Company Quick10K Filing
Woori Bank
20-F 2019-12-31 Filed 2020-04-29
20-F 2018-12-31 Filed 2019-04-30
20-F 2017-12-31 Filed 2018-04-30
20-F 2016-12-31 Filed 2017-04-27
20-F 2015-12-31 Filed 2016-04-29
20-F 2014-12-31 Filed 2015-04-30
20-F 2013-12-31 Filed 2014-04-30
20-F 2012-12-31 Filed 2013-04-30
20-F 2011-12-31 Filed 2012-04-30
20-F 2010-12-31 Filed 2011-06-27
20-F 2009-12-31 Filed 2010-06-25

WF 20F Annual Report

Item 1. Identity of Directors, Senior Management and Advisers
Item 2. Offer Statistics and Expected Timetable
Item 3. Key Information
Item 3A. Selected Financial Data
Item 3B. Capitalization and Indebtedness
Item 3C. Reasons for The Offer and Use of Proceeds
Item 3D. Risk Factors
Item 4. Information on The Company
Item 4A. History and Development of The Company
Item 4C. Organizational Structure
Item 4D. Property, Plants and Equipment
Item 4.A. Unresolved Staff Comments
Item 5. Operating and Financial Review and Prospects
Item 5A. Operating Results
Item 5B. Liquidity and Capital Resources
Item 5C. Research and Development, Patents and Licenses, Etc.
Item 5D. Trend Information
Item 5E. Off-Balance Sheet Arrangements
Item 5F. Tabular Disclosure of Contractual Obligations
Item 5G. Safe Harbor
Item 6. Directors, Senior Management and Employees
Item 6A. Directors and Senior Management
Item 6B. Compensation
Item 6C. Board Practices
Item 6D. Employees
Item 6E. Share Ownership
Item 7. Major Stockholders and Related Party Transactions
Item 7A. Major Stockholders
Item 7B. Related Party Transactions
Item 7C. Interest of Experts and Counsel
Item 8. Financial Information
Item 8B. Significant Changes
Item 9. The Offer and Listing
Item 9A. Offering and Listing Details
Item 9B. Plan of Distribution
Item 9C. Markets
Item 9D. Selling Shareholders
Item 9E. Dilution
Item 9F. Expenses of The Issuer
Item 10. Additional Information
Item 10A. Share Capital
Item 10B. Memorandum and Articles of Association
Item 10C. Material Contracts
Item 10D. Exchange Controls
Item 10E. Taxation
Item 10F. Dividends and Paying Agents
Item 10G. Statements By Experts
Item 10H. Documents on Display
Item 10I. Subsidiary Information
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Item 12. Description of Securities Other Than Equity Securities
Item 13. Defaults, Dividend Arrearages and Delinquencies
Item 14. Material Modifications To The Rights of Security Holders and Use of Proceeds
Item 15. Controls and Procedures
Item 16. Reserved
Item 16A. Audit Committee Financial Expert
Item 16B. Code of Ethics
Item 16C. Principal Accountant Fees and Services
Item 16D. Exemptions From The Listing Standards for Audit Committees
Item 16E. Purchase of Equity Securities By The Issuer and Affiliated Purchasers
Item 16F. Change in Registrant's Certifying Accountant
Item 16G. Corporate Governance
Item 16H. Mine Safety Disclosure
Item 17. Financial Statements
Item 18. Financial Statements
Item 19. Exhibits
EX-1.1 d693824dex11.htm
EX-12.1 d693824dex121.htm
EX-13.1 d693824dex131.htm

Woori Bank Earnings 2013-12-31

Balance SheetIncome StatementCash Flow

20-F 1 d693824d20f.htm FORM 20-F Form 20-F
Table of Contents

As filed with the Securities and Exchange Commission on April 30, 2014

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 20-F

 

 

(Mark One)

¨ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

¨ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from                      to                     

Commission file number 001-31811

 

 

Woori Finance Holdings Co., Ltd.

(Exact name of Registrant as specified in its charter)

 

 

Woori Finance Holdings Co., Ltd.

(Translation of Registrant’s name into English)

 

 

The Republic of Korea

(Jurisdiction of incorporation or organization)

51, Sogong-ro, Jung-gu, Seoul 100-792, Korea

(Address of principal executive offices)

Kwansic Lee

51, Sogong-ro, Jung-gu, Seoul 100-792, Korea

Telephone No.: +82-2-2125-2136

Facsimile No.: +82-2-0505001-2136

(Name, telephone, e-mail and/or facsimile number and address of company contact person)

 

 

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 

Title of each class

 

Name of each exchange on which registered

American Depositary Shares, each representing

three shares of Common Stock

  New York Stock Exchange

Common Stock, par value 5,000 per share

  New York Stock Exchange*

Securities registered or to be registered pursuant to Section 12(g) of the Act.

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

 

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

806,013,340 shares of Common Stock, par value 5,000 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    x  Yes    ¨  No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.    ¨  Yes    x  No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ¨  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

x    Large accelerated filer

  

¨    Accelerated Filer

   ¨    Non-accelerated filer

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

 

¨    U.S. GAAP

  

x    International Financial Reporting Standards as issued
by the International Accounting Standards Board

   ¨    Other

If “other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.    ¨  Item 17    ¨  Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    ¨  Yes    ¨  No

* Not for trading, but only in connection with the registration of the American Depositary Shares.

 

 


Table of Contents

TABLE OF CONTENTS

 

             Page  

Presentation of Financial and Other Information

     1   

Forward-Looking Statements

     3   

Item 1.

 

Identity of Directors, Senior Management and Advisers

     4   

Item 2.

 

Offer Statistics and Expected Timetable

     4   

Item 3.

 

Key Information

     4   
 

Item 3A.

 

Selected Financial Data

     4   
 

Item 3B.

 

Capitalization and Indebtedness

     11   
 

Item 3C.

 

Reasons for the Offer and Use of Proceeds

     11   
 

Item 3D.

 

Risk Factors

     11   

Item 4.

 

Information on the Company

     37   
 

Item 4A.

 

History and Development of the Company

     37   
 

Item 4B.

 

Business Overview

     45   
 

Item 4C.

 

Organizational Structure

     127   
 

Item 4D.

 

Property, Plants and Equipment

     128   

Item 4.A.

 

Unresolved Staff Comments

     129   

Item 5.

 

Operating and Financial Review and Prospects

     129   
 

Item 5A.

 

Operating Results

     129   
 

Item 5B.

 

Liquidity and Capital Resources

     160   
 

Item 5C.

 

Research and Development, Patents and Licenses, etc.

     167   
 

Item 5D.

 

Trend Information

     167   
 

Item 5E.

 

Off-Balance Sheet Arrangements

     167   
 

Item 5F.

 

Tabular Disclosure of Contractual Obligations

     167   
 

Item 5G.

 

Safe Harbor

     167   

Item 6.

 

Directors, Senior Management and Employees

     167   
 

Item 6A.

 

Directors and Senior Management

     167   
 

Item 6B.

 

Compensation

     169   
 

Item 6C.

 

Board Practices

     170   
 

Item 6D.

 

Employees

     172   
 

Item 6E.

 

Share Ownership

     174   

Item 7.

 

Major Stockholders and Related Party Transactions

     174   
 

Item 7A.

 

Major Stockholders

     174   
 

Item 7B.

 

Related Party Transactions

     174   
 

Item 7C.

 

Interest of Experts and Counsel

     175   

Item 8.

 

Financial Information

     175   
 

Item 8A.

 

Consolidated Statements and Other Financial Information

     175   
 

Item 8B.

 

Significant Changes

     178   

Item 9.

 

The Offer and Listing

     178   
 

Item 9A.

 

Offering and Listing Details

     178   
 

Item 9B.

 

Plan of Distribution

     179   
 

Item 9C.

 

Markets

     179   
 

Item 9D.

 

Selling Shareholders

     186   
 

Item 9E.

 

Dilution

     186   
 

Item 9F.

 

Expenses of the Issuer

     187   

Item 10.

