WF

Woori Financial Group Inc. (Woori Bank) - 1Q 2015 Summary

Business Context and Reporting Period

This Form 6-K filing covers the first quarter of 2015 (ended March 31, 2015) for Woori Bank, a major South Korean financial institution. The reporting period follows a significant corporate restructuring: on November 1, 2014, Woori Bank merged with its parent company, Woori Finance Holdings, to facilitate privatization. Consequently, 2013 and 2014 comparative figures have been restated to reflect the consolidated entity. The bank operates under Korean IFRS (K-IFRS) and maintains a diverse portfolio including domestic and international banking, trust services, and investment banking through subsidiaries like Woori Card and Woori Investment Bank.

Key Financial Metrics

Material Changes vs. Prior Period

• Profitability Decline: Net income attributable to owners decreased by approximately 10% year-over-year (from KRW 322.78 billion to KRW 290.78 billion). This was primarily driven by a significant increase in impairment losses due to credit loss, which rose from KRW 55.07 billion in 1Q 2014 to KRW 299.28 billion in 1Q 2015.
• Operating Income Drop: Operating income fell by 30% to KRW 297.30 billion, largely due to the aforementioned credit impairment charges and a loss on available-for-sale financial assets (KRW 30.17 billion loss vs. KRW 53.54 billion loss in prior year, though the net impact on operating income was negative).
• Asset Growth: Total assets grew by 3.4% to KRW 279.44 trillion, supported by increases in loans (up 3.4%) and deposits (up 1.2%).
• Asset Quality Improvement: Despite higher impairment charges, the sub-standard and below loan ratio improved to 1.94% from 2.10% in the prior year, indicating a stabilization in asset quality.
• Capital Structure: The Capital Adequacy Ratio decreased slightly to 13.44% from 14.25%, remaining well above regulatory requirements.

Guidance, Outlook, and Risks

Management Commentary & Outlook: The filing does not contain explicit forward-looking guidance or numerical forecasts for the remainder of 2015. Management highlights the successful completion of the merger with Woori Finance Holdings as a strategic move to maximize privatization potential. The bank continues to focus on expanding its international presence, evidenced by the launch of PT. Bank Woori Saudara Indonesia in February 2015.

Risks and Contingencies:

• Credit Risk: The sharp increase in impairment losses (KRW 299.28 billion) suggests heightened credit risk or specific provisioning events in the quarter. Investors should monitor the composition of these losses.
• Liquidity: While the Liquidity Coverage Ratio (102.62%) remains above the 100% threshold, it has declined from 123.10% in the prior year, indicating tighter liquidity buffers.
• Market Risk: The bank reported a loss on available-for-sale financial assets, exposing it to market volatility in its investment portfolio.
• Regulatory/Accounting: Financial statements are prepared under K-IFRS, which differs from US GAAP. The filing notes that 2013 and 2014 figures were restated to reflect the merger, which may complicate long-term trend analysis.

Key Facts for Investor Verification

• Impairment Drivers: Verify the specific causes of the KRW 299.28 billion increase in credit impairment losses compared to the prior year to assess if this is a one-time event or a trend.
• Merger Impact: Confirm the long-term financial impact of the November 2014 merger with Woori Finance Holdings on capital efficiency and cost structures.
• Shareholder Structure: Note that the Korea Deposit Insurance Corporation (KDIC) remains the largest shareholder with 51.04% ownership, following the sale of a portion of its stake in late 2014.
• Dividend Policy: No cash dividends were declared for 1Q 2015; the last dividend payout was in 2014 (KRW 500 per share).
• International Exposure: Review the performance of international subsidiaries (China, Russia, Indonesia, Brazil) given the bank's strategic focus on global expansion.