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 4B. Business Overview
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 Shareholders and Related Party Transactions
Item 7A. Major Shareholders
Item 7B. Related Party Transactions
Item 7C. Interest of Experts and Counsel
Item 8. Financial Information
Item 8A. Consolidated Statements and Other 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 d161925dex11.htm
EX-12.1 d161925dex121.htm
EX-13.1 d161925dex131.htm

Woori Bank Earnings 2015-12-31

Balance SheetIncome StatementCash Flow

20-F 1 d161925d20f.htm FORM 20-F Form 20-F
Table of Contents

As filed with the Securities and Exchange Commission on April 29, 2016

 

 

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, 2015

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 Bank

(Exact name of Registrant as specified in its charter)

 

 

Woori Bank

(Translation of Registrant’s name into English)

 

 

The Republic of Korea

(Jurisdiction of incorporation or organization)

51, Sogong-ro, Jung-gu, Seoul 04632, Korea

(Address of principal executive offices)

Kyung Cheon Lim

51, Sogong-ro, Jung-gu, Seoul 04632, Korea

Telephone No.: +82-2-2125-2085

Facsimile No.: +82-2-0505002-8851

(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.

673,271,226 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

     12   
 

Item 3C.

 

Reasons for the Offer and Use of Proceeds

     12   
 

Item 3D.

 

Risk Factors

     12   

Item 4.

 

Information on the Company

     34   
 

Item 4A.

 

History and Development of the Company

     34   
 

Item 4B.

 

Business Overview

     41   
 

Item 4C.

 

Organizational Structure

     109   
 

Item 4D.

 

Property, Plants and Equipment

     109   

Item 4.A.

 

Unresolved Staff Comments

     110   

Item 5.

 

Operating and Financial Review and Prospects

     110   
 

Item 5A.

 

Operating Results

     110   
 

Item 5B.

 

Liquidity and Capital Resources

     141   
 

Item 5C.

 

Research and Development, Patents and Licenses, etc.

     146   
 

Item 5D.

 

Trend Information

     146   
 

Item 5E.

 

Off-Balance Sheet Arrangements

     147   
 

Item 5F.

 

Tabular Disclosure of Contractual Obligations

     147   
 

Item 5G.

 

Safe Harbor

     147   

Item 6.

 

Directors, Senior Management and Employees

     147   
 

Item 6A.

 

Directors and Senior Management

     147   
 

Item 6B.

 

Compensation

     150   
 

Item 6C.

 

Board Practices

     150   
 

Item 6D.

 

Employees

     153   
 

Item 6E.

 

Share Ownership

     154   

Item 7.

 

Major Shareholders and Related Party Transactions

     154   
 

Item 7A.

 

Major Shareholders

     154   
 

Item 7B.

 

Related Party Transactions

     155   
 

Item 7C.

 

Interest of Experts and Counsel

     155   

Item 8.

 

Financial Information

     155   
 

Item 8A.

 

Consolidated Statements and Other Financial Information

     155   
 

Item 8B.

 

Significant Changes

     156   

Item 9.

 

The Offer and Listing

     156   
 

Item 9A.

 

Offering and Listing Details

     156   
 

Item 9B.

 

Plan of Distribution

     157   
 

Item 9C.

 

Markets

     157   
 

Item 9D.

 

Selling Shareholders

     164   
 

Item 9E.

 

Dilution

     164   
 

Item 9F.

 

Expenses of the Issuer

     164   

Item 10.

 

Additional Information

     164   
 

Item 10A.

 

Share Capital

     165   
 

Item 10B.

 

Memorandum and Articles of Association

     165   
 

Item 10C.

 

Material Contracts

     171   
 

Item 10D.

 

Exchange Controls

     171   
 

Item 10E.

 

Taxation

     172   

 

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Table of Contents
             Page  
 

Item 10F.

 

Dividends and Paying Agents

     177   
 

Item 10G.

 

Statements by Experts

     177   
 

Item 10H.