 

Additional Information

     187   
 

Item 10A.

 

Share Capital

     187   
 

Item 10B.

 

Memorandum and Articles of Association

     187   
 

Item 10C.

 

Material Contracts

     193   
 

Item 10D.

 

Exchange Controls

     193   
 

Item 10E.

 

Taxation

     194   

 

i


Table of Contents
             Page  
 

Item 10F.

 

Dividends and Paying Agents

     199   
 

Item 10G.

 

Statements by Experts

     199   
 

Item 10H.

 

Documents on Display

     199   
 

Item 10I.

 

Subsidiary Information

     199   

Item 11.

 

Quantitative and Qualitative Disclosures about Market Risk

     200   

Item 12.

 

Description of Securities other than Equity Securities

     224   

Item 13.

 

Defaults, Dividend Arrearages and Delinquencies

     225   

Item 14.

 

Material Modifications to the Rights of Security Holders and Use of Proceeds

     225   

Item 15.

 

Controls and Procedures

     225   

Item 16.

 

Reserved

     226   
 

Item 16A.

 

Audit Committee Financial Expert

     226   
 

Item 16B.

 

Code of Ethics

     226   
 

Item 16C.

 

Principal Accountant Fees and Services

     226   
 

Item 16D.

 

Exemptions from the Listing Standards for Audit Committees

     227   
 

Item 16E.

 

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

     227   
 

Item 16F.

 

Change in Registrant’s Certifying Accountant

     227   
 

Item 16G.

 

Corporate Governance

     228   
 

Item 16H.

 

Mine Safety Disclosure

     229   

Item 17.

 

Financial Statements

     229   

Item 18.

 

Financial Statements

     229   

Item 19.

 

Exhibits

     230   

 

ii


Table of Contents

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

The financial statements included in this annual report are prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. As such, we make an explicit and unreserved statement of compliance with IFRS as issued by the IASB with respect to our consolidated financial statements as of and for the years ended December 31, 2011, 2012 and 2013 included in this annual report. Unless indicated otherwise, the financial information in this annual report (i) as of and for the years ended December 31, 2010, 2011, 2012 and 2013 has been prepared in accordance with IFRS as issued by the IASB, and (ii) as of and for the year ended December 31, 2009 has been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP, which is not comparable to information prepared in accordance with IFRS.

In accordance with rule amendments adopted by the U.S. Securities and Exchange Commission which became effective on March 4, 2008, we are not required to provide a reconciliation to U.S. GAAP.

Unless expressly stated otherwise, all financial data included in this annual report are presented on a consolidated basis.

Acquisitions and other transactions that we have effected in recent years may affect the direct comparability of the historical financial information included in this annual report as of and for different dates and periods:

 

   

in March 2011, we acquired certain assets and assumed certain liabilities of Samhwa Mutual Savings Bank through our wholly-owned consolidated subsidiary, Woori FG Savings Bank Co., Ltd., which was established in connection with such transaction. In September 2012, we acquired certain assets and assumed certain liabilities of Solomon Mutual Savings Bank, also through Woori FG Savings Bank Co., Ltd;

 

   

in October 2012, we established Woori Finance Research Institute as a consolidated subsidiary; and

 

   

in April 2013, we effected a spin-off of the credit card business of Woori Bank into a newly established wholly-owned subsidiary, Woori Card.

See “Item 5A. Operating Results—Overview—Acquisitions.”

The Korean government, which currently owns 56.97% of our outstanding common stock through the Korea Deposit Insurance Corporation, or the KDIC, is in the process of implementing a privatization plan with respect to us and our subsidiaries. Pursuant to such plan, in May 2014, we plan to establish two new companies, KJB Financial Group Co., Ltd. and KNB Financial Group Co., Ltd., through a spin-off of our businesses related to the holding of the shares and thereby controlling the business operations of Kwangju Bank and Kyongnam Bank, respectively. As a result of such spin-off, KJB Financial Group will own the shares of Kwangju Bank currently held by us, and KNB Financial Group will own the shares of Kyongnam Bank currently held by us. We will no longer own any shares of Kwangju Bank or Kyongnam Bank, and neither they nor their new holding companies will be our subsidiaries, after the spin-off. In addition, in March 2014, we sold our 52% ownership interest in Woori Financial Co., Ltd. to KB Financial Group Inc. We also entered into share purchase agreements for (i) the sale of our 100% ownership interest in Woori Asset Management Co., Ltd. to Kiwoom Securities Co., Ltd. in February 2014, (ii) the sale of our 100% ownership interest in Woori F&I to Daishin Securities Co., Ltd. in April 2014 and (iii) the collective sale of our 37.9% ownership interest in Woori Investment & Securities Co. Ltd., 51.6% ownership interest in Woori Aviva Life Insurance Co., Ltd. and 100% ownership interest in Woori FG Savings Bank to NongHyup Financial Group Inc. in April 2014. See “Item 4A. History and Development of the Company—Privatization Plan.” In light of such planned dispositions, the operations of Kwangju Bank, Kyongnam Bank, Woori Investment & Securities, Woori Aviva Life Insurance, Woori Asset Management, Woori Financial, Woori FG Savings Bank and Woori F&I have been classified as a disposal group held for distribution or sale, and their operations have been accounted for as discontinued operations, in our consolidated financial statements as of and for the year ended December 31, 2013 included in this annual report. Similarly, our consolidated statements of comprehensive income for the years ended December 31, 2011 and 2012 included in this annual report have been restated to account for such entities as discontinued operations. However, our

 

1


Table of Contents

consolidated statements of financial position as of December 31, 2011 and 2012 included in this annual report have not been so restated. Accordingly, in general, our financial information as of December 31, 2013 and for the years ended December 31, 2010, 2011, 2012 and 2013 appearing in this annual report does not include financial data with respect to such discontinued operations, while our financial information as of December 31, 2010, 2011 and 2012 appearing in this annual report includes financial data with respect to such discontinued operations. As a result, our financial information as of December 31, 2013 and for the years ended December 31, 2010, 2011, 2012 and 2013 may not be directly comparable to our financial information as of and for other dates and periods.

In this annual report:

 

   

references to “we,” “us” or “Woori Finance Holdings” are to Woori Finance Holdings Co., Ltd. and, unless the context otherwise requires, its subsidiaries (excluding discontinued operations);

 

   

references to “Korea” are to the Republic of Korea;

 

   

references to the “government” are to the government of the Republic of Korea;

 

   

references to “Won” or “₩” are to the currency of Korea; and

 

   

references to “U.S. dollars,” “$” or “US$” are to United States dollars.

Discrepancies between totals and the sums of the amounts contained in any table may be a result of rounding.

For your convenience, this annual report contains conversions of Won amounts into U.S. dollars at the noon buying rate of the Federal Reserve Bank of New York for Won in effect on December 31, 2013, which was ₩1,055.3 = US$1.00.

 

2


Table of Contents

FORWARD-LOOKING STATEMENTS

The U.S. Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This annual report contains forward-looking statements.

Words and phrases such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “estimate,” “expect,” “future,” “goal,” “intend,” “may,” “objective,” “plan,” “positioned,” “predict,” “project,” “risk,” “seek to,” “shall,” “should,” “will likely result,” “will pursue,” “plan” and words and terms of similar substance used in connection with any discussion of future operating or financial performance or our expectations, plans, projections or business prospects identify forward-looking statements. In particular, the statements under the headings “Item 3D. Risk Factors,” “Item 4B. Business Overview” and “Item 5. Operating and Financial Review and Prospects” regarding our financial condition and other future events or prospects are forward-looking statements. All forward-looking statements are management’s present expectations of future events and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

In addition to the risks related to our business discussed under “Item 3D. Risk Factors,” other factors could cause actual results to differ materially from those described in the forward-looking statements. These factors include, but are not limited to:

 

   

a change or delay in, or cancellation of, the Korean government’s privatization plan with respect to us and our subsidiaries;

 

   

our ability to successfully implement our strategy;

 

   

future levels of non-performing loans;

 

   

our growth and expansion;

 

   

the adequacy of allowances for credit and other losses;

 

   

technological changes;

 

   

interest rates;

 

   

investment income;

 

   

availability of funding and liquidity;

 

   

our exposure to market risks; and

 

   

adverse market and regulatory conditions.

