billion won.
- Non-Performing Loans (NPLs): Monitor the resolution of LG Card and SK Networks exposures to determine if current allowances (80 billion won and 106 billion won, respectively) are sufficient.
- Asset Quality: Review the trend in the allowance for possible loan losses ratio, which stood at 2.58% of loans subject to allowance in 2003.
- Convertible Bond Conversion: Track the exercise of outstanding convertible bonds, which could impact share count and earnings per share.
- Dividend Sustainability: Assess the ability to maintain dividend payouts given the sharp decline in consolidated net income.