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, 2008 (3Q 2008)
Filing Date: November 14, 2008
Business Overview: A financial holding company under the Financial Holding Company Act of Korea. Its primary income source consists of dividends from subsidiaries, including Woori Bank, Kyongnam Bank, Kwangju Bank, Woori Investment & Securities, and Woori Aviva Life Insurance. The company does not engage in direct banking operations but manages and governs its subsidiaries.
Key Financial Metrics (Non-Consolidated)
| Metric | 9 Months Ended Sep 30, 2008 | 9 Months Ended Sep 30, 2007 | As of Sep 30, 2008 |
|---|---|---|---|
| Operating Revenue | WON 1,269,204 million | WON 1,922,154 million | - |
| Net Profit | WON 1,119,269 million | WON 1,827,612 million | - |
| Net Profit per Share | WON 1,389 | WON 2,267 | - |
| Total Assets | - | - | WON 16,089,023 million |
| Total Liabilities | - | - | WON 2,760,942 million |
| Shareholders' Equity | - | - | WON 13,328,081 million |
| Debt Ratio (Liabilities/Equity) | - | - | 20.72% |
| Cash and Bank Deposits | - | - | WON 382,754 million |
| Debentures Outstanding | - | - | WON 2,745,463 million |
Note: Financial statements are prepared in accordance with Korean GAAP. Consolidated figures for the group are estimates in the text, but non-consolidated figures are reviewed by auditors.
Material Changes vs. Prior Period
- Profit Decline: Net profit for the nine months ended September 30, 2008, decreased by approximately 38.7% to WON 1.12 trillion compared to WON 1.83 trillion in the same period of 2007. This decline is primarily attributed to a reduction in "Gain on valuation using the equity method of accounting" from subsidiaries.
- Equity Method Gains: The gain on valuation from subsidiaries dropped from WON 1.92 trillion in 2007 to WON 1.26 trillion in 2008. Woori Bank's contribution to net income fell from 81.4% of the total in 2007 to 73.3% in 2008.
- Debt Increase: Total debentures increased from WON 2.12 trillion in 2007 to WON 2.75 trillion in 2008. The company issued new debentures (No. 20-1, 20-2, 21, 22-1, 22-2) totaling WON 827.6 billion during the period to fund operations and subsidiary capital increases.
- Acquisition: On April 4, 2008, the company acquired a 51% stake in LIG Life Insurance (renamed Woori Aviva Life Insurance) for WON 75.6 billion, adding it to the consolidation scope.
- Capital Contributions: The company participated in capital increases for Kwangju Bank and Kyongnam Bank, increasing its shareholding in these subsidiaries.
Guidance, Outlook, Risks, and Unusual Items
- Management Commentary: The company's main income is derived from dividends. The decline in net income reflects the performance of subsidiaries, particularly Woori Bank, under the equity method. The company adjusted prior period financial statements due to changes in accounting standards regarding derivatives and investments in associates (SKAS No. 15).
- Capital Adequacy (BIS Ratio): The consolidated BIS ratio (estimated) for 3Q 2008 was 10.43%, down from 11.53% in 2007. This remains above the regulatory minimum but indicates tightening capital buffers.
- Management Improvement Plan: The company and its three major bank subsidiaries (Woori, Kyongnam, Kwangju) are subject to agreements with the Korea Deposit Insurance Corporation (KDIC). Failure to meet specific financial ratio targets (BIS, ROA, NPL rates) could result in KDIC mandates for capital changes, mergers, or business closures.
- Stock Performance: Domestic stock prices declined significantly from April to September 2008, with the low in September reaching WON 11,700. NYSE ADR prices also fell, hitting a low of $26.26 in September 2008.
- Unusual Items: The company recorded a loss on valuation using the equity method of WON 26,001 million for the nine months ended September 30, 2008, compared to a gain in the prior year. Additionally, Woori Financial Co., Ltd. recorded a loss of WON 24,078 million in the equity method valuation.
Key Facts for Investor Verification
- Major Shareholder: The Korea Deposit Insurance Corporation (KDIC) owns 72.97% of the company's common stock (588,158,609 shares).
- Accounting Standards: Financial statements are prepared under Korean GAAP, which differs from US GAAP. Investors should note the impact of SKAS No. 15 (Investments in Associates) and derivative accounting changes on reported equity and income.
- Subsidiary Performance: Woori Bank is the dominant profit driver (73.3% of net income contribution in 9M 2008). Investors should monitor Woori Bank's non-performing loan (NPL) ratios and capital adequacy separately.
- Debt Obligations: Significant debenture maturities are scheduled between 2009 and 2013. The company issued new debt in 2008 to refinance and fund operations.
- Regulatory Oversight: The company operates under strict management improvement plans with the KDIC. Failure to meet targets could trigger forced restructuring.