By their nature, certain disclosures relating to these and other risks are only estimates and could be materially different from what actually occurs in the future. As a result, actual future gains, losses or impact on our income or results of operations could materially differ from those that have been estimated. For example, revenues could decrease, costs could increase, capital costs could increase, capital investment could be delayed and anticipated improvements in performance might not be fully realized.

In addition, other factors that could cause actual results to differ materially from those estimated by the forward-looking statements contained in this annual report could include, but are not limited to:

 

   

general economic and political conditions in Korea or other countries that have an impact on our business activities or investments;

 

   

the monetary and interest rate policies of Korea;

 

   

inflation or deflation;

 

   

unanticipated volatility in interest rates;

 

3


Table of Contents
   

foreign exchange rates;

 

   

prices and yields of equity and debt securities;

 

   

the performance of the financial markets in Korea and globally;

 

   

changes in domestic and foreign laws, regulations and taxes;

 

   

changes in competition and the pricing environment in Korea; and

 

   

regional or general changes in asset valuations.

For further discussion of the factors that could cause actual results to differ, see the discussion under “Item 3D. Risk Factors” contained in this annual report. We caution you not to place undue reliance on the forward-looking statements, which speak only as of the date of this annual report. Except as required by law, we are not under any obligation, and expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.

All subsequent forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this annual report.

 

Item 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not Applicable

 

Item 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable

 

Item 3. KEY INFORMATION

 

Item 3A. Selected Financial Data

The selected consolidated financial and operating data set forth below as of and for the years ended December 31, 2010, 2011, 2012 and 2013 have been derived from our audited consolidated financial statements, which have been prepared in accordance with IFRS as issued by the IASB. Our consolidated financial statements as of and for the years ended December 31, 2010, 2011, 2012 and 2013 have been audited by Deloitte Anjin LLC, an independent registered public accounting firm.

Pursuant to the transitional relief granted by the U.S. Securities and Exchange Commission in respect of the first-time application of IFRS, financial and operating data as of and for the year ended December 31, 2009 derived from our consolidated financial statements prepared in accordance with U.S. GAAP have not been included below.

The Korean government, which currently owns 56.97% of our outstanding common stock through the KDIC, is in the process of implementing a privatization plan with respect to us and our subsidiaries. As a result, Kwangju Bank, Kyongnam Bank, Woori Investment & Securities, Woori Aviva Life Insurance, Woori Asset Management, Woori Financial, Woori FG Savings Bank and Woori F&I have been classified as a disposal group held for distribution or sale in our consolidated statement of financial position as of December 31, 2013 (but not as of prior dates) and have been accounted for as discontinued operations in our consolidated statements of comprehensive income for the years ended December 31, 2010, 2011, 2012 and 2013. See “Item 4A. History and Development of the Company—Privatization Plan.”

You should read the following data together with the more detailed information contained in “Item 5. Operating and Financial Review and Prospects” and our consolidated financial statements included elsewhere in this annual report. Historical results do not necessarily predict future results.

 

4


Table of Contents

Consolidated Statement of Comprehensive Income Data

 

    Year ended December 31,  
    2010(1)     2011(1)(2)     2012(1)(2)(3)     2013(1)(2)(3)     2013(1)(2)(3)(4)  
    (in billions of Won except per share data)     (in millions of
US$ except per
share data)
 

Interest income

  10,442      11,095      10,891      9,493      US$ 8,996   

Interest expense

    (6,255     (6,206     (6,043     (5,001     (4,739
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

    4,187        4,889        4,848        4,492        4,257   

Fees and commissions income

    1,576        1,625        1,687        1,565        1,483   

Fees and commissions expense

    (420     (444     (498     (639     (605
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net fees and commissions income

    1,156        1,181        1,189        926        878   

Dividends

    140        143        101        88        83   

Net gain (loss) on financial assets at fair value through profit or loss

    22        137        (365     124        117   

Net gain on available-for-sale financial assets

    976        1,027        533        (85     (81

Impairment losses on credit loss

    (2,506     (1,923     (1,799     (2,277     (2,158

Other net operating expenses(5)

    (2,676     (3,163     (2,958     (3,028     (2,869
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

    1,299        2,291        1,549        240        227   

Share of profits of joint ventures and associates

    33        (39     45        (1     (1

Other non-operating income (expense)

    (68     90        44        49        46   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-operating income

    (35     51        89        48        45   

Net income before income tax expense

    1,264        2,342        1,638        288        272   

Income tax expense

    313        559        357        35        33   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income of continuing operations

    951        1,783        1,281        253        239   

Income (loss) of discontinued operations

    650        668        566        (966     (916

Net income

  1,601      2,451      1,847      (713   US$ (677
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Remeasurement of the net defined benefit liability

           (18     (51     9        9   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Items not subsequently reclassified to net income

           (18     (51     9        9   

Loss on available-for-sale financial assets

    (205     (375     (349     (51     (48

Share of other comprehensive gain (loss) of joint ventures and associates

    (21     (38     57        (6     (6

Gain (loss) on overseas business translation

    (19     25        (108     (60     (57

Gain (loss) on valuation of cashflow hedge

    9        3        13        (2     (2
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Items subsequently reclassified to net income

    (236     (385     (387     (119     (113

Other comprehensive income (loss), net of tax

    (236     (403     (438     (110     (104
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

  1,365      2,048      1,409      (823   US$ (781
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to owners

  1,289      2,154      1,633      (538   US$ (510

Income of continuing operations

    794        1,636        1,164        162        153   

Income (loss) of discontinued operations

    495        518        469        (700     (663

Net income (loss) attributable to non-controlling interests

  312      297      214      (175   US$ (167

Income of continuing operations

    157        147        117        91        86   

Income (loss) of discontinued operations

    155        150        97        (266     (253

Comprehensive income (loss) attributable to owners

    1,052        1,729        1,177        (623     (591

Comprehensive income (loss) attributable to non-controlling interests

    313        319        232        (200     (190

Basic and diluted earnings from continuing and discontinued operations per share

  1,599      2,670      1,993      (704   US$ (0.67

Basic and diluted earnings from continuing operations per share

    985        2,027        1,411        165        0.16   

Per common share data:

         

Net income (loss) per share—basic

  1,599      2,670      1,993      (704   US$ (0.67

Weighted average common shares outstanding—basic (in thousands)

    806,013        806,013        806,013        806,013        806,013   

Net income (loss) per share—diluted

  1,599      2,670      1,993      (704   US$ (0.67

Weighted average common shares outstanding—diluted (in thousands)

    806,013        806,013        806,013        806,013        806,013   

Cash dividends paid per share

  250      250      250           US$   

 

(1) 

The amounts for 2010, 2011, 2012 and 2013 reflect the classification of certain subsidiaries as discontinued operations.

(2) 

The amounts for 2013 reflect a change in our accounting policies pursuant to an amendment to International Accounting Standards, or IAS 19, Employee Benefits, which is effective beginning in 2013. Corresponding amounts for 2012 and 2011 (but not for 2010) have been restated to retroactively apply such change. See “Item 5A. Operating Results—Overview—Changes in Accounting Policies.”

(3) 

The amounts for 2013 reflect a change in our accounting policies pursuant to the adoption of IFRS 10, Consolidated Financial Statements, which is effective beginning in 2013. Pursuant to IFRS 10, corresponding amounts for 2012 (but not for 2011 or 2010) have been restated to retroactively apply such change. See “Item 5A. Operating Results—Overview—Changes in Accounting Policies.”

(4) 

Won amounts are expressed in U.S. dollars at the rate of ₩1,055.3 to US$1.00, the noon buying rate in effect on December 31, 2013 as quoted by the Federal Reserve Bank of New York in the United States.

