WF

Woori Financial Group Inc. (Woori Bank) - Form 6-K Summary

Business Context and Reporting Period

This Form 6-K filing, dated May 15, 2017, reports the consolidated financial results and business overview for Woori Bank for the first quarter of 2017 (ended March 31, 2017). The bank operates under Korean IFRS and is a major financial institution in South Korea with a global network. The reporting period covers the quarter following the bank's privatization efforts, which saw the Korea Deposit Insurance Corporation (KDIC) reduce its stake to approximately 21.37%.

Key Financial Metrics

Material Changes vs. Prior Period

• Profitability Surge: Net income for 1Q 2017 increased by approximately 44% compared to 1Q 2016 (KRW 642.7 billion vs. KRW 446.5 billion). This growth was primarily driven by a significant reduction in impairment losses due to credit loss, which dropped from KRW 180.2 billion in 1Q 2016 to KRW 79.3 billion in 1Q 2017.
• Asset Growth: Total assets grew modestly to KRW 310.9 trillion, up from KRW 310.7 trillion in the prior year-end. Total loans increased to KRW 209.7 trillion, while deposits rose to KRW 222.4 trillion.
• Shareholder Structure: The KDIC continued to reduce its ownership stake, falling from 23.37% at the beginning of the quarter to 21.37% by March 31, 2017, following sales to private investors.
• Asset Quality Improvement: The sub-standard and below loan ratio improved to 0.85% in 1Q 2017, down from 0.98% in 2016 and 1.47% in 2015. The delinquency ratio also decreased to 0.45%.

Outlook, Risks, and Management Commentary

• Strategic Developments: The bank launched "SORi," the first voice recognition AI banking service in Korea, in February 2017. It also expanded its overseas footprint with new branches in Gurgaon, India, and Katowice, Poland.
• Capital and Liquidity: The bank maintains a strong capital position with a Capital Adequacy Ratio of 15.07% and a Liquidity Coverage Ratio of 112.57%, exceeding regulatory requirements. The foreign currency LCR was reported at 79.32%, meeting the 2017 requirement of 60%.
• Risks and Contingencies: The filing notes that financial information is prepared under Korean IFRS, which differs from US GAAP. The bank faces standard banking risks including credit risk, market risk, and liquidity risk, though asset quality metrics show improvement. There are no specific unusual items or contingencies highlighted as material threats in this summary.
• Dividends: No cash dividends were declared for the first quarter of 2017. The last recorded cash dividend payout ratio was 21.35% for the full year 2016.

Key Facts for Investor Verification

• Revenue Quality: Verify the sustainability of the reduced impairment losses (KRW 79.3 billion) compared to the prior year, as this was the primary driver of the 44% net income increase.
• Shareholder Dilution/Privatization: Monitor the continued reduction of the KDIC's stake (now 21.37%) and the impact of future sales on the bank's governance and strategic direction.
• Accounting Standards: Confirm the reconciliation of Korean IFRS figures to US GAAP if comparing with US-listed peers, as noted in the filing.
• Loan-to-Deposit Ratio: The LDR stands at 97.84%, indicating a balanced funding structure, but investors should watch for shifts in funding costs given the low interest rate environment.
• Non-Interest Income: Review the "Gain on financial instruments at fair value through profit or loss," which was negative (KRW 158.5 billion) in 1Q 2017, contrasting with positive gains in previous periods.