 

Documents on Display

     177   
 

Item 10I.

 

Subsidiary Information

     177   

Item 11.

 

Quantitative and Qualitative Disclosures about Market Risk

     177   

Item 12.

 

Description of Securities Other Than Equity Securities

     199   

Item 13.

 

Defaults, Dividend Arrearages and Delinquencies

     200   

Item 14.

 

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

     200   

Item 15.

 

Controls and Procedures

     200   

Item 16.

 

Reserved

     201   
 

Item 16A.

 

Audit Committee Financial Expert

     201   
 

Item 16B.

 

Code of Ethics

     201   
 

Item 16C.

 

Principal Accountant Fees and Services

     201   
 

Item 16D.

 

Exemptions from the Listing Standards for Audit Committees

     202   
 

Item 16E.

 

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

     202   
 

Item 16F.

 

Change in Registrant’s Certifying Accountant

     202   
 

Item 16G.

 

Corporate Governance

     202   
 

Item 16H.

 

Mine Safety Disclosure

     204   

Item 17.

 

Financial Statements

     204   

Item 18.

 

Financial Statements

     204   

Item 19.

 

Exhibits

     204   

 

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.

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

Prior to November 1, 2014, we, Woori Bank, were a wholly-owned subsidiary of Woori Finance Holdings Co., Ltd. On November 1, 2014, Woori Finance Holdings merged with and into us, such that we remained as the surviving entity, and Woori Finance Holdings ceased to exist, after the merger. In connection with the merger, shareholders of Woori Finance Holdings recorded in its shareholder register as of November 1, 2014 received one share of our common stock for each share of common stock of Woori Finance Holdings they held.

As a result of the merger, the other former subsidiaries of Woori Finance Holdings, including Woori Card Co., Ltd., Woori Private Equity Co., Ltd., Woori FIS Co., Ltd., Woori Investment Bank, Ltd. and Woori Finance Research Institute Co., Ltd., became our subsidiaries. Accordingly, our overall business and operations after the merger, on a consolidated basis, are substantially identical to those of Woori Finance Holdings on a consolidated basis prior to the merger. See “Item 4A. History and Development of the Company—Privatization Plan—Merger with Woori Finance Holdings.”

The merger constituted a succession for purposes of Rule 12g-3(a) under the Securities Exchange Act of 1934, as amended, such that our common stock was deemed registered under Section 12(b) of the Exchange Act by operation of Rule 12g-3(a). Following the merger, we file reports under the Exchange Act as the successor issuer to Woori Finance Holdings.

The merger qualified as a business combination under common control for accounting purposes. Accordingly, we recognized the transferred assets and liabilities of Woori Finance Holdings at their book value and did not recognize any goodwill in connection with the merger. The consolidated financial statements included in this annual report are, as of dates and for periods prior to the date of the merger, for Woori Finance Holdings and its subsidiaries (including us) and, as of dates and for periods from and after the date of the merger, for us and our subsidiaries. For further information regarding the accounting treatment of the merger, see Note 50 of the notes to our consolidated financial statements.

Dispositions 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. The Korean government, which currently owns 51.06% of our outstanding common stock through the Korea Deposit Insurance Corporation, or the KDIC, has been implementing a privatization plan with respect to Woori Finance Holdings and its former subsidiaries, including us. Pursuant to such plan, in May 2014, Woori Finance Holdings established KJB Financial Group Co., Ltd. and KNB Financial Group Co., Ltd. through a spin-off of its 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 became the owner of the shares of Kwangju Bank previously held by Woori Finance Holdings, and KNB Financial Group became the owner of the shares of Kyongnam Bank previously held by Woori Finance Holdings. Woori Finance Holdings no longer owned any shares of Kwangju Bank or Kyongnam Bank, and neither they nor their new holding companies were its subsidiaries, after the spin-off. Following such spin-off, each of these banks was merged with its holding company, and in October 2014, the KDIC sold its 56.97% ownership interest in Kwangju Bank and Kyongnam Bank to JB Financial Group and BS Financial Group, respectively. In addition, in March 2014, Woori Finance Holdings sold its 52.0% ownership interest in Woori Financial Co., Ltd. to KB Financial Group Inc. In May 2014, Woori Finance Holdings also sold its 100.0% ownership interest in Woori Asset Management Co., Ltd. to Kiwoom Securities Co., Ltd. and sold its 100.0% ownership interest in Woori F&I to Daishin Securities Co., Ltd. In June 2014, Woori Finance Holdings sold its 37.9% ownership interest in Woori Investment & Securities Co., Ltd., its 51.6% ownership interest in Woori Aviva Life Insurance Co., Ltd. and its 100.0% ownership interest in Woori FG Savings Bank to NongHyup Financial Group Inc. in a collective sale. As a result of such sales, Woori Investment & Securities, Woori Asset Management, Woori Aviva Life Insurance, Woori FG