(5) 

For a description of “other net operating expenses,” see Note 39 of the notes to our consolidated financial statements.

 

5


Table of Contents

Consolidated Statement of Financial Position Data

 

    As of December 31,  
    2010     2011(1)     2012(1)(2)     2013(1)(2)(3)     2013(1)(2)(3)(4)  
    (in billions of Won)    

(in millions

of US$)

 

Assets

         

Cash and cash equivalents

  4,871      6,417      5,778      5,478      US$ 5,191   

Financial assets at fair value through profit or loss

    22,184        25,600        27,352        4,806        4,554   

Available-for-sale financial assets

    21,998        19,672        18,889        17,085        16,190   

Held-to-maturity financial assets

    19,886        20,036        18,685        12,039        11,408   

Loans and receivables

    216,792        235,160        250,276        211,912        200,808   

Investments in joint ventures and associates

    745        928        1,038        618        585   

Investment properties

    643        499        492        341        323   

Premises and equipment

    3,097        3,134        3,186        2,536        2,404   

Intangible assets and goodwill

    295        448        433        269        255   

Assets held for sale

    88        56        83        1        1   

Current tax assets

    9        57        39        143        136   

Deferred tax assets

    59        80        155        155        147   

Derivative assets

    131        327        281        131        125   

Other assets(5)

    379        377        415        179        169   

Disposal group held for sale

                         34,685        32,867   

Disposal group held for distribution to owners

                         50,312        47,676   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  291,177      312,791      327,102      340,690      US$ 322,839   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities

         

Financial liabilities at fair value through profit or loss

  8,838      9,622      10,986      2,507      US$ 2,376   

Deposits due to customers

    185,428        195,930        204,210        175,324        166,136   

Borrowings

    34,266        34,667        33,480        18,232        17,276   

Debentures

    29,111        29,266        27,960        21,678        20,542   

Provisions

    761        892        864        685        649   

Net defined benefit liability

    70        120        166        72        68   

Current tax liabilities

    174        274        179        10        9   

Deferred tax liabilities

    213        260        134        49        47   

Derivative liabilities

    5        33        38        2        2   

Other financial liabilities(6)

    11,648        19,084        25,544        19,914        18,871   

Other liabilities(7)

    399        570        508        410        391   

Liabilities directly associated with disposal group held for sale

                         32,048        30,368   

Liabilities directly associated with disposal group held for distribution to owners

                         46,882        44,426   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

  270,913      290,718      304,069      317,813      US$ 301,161   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity

         

Owners’ Equity

         

Capital stock

  4,030      4,030      4,030      4,030      US$ 3,819   

Hybrid securities

           309        498        498        472   

Capital surplus

    180        176        174        177        167   

Other equity(8)

    1,002        563        112        (35     (34

Retained earnings

    10,489        12,446        13,881        13,113        12,426   

Equity related to asset group held for sale

          30        28   

Equity related to asset group held for distribution to owners

          36        34   

Non-controlling interests

    4,563        4,549        4,338        5,028        4,766   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

  20,264      22,073      23,033      22,877      US$ 21,678   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

  291,177      312,791      327,102      340,690      US$ 322,839   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

The amounts as of December 31, 2013 reflect a change in our accounting policies pursuant to an amendment to IAS 19, Employee Benefits, which is effective beginning in 2013. Corresponding amounts as of December 31, 2012 and 2011 (but not as of December 31, 2010) have been restated to retroactively apply such change. See “Item 5A. Operating Results—Overview—Changes in Accounting Policies.”

 

6


Table of Contents
(2)

The amounts as of December 31, 2013 reflect a change in our accounting policies pursuant to the adoption of IFRS 10, Consolidated Financial Statements, which is effective beginning in 2013. Pursuant to IFRS 10, corresponding amounts as of December 31, 2012 (but not as of December 31, 2011 or 2010) have been restated to retroactively apply such change. See “Item 5A. Operating Results—Overview—Changes in Accounting Policies.”

(3) 

The amounts as of December 31, 2013 reflect the classification of certain subsidiaries as a disposal group held for distribution or sale.

(4) 

Won amounts are expressed in U.S. dollars at the rate of ₩1,055.3 to US$1.00, the noon buying rate in effect on December 31, 2013 as quoted by the Federal Reserve Bank of New York in the United States.

(5) 

For a description of “other assets,” see Note 18 of the notes to our consolidated financial statements.

(6) 

For a description of “other financial liabilities,” see Note 24 of the notes to our consolidated financial statements.

(7) 

For a description of “other liabilities,” see Note 24 of the notes to our consolidated financial statements.

(8) 

For a description of “other equity,” see Note 29 of the notes to our consolidated financial statements.

Profitability Ratios and Other Data

 

     Year ended December 31,  
             2010(1)                     2011(1)                     2012(1)(2)                     2013(1)(2)          
     (in billions of Won except percentages)  

Return on average assets(3)

     0.55     0.90     0.67     (0.22 )% 

Return on average equity(4)

     9.19        14.20        10.46        (3.45

Net interest spread(5)

     1.75        2.01        1.94        1.83   

Net interest margin(6)

     1.87        2.14        2.07        1.94   

Cost-to-income ratio(7)

     44.86        46.12        50.79        59.30   

Average equity as a percentage of average total assets

     6.01        6.36        6.39        6.50   

Total revenue(8)

   13,156      14,027      12,847      11,185   

Operating expense(9)

     9,351        9,813        9,499        8,668   

Operating margin(10)

     3,805        4,214        3,348        2,517   

Operating margin as a percentage of total revenue

     28.92     30.04     26.06     22.50

 

(1) 

The amounts for 2010, 2011, 2012 and 2013 reflect the classification of certain subsidiaries as discontinued operations.

(2)

The amounts for 2013 reflect a change in our accounting policies pursuant to the adoption of IFRS 10, Consolidated Financial Statements, which is effective beginning in 2013. Pursuant to IFRS 10, corresponding amounts for 2012 (but not for 2011 or 2010) have been restated to retroactively apply such change. See “Item 5A. Operating Results—Overview—Changes in Accounting Policies.”

(3) 

Represents net income attributable to owners as a percentage of average total assets. Average balances are based on daily balances for Woori Bank and on quarterly balances for all of our other subsidiaries and our structured companies.

(4) 

Represents net income attributable to owners as a percentage of average equity. Average balances are based on daily balances for Woori Bank and on quarterly balances for all of our other subsidiaries and our structured companies.

(5) 

Represents the difference between the yield on average interest-earning assets and cost of average interest-bearing liabilities.

(6) 

Represents the ratio of net interest income to average interest-earning assets.

(7) 

Represents the ratio of non-interest expense (excluding impairment losses on credit loss) to the sum of net interest income and non-interest income.

(8) 

Represents the sum of interest income, dividend income, fees and commissions income, net gain (loss) on financial assets at fair value through profit or loss, net gain on available-for-sale financial assets and net gain on held-to-maturity financial assets.

The following table shows how total revenue is calculated:

 

     Year ended December 31,  
     2010(a)      2011(a)      2012(a)(b)      2013(a)(b)  
     (in billions of Won)  

Interest income

   10,442       11,095       10,891       9,493   

Fees and commissions income

     1,576         1,625         1,687         1,565   

Dividends

     140         143         101         88   

Net gain (loss) on financial assets at fair value through profit or loss

     22         137         (365      124   

Net gain on available-for-sale financial assets

     976         1,027         533         (85

Net gain on held-to-maturity financial assets

                               
  

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

   13,156       14,027       12,847       11,185   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

The amounts for 2010, 2011, 2012 and 2013 reflect the classification of certain subsidiaries as discontinued operations.

 

7


Table of Contents
  (b) 

The amounts for 2013 reflect a change in our accounting policies pursuant to the adoption of IFRS 10, Consolidated Financial Statements, which is effective beginning in 2013. Pursuant to IFRS 10, corresponding amounts for 2012 (but not for 2011 or 2010) have been restated to retroactively apply such change. See “Item 5A. Operating Results—Overview—Changes in Accounting Policies.”

(9) 

Represents interest expense, fees and commissions expense and other net operating expense, excluding impairment losses on credit loss of ₩2,506 billion, ₩1,923 billion, ₩1,799 billion and ₩2,277 billion for 2010, 2011, 2012 and 2013, respectively.

The following table shows how operating expense is calculated:

 

     Year ended December 31,  
     2010(a)      2011(a)      2012(a)(b)      2013(a)(b)  
     (in billions of Won)  

Interest expense

   6,255       6,206       6,043       5,001   

Fees and commissions expense

     420         444         498         639   

Other net operating expenses(c)

     2,676         3,163         2,958         3,028   
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating expense

   9,351       9,813       9,499       8,668   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a) 

The amounts for 2010, 2011, 2012 and 2013 reflect the classification of certain subsidiaries as discontinued operations.

  (b) 

The amounts for 2013 reflect a change in our accounting policies pursuant to the adoption of IFRS 10, Consolidated Financial Statements, which is effective beginning in 2013. Pursuant to IFRS 10, corresponding amounts for 2012 (but not for 2011 or 2010) have been restated to retroactively apply such change. See “Item 5A. Operating Results—Overview—Changes in Accounting Policies.”

  (c) 

The amount for 2013 reflects a change in our accounting policies pursuant to an amendment to IAS 19, Employee Benefits, which is effective beginning in 2013. Corresponding amounts for 2012 and 2011 (but not for 2010) have been restated to retroactively apply such change. See “Item 5A. Operating Results—Overview—Changes in Accounting Policies.”

(10) 

Represents total revenue less operating expense.

Asset Quality Data

 

     As of December 31,  
     2010     2011     2012(1)     2013(1)(2)  
     (in billions of Won, except percentages)  

Total loans(3)

   201,235      212,492      221,028      193,766   

Total non-performing loans(4)

     6,550        3,780        3,766        4,996   

Other impaired loans not included in non-performing loans(5)

     475        238        698        690   

Total non-performing loans and other impaired loans(5)

     7,025        4,018        4,464        5,685   

Total allowance for credit losses

     4,718        3,759        3,565        3,337   

Non-performing loans as a percentage of total loans

     3.25     1.78     1.70     2.58

Non-performing loans as a percentage of total assets

     2.25        1.21        1.15        1.47   

Total non-performing loans and other impaired loans as a percentage of total loans

     3.49        1.89        2.02        2.93   

Allowance for credit losses as a percentage of total loans

     2.34        1.77        1.61        1.72   

 

(1)

The amounts as of December 31, 2013 reflect a change in our accounting policies pursuant to the adoption of IFRS 10, Consolidated Financial Statements, which is effective beginning in 2013. Pursuant to IFRS 10, corresponding amounts as of December 31, 2012 (but not as of December 31, 2011 or 2010) have been restated to retroactively apply such change. See “Item 5A. Operating Results—Overview—Changes in Accounting Policies.”

(2) 

The amounts as of December 31, 2013 reflect the classification of certain subsidiaries as a disposal group held for distribution or sale.

(3) 

Not including due from banks and other receivables, and prior to deducting allowance for credit losses and present value discount or reflecting deferred origination costs.

(4) 

Defined as those loans that are past due by 90 days or more or classified as substandard or below based on the Financial Services Commission’s asset classification criteria. See “Item 4B. Business Overview—Assets and Liabilities—Asset Quality of Loans—Loan Classifications.”

(5) 

Other impaired loans as of December 31, 2010, 2011 and 2012 exclude loans that would otherwise have been considered impaired but were securitized and were held by Woori F&I, our wholly-owned subsidiary, in the aggregate amount of ₩664 billion, ₩980 billion and ₩1,207 billion as of December 31, 2010, 2011 and 2012, respectively.

 

8


Table of Contents

Selected Financial Information

Average Balances and Related Interest

The following tables show our average balances and interest rates for the past three years (excluding discontinued operations):

 

    Year ended December 31,  
    2011     2012(1)     2013(1)  
    Average
Balance(2)
    Interest
Income(3)
    Average
Yield
    Average
Balance(2)
    Interest
Income(3)
    Average
Yield
    Average
Balance(2)
    Interest
Income(3)
    Average
Yield
 
    (in billions of Won, except percentages)  

Assets

                 

Interest-earning assets

                 

Due from banks

  6,276      53        0.84   7,781      109        1.40   9,088      120        1.32

Loans(4)

                 

Commercial and industrial

    80,588        4,826        5.99        80,377        4,582        5.70        82,875        4,062        4.90   

Trade financing

    11,874        283        2.38        12,935        296        2.29        12,386        220        1.78   

Other commercial

    11,729        565        4.82        11,030        449        4.07        9,584        351        3.66   

General purpose household(5)

    62,519        3,271        5.23        60,840        3,198        5.26        58,770        2,694        4.58   

Mortgage

    6,345        330        5.20        10,296        520        5.05        15,979        686        4.29   

Credit cards(3)

    4,344        370        8.52        4,310        318        7.38        4,197        337        8.03   
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total loans

    177,399        9,645        5.44        179,788        9,363        5.21        183,791        8,350        4.54   

Securities

                 

Trading

    7,952        292        3.67        9,221        326        3.54        3,753        109        2.90   

Investment(6)

    28,569        991        3.47        26,973        1,013        3.76        26,349        860        3.26   
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total securities

    36,521        1,283        3.51        36,194        1,339        3.70        30,102        969        3.22   
 

 

 

   

 

 

               

Other

    8,429        114        1.35        10,893        80        0.73        8,548        54        0.63   
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average interest earning assets

    228,625        11,095        4.85        234,656        10,891        4.64        231,529        9,493        4.10   
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average non-interest earning assets

    9,828                      9,789                      8,595                 
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average assets

  238,453      11,095        4.65   244,445      10,891        4.46   240,124      9,493        3.95
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

 

    Year ended December 31,  
    2011     2012(1)     2013(1)  
    Average
Balance(2)
    Interest
Expense
    Average
Cost
    Average
Balance(2)
    Interest
Expense
    Average
Cost
    Average
Balance(2)
    Interest
Expense
    Average
Cost
 
    (in billions of Won, except percentages)  

Liabilities

                 

Interest-bearing liabilities

                 

Deposits due to customers:

                 

Demand deposits

  7,898      20        0.25   9,641      27        0.28   9,397      38        0.40

Time and savings deposits

    136,423        4,114        3.02        138,660        4,119        2.97        140,981        3,369        2.39   

Certificates of deposit

    1,516        65        4.29        694        24        3.46        2,316        65        2.81   

Other deposits

    16,287        312        1.92        18,131        336        1.85        14,243        178        1.25   
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total deposits

    162,124        4,511        2.78        167,126        4,506        2.70        166,937        3,650        2.19   

Borrowings

    19,025        362        1.90        17,830        315        1.77        15,678        254        1.62   

Debentures

    24,866        1,234        4.96        22,721        1,112        4.89        21,994        961        4.37   

Other

    12,490        99        0.79        16,438        110        0.67        16,026        136        0.85   
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average interest-bearing liabilities

    218,505        6,206        2.84        224,115        6,043        2.70        220,635        5,001        2.27   
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average non-interest-bearing liabilities

    4,780                      4,722                      3,879                 
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average liabilities

    223,285        6,206        2.78        228,837        6,043        2.64        224,514        5,001        2.23   
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average equity

    15,168                      15,608                      15,610                 
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average liabilities and equity

  238,453      6,206        2.60   244,445      6,043        2.47   240,124      5,001        2.08
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

 

(1) 

The amounts for 2013 reflect a change in our accounting policies pursuant to the adoption of IFRS 10, Consolidated Financial Statements, which is effective beginning in 2013. Pursuant to IFRS 10, corresponding amounts for 2012 (but not for 2011) have been restated to retroactively apply such change. See “Item 5A. Operating Results—Overview—Changes in Accounting Policies.”