 

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Table of Contents

Savings Bank, Woori F&I and Woori Financial were no longer subsidiaries of Woori Finance Holdings, and it no longer owned any shares in such former subsidiaries. See “Item 4A. History and Development of the Company—Privatization Plan.”

In light of such dispositions during 2014, Kwangju Bank, Kyongnam Bank, Woori Investment & Securities, Woori Aviva Life Insurance, Woori Asset Management, Woori Financial, Woori FG Savings Bank and Woori F&I were classified as a disposal group held for distribution or sale, and their operations were accounted for as discontinued operations, in our consolidated statements of financial position and comprehensive income as of and for the year ended December 31, 2013, as well as in our consolidated statement of comprehensive income for the year ended December 31, 2014, included in this annual report. Similarly, information derived from our consolidated statement of comprehensive income for the years ended December 31, 2011 and 2012 was restated to account for such entities as discontinued operations. However, information derived from our consolidated statements of financial position as of December 31, 2011 and 2012 was not so restated. Accordingly, in general, our financial information as of December 31, 2013 and 2014 and for the years ended December 31, 2011, 2012, 2013 and 2014 appearing in this annual report does not include financial data with respect to such discontinued operations, while our financial information as of December 31, 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, 2011 and 2012 may not be directly comparable to our financial information as of and for other dates and periods.

In this annual report:

 

   

unless otherwise indicated or required by the context, “we,” “us,” “our” and similar terms refer to Woori Bank and its subsidiaries and, for periods prior to the merger of Woori Finance Holdings with and into Woori Bank, refer to Woori Finance Holdings and its subsidiaries for such periods (including Woori Bank), but excluding those accounted for as 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, 2015, which was ₩1,169.3 = US$1.00.

 

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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” 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;

 

   

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;

 

   

foreign exchange rates;

 

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Table of Contents
   

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, 2011, 2012, 2013, 2014 and 2015 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, 2011, 2012, 2013, 2014 and 2015 have been audited by Deloitte Anjin LLC, an independent registered public accounting firm.

The Korean government, which currently owns 51.06% of our outstanding common stock through the KDIC, has been implementing a privatization plan with respect to Woori Finance Holdings and its former subsidiaries, including us. As a result of the dispositions of Woori Finance Holdings’ ownership interests in Kwangju Bank, Kyongnam Bank, Woori Investment & Securities, Woori Aviva Life Insurance, Woori Asset Management, Woori Financial, Woori FG Savings Bank and Woori F&I in 2014, these former subsidiaries of Woori Finance Holdings were 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, 2011, 2012, 2013 and 2014. 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.