 

9


Table of Contents
(2) 

Average balances are based on daily balances for Woori Bank and on quarterly balances for all of our other subsidiaries and our structured companies.

(3) 

Interest income from credit cards is derived from interest on credit card loans and credit card installment purchases.

(4) 

Not including other receivables, and prior to deducting allowance for credit losses and present value discount or reflecting deferred origination costs.

(5) 

Includes home equity loans.

(6) 

Includes available-for-sale financial assets and held-to-maturity financial assets.

Analysis of Changes in Net Interest Income—Volume and Rate Analysis

The following table provides an analysis of changes in interest income, interest expense and net interest income (in each case excluding discontinued operations) based on changes in volume and changes in rate for 2012 compared to 2011 and 2013 compared to 2012. Information is provided with respect to: (1) effects attributable to changes in volume (changes in volume multiplied by prior rate) and (2) effects attributable to changes in rate (changes in rate multiplied by prior volume). Changes attributable to the combined impact of changes in rate and volume have been allocated proportionately to the changes due to volume changes and changes due to rate changes.

 

     2012 vs. 2011(1)
Increase/(decrease)
due to changes in
    2013 vs. 2012(1)
Increase/(decrease)
due to changes in
 
     Volume     Rate     Total     Volume     Rate     Total  
     (in billions of Won)  

Interest-earning assets

  

Due from banks

   13      43      56      18      (7   11   

Loans(2)

            

Commercial and industrial

     (13     (231     (244     142        (662     (520

Trade financing

     25        (12     13        (13     (63     (76

Other commercial

     (34     (82     (116     (59     (39     (98

General purpose household(3)

     (88     15        (73     (109     (395     (504

Mortgage

     205        (15     190        287        (121     166   

Credit cards

     (3     (49     (52     (8     27        19   

Securities

            

Trading

     47        (13     34        (193     (24     (217

Investment(4)

     (55     77        22        (23     (130     (153

Other

     33        (67     (34     (17     (9     (26
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

   130      (334   (204   25      (1,423   (1,398
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest-bearing liabilities

            

Deposits due to customers

            

Demand deposits

   4      3      7      (1   12      11   

Time and savings deposits

     67        (62     5        69        (819     (750

Certificate of deposit

     (35     (6     (41     56        (15     41   

Other deposits

     35        (11     24        (72     (86     (158

Borrowings

     (23     (24     (47     (38     (23     (61

Debentures

     (106     (16     (122     (36     (115     (151

Other

     31        (20     11        (3     29        26   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

   (27   (136   (163   (25   (1,017   (1,042
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

   157      (198   (41   50      (406   (356
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) 

The amounts for 2013 reflect a change in our accounting policies pursuant to the adoption of IFRS 10, Consolidated Financial Statements, which is effective beginning in 2013. Pursuant to IFRS 10, corresponding amounts for 2012 (but not for 2011) have been restated to retroactively apply such change. See “Item 5A. Operating Results—Overview—Changes in Accounting Policies.”

(2) 

Not including other receivables and prior to deducting allowance for credit losses and present value discount or reflecting deferred origination costs.

 

10


Table of Contents
(3) 

Includes home equity loans.

(4) 

Includes available-for-sale financial assets and held-to-maturity financial assets.

Exchange Rates

The table below sets forth, for the periods and dates indicated, information concerning the noon buying rate for Won, expressed in Won per one U.S. dollar. The “noon buying rate” is the rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York. Unless otherwise stated, translations of Won amounts into U.S. dollars in this annual report were made at the noon buying rate in effect on December 31, 2013, which was ₩1,055.3 to US$1.00. We do not intend to imply that the Won or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or Won, as the case may be, at any particular rate, or at all. On April 25, 2014, the noon buying rate was ₩1,041.0 = US$1.00.

 

     Won per U.S. dollar (noon buying rate)  
     Low      High      Average(1)      Period-End  

2009

     1,149.0         1,570.1         1,274.6         1,163.7   

2010

     1,104.0         1,253.2         1,155.7         1,130.6   

2011

     1,049.2         1,197.5         1,106.9         1,158.5   

2012

     1,063.2         1,185.0         1,126.2         1,063.2   

2013

     1,050.1         1,161.3         1,094.7         1,055.3   

October

     1,057.5         1,075.5         1,065.9         1,060.8   

November

     1,054.8         1,072.7         1,061.6         1,057.8   

December

     1,050.1         1,061.4         1,055.6         1,055.3   

2014 (through April 25)

     1,035.4         1,084.3         1,063.6         1,041.0   

January

     1,050.3         1,083.7         1,067.1         1,080.4   

February

     1,062.1         1,084.3         1,071.3         1,066.0   

March

     1,069.9         1,079.6         1,070.5         1,064.7   

April (through April 25)

     1,064.1         1,058.3         1,044.2         1,041.0   

 

Source: Federal Reserve Bank of New York
(1) 

The average of the daily noon buying rates of the Federal Reserve Bank in effect during the relevant period (or portion thereof).

 

Item 3B. Capitalization and Indebtedness

Not Applicable

 

Item 3C. Reasons for the Offer and Use of Proceeds

Not Applicable

 

Item 3D. Risk Factors

Risks relating to our corporate credit portfolio

The largest portion of our exposure is to small- and medium-sized enterprises, and financial difficulties experienced by companies in this segment may result in a deterioration of our asset quality and have an adverse impact on us.

Our loans to small- and medium-sized enterprises amounted to ₩83,624 billion, or 39.4% of our total loans, as of December 31, 2011, ₩80,506 billion, or 36.4% of our total loans, as of December 31, 2012 and ₩60,793 billion (excluding discontinued operations), or 31.4% of our total loans, as of December 31, 2013. As of December 31, 2013, Won-denominated loans to small- and medium-sized enterprises that were classified as substandard or below were ₩2,047 billion (excluding discontinued operations), representing 3.4% of such loans to those enterprises. See “Item 4B. Business Overview—Corporate Banking—Small and Medium-Sized Enterprise Banking.” We recorded charge-offs of ₩517 billion in respect of our Won-denominated loans to

 

11


Table of Contents

small- and medium-sized enterprises in 2013, compared to charge-offs of ₩643 billion in 2012 and ₩532 billion in 2011 (excluding discontinued operations for all years). According to data compiled by the Financial Supervisory Service, the industry-wide delinquency ratios for Won-denominated loans to small- and medium-sized enterprises decreased in 2012 and 2013. The delinquency ratio for small- and medium-sized enterprises is calculated as the ratio of (1) the outstanding balance of such loans in respect of which either principal or interest payments are overdue by one month or more to (2) the aggregate outstanding balance of such loans. Our delinquency ratio for such loans denominated in Won was 1.6% as of December 31, 2011, 1.3% as of December 31, 2012 and 1.5% (excluding discontinued operations) as of December 31, 2013. Our delinquency ratio may increase further in 2014 as a result of, among other things, adverse economic conditions in Korea and globally. See “—Other risks relating to our business—Difficult conditions in the global financial markets could adversely affect our results of operations and financial condition.” Accordingly, we may be required to take measures to decrease our exposures to these customers.

In light of the deteriorating financial condition and liquidity position of small- and medium-sized enterprises in Korea as a result of the global financial crisis commencing in the second half of 2008, the Korean government introduced measures intended to encourage Korean banks to provide financial support to small- and medium-sized enterprise borrowers. For example, the Korean government requested Korean banks, including Woori Bank to establish a “fast track” program to provide liquidity assistance to small- and medium-sized enterprises on an expedited basis. Under the “fast track” program established by Woori Bank, which is currently expected to be effective through December 31, 2014, liquidity assistance is provided to small- and medium-sized enterprise borrowers applying for such assistance, in the form of new short term loans or maturity extensions or interest rate adjustments with respect to existing loans, after expedited credit review and approval by such banks. The overall prospects for the Korean economy in 2014 and beyond remain uncertain, and the Korean government may extend or renew existing or past policies and initiatives or introduce new policies or initiatives to encourage Korean banks to provide financial support to small- and medium-sized enterprises. We believe that, to date, our participation in such government-led initiatives (primarily through the “fast track” program) has not caused us to extend a material amount of credit that we would not have otherwise extended nor materially impacted our results of operations and financial condition in general. The aggregate amount of outstanding small- and medium-sized enterprise loans made by Woori Bank under the “fast track” program was ₩93 billion as of December 31, 2013, which represented 0.16% of its total small- and medium-sized enterprise loan portfolio as of such date. Furthermore, loans made by us under the “fast track” program are partially guaranteed by the Korean government’s public financial institutions, including the Korea Credit Guarantee Fund and the Korea Technology Finance Corporation. However, there can be no assurance that our future participation in such government-led initiatives would not lead us to extend credit to small- and medium-sized enterprise borrowers that we would not otherwise extend, or offer terms for such credit that we would not otherwise offer, in the absence of such initiatives. Furthermore, there is no guarantee that the financial condition and liquidity position of our small- and medium-sized enterprise borrowers benefiting from such initiatives will improve sufficiently for them to service their debt on a timely basis, or at all. Accordingly, increases in our exposure to small- and medium-sized enterprises resulting from such government-led initiatives may have a material adverse effect on our results of operations and financial condition.

Many small- and medium-sized enterprises represent sole proprietorships or very small businesses dependent on a relatively limited number of suppliers or customers and tend to be affected to a greater extent than large corporate borrowers by fluctuations in the Korean and global economy. In addition, small- and medium-sized enterprises often maintain less sophisticated financial records than large corporate borrowers. Therefore, it is generally more difficult for us to judge the level of risk inherent in lending to these enterprises, as compared to large corporations.

In addition, many small- and medium-sized enterprises have close business relationships with large corporations in Korea, primarily as suppliers. Any difficulties encountered by those large corporations would likely hurt the liquidity and financial condition of related small- and medium-sized enterprises, including those to which we have exposure, also resulting in an impairment of their ability to repay loans.

Financial difficulties experienced by small- and medium-sized enterprises as a result of, among other things, adverse economic conditions in Korea and globally, as well as aggressive marketing and intense competition

 

12


Table of Contents

among banks to lend to this segment in recent years, have led to a deterioration in the asset quality of our loans to this segment in the past and such factors may lead to a deterioration of asset quality in the future. Any such deterioration would result in increased charge-offs and higher provisioning and reduced interest and fee income from this segment, which would have an adverse impact on our financial condition and results of operations.

We have exposure to Korean construction and shipbuilding companies, and financial difficulties of these companies may adversely impact us.

As of December 31, 2013, the total amount of loans provided by us to construction and shipbuilding companies in Korea amounted to ₩6,810 billion and ₩2,013 billion (in each case excluding discontinued operations), or 3.5% and 1.0% of our total loans, respectively. We also have other exposures to Korean construction and shipbuilding companies, including in the form of guarantees extended for the benefit of such companies and debt and equity securities of such companies held by us. In the case of shipbuilding companies, such exposures include refund guarantees extended by us on behalf of shipbuilding companies to cover their obligation to return a portion of the ship order contract amount to customers in the event of performance delays or defaults under shipbuilding contracts. In the case of construction companies, we also have potential exposures in the form of guarantees provided to us by general contractors with respect to financing extended by us for residential and commercial real estate development projects, as well as commitments to purchase asset-backed securities secured by the assets of companies in the construction industry and other commitments we enter into relating to project financing for such real estate projects which may effectively function as guarantees.

The construction industry in Korea has experienced a downturn in recent years, due to excessive investment in residential property development projects, stagnation of real property prices and reduced demand for residential property, especially in areas outside of Seoul, including as a result of the deterioration of the Korean economy. The shipbuilding industry in Korea has also experienced a severe downturn in recent years due to a significant decrease in ship orders, primarily due to adverse conditions in the global economy and the resulting slowdown in global trade. In response to the deteriorating financial condition and liquidity position of borrowers in the construction and shipbuilding industries, which were disproportionately impacted by adverse economic developments in Korea and globally, the Korean government implemented a program in the first half of 2009 to promote expedited restructuring of such borrowers by their Korean creditor financial institutions, under the supervision of major commercial banks. In accordance with such program, 24 construction companies and five shipbuilding companies became subject to workout in 2009, following review by their creditor financial institutions (including us) and the Korean government. In addition, in June 2010, the Financial Services Commission and the Financial Supervisory Service announced that, following credit risk evaluations conducted by six creditor financial institutions (including us) of companies in Korea with outstanding debt of ₩50 billion or more, 65 companies were selected by such financial institutions for restructuring in the form of workout, liquidation or court receivership. Of such 65 companies, 16 were construction-related companies and three were shipbuilding companies. The Financial Supervisory Service announced the results of subsequent credit risk evaluations conducted by creditor financial institutions (including us) of companies in Korea in July 2012, in which 36 companies with outstanding debt of ₩50 billion or more (17 of which were construction-related companies, and two of which were shipbuilding companies) were selected by such financial institutions for restructuring in the form of workout, liquidation or court receivership, and in July 2013, in which 40 companies with outstanding debt of ₩50 billion or more (20 of which were construction-related companies, and three of which were shipbuilding companies) were similarly selected for restructuring. There is no assurance, however, that these measures will be successful in stabilizing the Korean construction and shipbuilding industries.

The allowance for credit losses that we have established against our credit exposures to Korean construction and shipbuilding companies may not be sufficient to cover all future losses arising from these and other exposures. If the credit quality of our exposures to Korean construction and shipbuilding companies declines, we may incur substantial additional provisions for credit loss, which could adversely impact our results of operations and financial condition. Furthermore, although a portion of our loans to construction and shipbuilding companies are secured by collateral, such collateral may not be sufficient to cover uncollectible amounts in respect of such loans.

 

13


Table of Contents

We also have construction-related credit exposures under our project financing loans for real estate development projects in Korea. In light of the general deterioration in the asset quality of real estate project financing loans in Korea in recent years, Korean banks, including Woori Bank, implemented a uniform set of guidelines regarding the evaluation of real estate development projects and asset quality classification of project financing loans for such projects in September 2010. Under these guidelines, which became effective from the third quarter of 2010, Korean banks are generally required to apply more stringent criteria in evaluating the asset quality of real estate project financing loans. As a result, we may be required to establish additional allowances with respect to our outstanding real estate project financing loans, which could adversely affect our financial condition and results of operations.

We have exposure to the largest Korean commercial conglomerates, known as “chaebols,” and, as a result, financial difficulties of chaebols may have an adverse impact on us.

Of our 20 largest corporate exposures (including loans, debt and equity securities, credit-related commitments and other exposures) as of December 31, 2013, seven were to companies that were members of the 30 largest chaebols in Korea. As of that date, the total amount of our exposures to the 30 largest chaebols was ₩25,306 billion (excluding discontinued operations), or 7.5% of our total exposures. If the credit quality of our exposures to chaebols declines, we could incur additional provisions for credit loss, which would hurt our results of operations and financial condition. See “Item 4B. Business Overview—Assets and Liabilities—Loan Portfolio—Exposure to Chaebols.”

The allowances we have established against these exposures may not be sufficient to cover all future losses arising from these exposures. In addition, in the case of companies that are in or in the future enter into workout, restructuring, reorganization or liquidation proceedings, our recoveries from those companies may be limited. We may, therefore, experience future losses with respect to these exposures.

A large portion of our exposure is concentrated in a relatively small number of large corporate borrowers, which increases the risk of our corporate credit portfolio.

As of December 31, 2013, our 20 largest exposures to corporate borrowers totaled ₩37,963 billion (excluding discontinued operations), which represented 11.3% of our total exposures. As of that date, our single largest corporate exposure was to the Bank of Korea, to which we had outstanding credits in the form of debt securities of ₩5,111 billion and loans in Won of ₩2,790 billion, representing 2.0% of our total exposures in the aggregate. Aside from exposure to the Korean government and government-related agencies, our next largest exposure was to Hyundai Heavy Industries, to which we had outstanding exposure of ₩1,990 billion representing 0.6% of our total exposures. Any deterioration in the financial condition of our large corporate borrowers may require us to record substantial additional allowances and may have a material adverse impact on our results of operations and financial condition.