 

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Consolidated Statement of Comprehensive Income Data

 

     Year ended December 31,  
     2011(1)     2012(1)(2)     2013(1)(2)     2014(1)(2)     2015(2)     2015(2)(3)  
     (in billions of Won except per share data)     (in millions of
US$ except per
share data)
 

Interest income

   11,095      10,891      9,493      9,211      8,698      US$ 7,438   

Interest expense

     (6,206     (6,043     (5,001     (4,718     (3,936     (3,366
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     4,889        4,848        4,492        4,493        4,762        4,072   

Fees and commissions income

     1,625        1,687        1,565        1,598        1,757        1,503   

Fees and commissions expense

     (444     (498     (639     (681     (781     (668
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net fees and commissions income

     1,181        1,189        926        917        976        835   

Dividend income

     143        101        88        97        103        88   

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

     137        (365     124        190        240        206   

Net gain (loss) on available-for-sale financial assets

     1,027        533        (85     (69     (3     (3

Impairment losses due to credit loss

     (1,923     (1,799     (2,277     (1,097     (966     (826

Net other operating expenses(4)

     (3,163     (2,958     (3,028     (3,633     (3,761     (3,216
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     2,291        1,549        240        898        1,351        1,156   

Share of gain (loss) of joint ventures and associates

     (39     45        (1     (68     (70     (60

Other net non-operating income (expense)

     90        44        49        4        171        146   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-operating income (loss)

     51        89        48        (64     101        86   

Net income before income tax expense

     2,342        1,638        288        834        1,452        1,242   

Income tax expense

     559        357        35        288        377        322   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income from continuing operations

     1,783        1,281        253        546        1,075        920   

Net income (loss) from discontinued operations

     668        566        (966     662                 

Net income (loss)

   2,451      1,847      (713   1,208      1,075      US$ 920   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Remeasurement of the net defined benefit liability

     (18     (51     9        (52     (78     (67
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Items that will not be reclassified to profit or loss

     (18     (51     9        (52     (78     (67

Gain (loss) on available-for-sale financial assets

     (375     (349     (51     (75     72        61   

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

     (38     57        (6     (2     3        3   

Gain (loss) on foreign currency translation of foreign operations

     25        (108     (60     48        34        29   

Gain (loss) on valuation of cash flow hedge

     3        13        (2     (27              
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Items that may be reclassified to profit or loss

     (385     (387     (119     (56     109        93   

Other comprehensive gain (loss), net of tax

     (403     (438     (110     (108     31        26   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

   2,048      1,409      (823   1,100      1,106      US$ 946   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to owners

   2,154      1,633      (538   1,214      1,059      US$ 906   

Income from continuing operations

     1,636        1,164        162        435        1,059        906   

Income (loss) from discontinued operations

     518        469        (700     779                 

Net income (loss) attributable to non-controlling interests

   297      214      (175   (6   16      US$ 14   

Income from continuing operations

     147        117        91        111        16        14   

Income (loss) from discontinued operations

     150        97        (266     (117              

Comprehensive income (loss) attributable to owners

     1,729        1,177        (623     1,192        1,095        936   

Comprehensive income (loss) attributable to non-controlling interests

     319        232        (200     (92     11        10   

Basic and diluted earnings (loss) from continuing and discontinued operations per share

   2,670      1,993      (704   1,621      1,301      US$ 1.52   

Basic and diluted earnings from continuing operations per share

     2,027        1,411        165        536        1,301        1.52   

Per common share data:

            

Net income (loss) per share—basic

   2,670      1,993      (704   1,621      1,301      US$ 1.52   

Weighted average common shares outstanding—basic (in thousands)

     806,013        806,013        806,013        718,265        673,271        673,271   

Net income (loss) per share—diluted

   2,670      1,993      (704   1,621      1,301      US$ 1.52   

Weighted average common shares outstanding—diluted (in thousands)

     806,013        806,013        806,013        718,265        673,271        673,271   

Cash dividends paid per share

   250      250           500      500      US$ 0.58   

 

(1)

The amounts for 2011, 2012, 2013 and 2014 reflect the classification of certain former subsidiaries as discontinued operations.

 

5


Table of Contents
(2)

The amounts for 2013, 2014 and 2015 reflect a change in our accounting policies pursuant to the adoption of IFRS 10, Consolidated Financial Statements, which became effective beginning in 2013. Pursuant to IFRS 10, corresponding amounts for 2012 (but not for 2011) were restated to retroactively apply such change.