We have exposure to companies that are currently or may in the future be put in restructuring, and we may suffer losses as a result of additional provisions for credit loss required or the adoption of restructuring plans with which we do not agree.

As of December 31, 2013, our credit exposures to companies that were in workout or corporate restructuring amounted to ₩2,620 billion (excluding discontinued operations) or 0.8% of our total credit exposures, of which ₩1,780 billion or 67.9% was classified as substandard or below and substantially all of which was classified as impaired. As of the same date, our allowance for credit losses on these credit exposures amounted to ₩933 billion, or 35.6% of these exposures. These allowances may not be sufficient to cover all future losses arising from our credit exposure to these companies. Furthermore, we have other exposure to such companies, in the form of debt and equity securities of such companies held by us (including equity securities we acquired as a result of debt-to-equity conversions). Including such securities, our exposures as of December 31, 2013 to companies in workout or restructuring amounted to ₩2,733 billion, or 0.8% of our total exposures. Our exposures to such companies may also increase in the future, including as a result of adverse conditions in the

 

14


Table of Contents

Korean economy. In addition, in the case of borrowers that are or become subject to workout, we may be forced to restructure our credits pursuant to restructuring plans approved by other creditor financial institutions of the borrower, or to dispose of our credits to other creditors on unfavorable terms, which may adversely affect our results of operations and financial condition.

We have exposure to member companies of the STX Group, and financial difficulties of these companies may adversely impact us.

Certain member companies of the STX Group, one of Korea’s top-30 chaebols, have been experiencing financial difficulties, including as a result of the prolonged slowdown in the Korean construction and shipbuilding industries since the global financial crisis commencing in the second half of 2008. STX Construction Co., Ltd. and STX Pan Ocean Co., Ltd. have been in court receivership with the Seoul Central District Court since April and June 2013, respectively. Certain other member companies of the STX Group, including STX Corporation, which is the holding company of the STX Group, and its subsidiaries STX Offshore & Shipbuilding Co., Ltd., STX Heavy Industries Co., Ltd. and STX Engine Co., Ltd., have commenced a voluntary, out-of-court debt restructuring program. Other member companies of the STX Group may also undergo out-of-court debt restructuring programs, file for court receivership or default on their debt in the future as a result of financial or operational difficulties or otherwise. As of December 31, 2013, our aggregate credit exposures to the member companies of the STX Group amounted to ₩1,268 billion (excluding discontinued operations), consisting primarily of loans extended to STX Construction, STX Corporation, STX Offshore & Shipbuilding, STX Heavy Industries and STX Engine. As of December 31, 2013, our allowance for credit losses with respect to such credit exposures to the STX Group amounted to ₩529 billion, of which ₩431 billion were with respect to credit exposures to STX Corporation, STX Offshore & Shipbuilding, STX Heavy Industries and STX Engine. Moreover, the terms of the restructuring program currently under negotiation may require the creditors, including us, to extend additional credit to such companies. To the extent that we need to set aside significant additional allowances in 2014 and beyond with respect to our current and any additional exposures to the member companies of the STX Group, such allowances may have a material adverse impact on our results of operations. Furthermore, such allowances may not be sufficient to cover all future losses arising from our exposures to these companies. In the event that the financial condition of these companies deteriorates further in the future, we may be required to record additional allowances for credit losses, as well as charge-offs and valuation or impairment losses, which may have a material adverse effect on our financial condition and results of operations.

Risks relating to our consumer credit portfolio

We may experience increases in delinquencies in our consumer loan and credit card portfolios.

In recent years, consumer debt has increased rapidly in Korea. Our portfolio of consumer loans amounted to ₩72,914 billion as of December 31, 2011, ₩78,811 billion as of December 31, 2012 and ₩71,041 billion (excluding discontinued operations) as of December 31, 2013. Our credit card portfolio amounted to ₩4,592 billion as of December 31, 2011, ₩4,505 billion as of December 31, 2012 and ₩4,209 billion (excluding discontinued operations) as of December 31, 2013. As of December 31, 2013, our consumer loans and credit card receivables represented 36.7% and 2.2% of our total lending, respectively. See “Item 4B. Business Overview—Consumer Banking—Lending Activities” and “Item 4B. Business Overview—Credit Cards—Products and Services.”

The growth in our consumer loan portfolio in recent years, together with adverse economic conditions in Korea and globally, may lead to increasing delinquencies and a deterioration in asset quality. The amount of our consumer loans classified as substandard or below was ₩396 billion (or 0.5% of our consumer loan portfolio) as of December 31, 2011, ₩441 billion (or 0.6% of our consumer loan portfolio) as of December 31, 2012 and ₩454 billion (excluding discontinued operations) (or 0.6% of our consumer loan portfolio) as of December 31, 2013. We charged off consumer loans amounting to ₩180 billion in 2013, as compared to ₩190 billion in 2012

 

15


Table of Contents

and ₩89 billion in 2011, and recorded provisions for credit loss in respect of consumer loans of ₩238 billion in 2013, as compared to ₩242 billion in 2012 and ₩158 billion in 2011. Within our consumer loan portfolio, the outstanding balance of general purpose household loans, which, unlike mortgage or home equity loans, are often unsecured and therefore tend to carry a higher credit risk, amounted to ₩27,935 billion, or 28.7% of our total outstanding consumer loans, as of December 31, 2011, ₩22,785 billion, or 28.9% of our total outstanding consumer loans, as of December 31, 2012 and ₩20,673 billion (excluding discontinued operations), or 29.1% of our total outstanding consumer loans, as of December 31, 2013.

In our credit card segment, outstanding balances overdue by 30 days or more amounted to ₩92 billion, or 2.0% of our credit card receivables, as of December 31, 2011, ₩87 billion, or 1.9% of our credit card receivables, as of December 31, 2012 and ₩76 billion (excluding discontinued operations), or 1.8% of our credit card receivables, as of December 31, 2013. In line with industry practice, we have restructured a portion of our delinquent credit card account balances as loans. As of December 31, 2013, these restructured loans amounted to ₩73 billion, or 1.7% of our credit card balances. Because these restructured loans are not initially recorded as being delinquent, our delinquency ratios do not fully reflect all delinquent amounts relating to our credit card balances. Including all restructured loans, outstanding balances overdue by 30 days or more accounted for 3.4% of our credit card balances as of December 31, 2013. We charged off credit card balances amounting to ₩172 billion in 2013, as compared to ₩186 billion in 2012 and ₩142 billion in 2011, and recorded provisions for credit loss in respect of credit card balances of ₩125 billion (excluding discontinued operations) in 2013, as compared to ₩152 billion in 2012 and ₩115 billion in 2011. Delinquencies may increase in the future as a result of, among other things, adverse economic conditions in Korea, difficulties experienced by other credit card issuers that adversely affect our customers, additional government regulation or the inability of Korean consumers to manage increased household debt. In addition, as a part of our strategy to enhance our credit card operations and increase its synergies with our other businesses, in April 2013, we effected a horizontal spin-off of the credit card business of Woori Bank. As a result, the former credit card business of Woori Bank is operated by a newly established wholly-owned subsidiary of ours, Woori Card Co., Ltd. However, we may not be able to realize the anticipated benefits of this spin-off due to various factors, including increased expenses arising from the operation of a separate credit card company, unexpected business disruptions, difficulties in reorganizing personnel and administrative functions and potential loss of customers.

A deterioration of the asset quality of our consumer loan and credit card portfolios would require us to record increased provisions for credit loss and charge-offs and will adversely affect our financial condition and results of operations. In addition, our large exposure to consumer debt means that we are exposed to changes in economic conditions affecting Korean consumers. Accordingly, economic difficulties in Korea that hurt those consumers could result in further deter