(3)

Won amounts are expressed in U.S. dollars at the rate of ₩1,169.3 to US$1.00, the noon buying rate in effect on December 31, 2015 as quoted by the Federal Reserve Bank of New York in the United States.

(4)

For a description of “net other operating expenses,” see Note 40 of the notes to our consolidated financial statements.

 

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Table of Contents

Consolidated Statement of Financial Position Data

 

    As of December 31,  
    2011     2012(1)     2013(1)(2)     2014(1)     2015(1)     2015(1)(3)  
    (in billions of Won)    

(in millions

of US$)

 

Assets

           

Cash and cash equivalents

  6,417      5,778      5,478      5,963      6,644      US$ 5,682   

Financial assets at fair value through profit or loss

    25,600        27,352        4,806        4,554        5,133        4,390   

Available-for-sale financial assets

    19,672        18,889        17,085        18,811        17,171        14,685   

Held-to-maturity financial assets

    20,036        18,685        12,039        13,044        13,622        11,649   

Loans and receivables

    235,160        250,276        211,912        223,370        244,842        209,392   

Investments in joint ventures and associates

    928        1,038        618        648        644        551   

Investment properties

    499        492        341        358        351        301   

Premises and equipment

    3,134        3,186        2,536        2,501        2,471        2,113   

Intangible assets and goodwill

    448        433        269        296        420        359   

Assets held for sale

    56        83        1        8        18        15   

Current tax assets

    57        39        143        5        7        6   

Deferred tax assets

    80        155        155        258        210        180   

Derivative assets

    327        281        131        196        183        157   

Other assets(4)

    377        415        179        145        143        123   

Disposal group held for sale

                  34,685                        

Disposal group held for distribution to owners

                  50,312                        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  312,791      327,102      340,690      270,157      291,859      US$ 249,603   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities

           

Financial liabilities at fair value through profit or loss

  9,622      10,986      2,507      2,675      3,461      US$ 2,960   

Deposits due to customers

    195,930        204,210        175,324        188,516        209,142        178,861   

Borrowings

    34,667        33,480        18,232        17,708        20,034        17,133   

Debentures

    29,266        27,960        21,678        24,796        21,899        18,728   

Provisions

    892        864        685        692        517        442   

Net defined benefit liability

    120        166        72        75        99        85   

Current tax liabilities

    274        179        10        299        109        93   

Deferred tax liabilities

    260        134        49        22        19        17   

Derivative liabilities

    33        38        2                        

Other financial liabilities(5)

    19,084        25,544        19,914        16,890        16,964        14,508   

Other liabilities(6)

    570        508        410        391        305        261   

Liabilities directly associated with disposal group held for sale

                  32,048                        

Liabilities directly associated with disposal group held for distribution to owners

                  46,882                        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

  290,718      304,069      317,813      252,064      272,549      US$ 233,088   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity

           

Owners’ equity

           

Capital stock

  4,030      4,030      4,030      3,381      3,381      US$ 2,892   

Hybrid securities

    309        498        498        2,539        3,334        2,851   

Capital surplus

    176        174        177        291        294        252   

Other equity(7)

    563        112        (35     (2,393     (1,547     (1,323

Retained earnings

    12,446        13,881        13,113        14,165        13,726        11,739   

Equity directly associated with disposal group held for sale

                  30                        

Equity directly associated with disposal group held for distribution to owners

                  36                        

Non-controlling interests

    4,549        4,338        5,028        110        122        104   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

  22,073      23,033      22,877      18,093      19,310      US$ 16,515   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

  312,791      327,102      340,690      270,157      291,859      US$ 249,603   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

The amounts as of December 31, 2013, 2014 and 2015 reflect a change in our accounting policies pursuant to the adoption of IFRS 10, Consolidated Financial Statements, which became effective beginning in 2013. Pursuant to IFRS 10, corresponding amounts as of December 31, 2012 (but not as of December 31, 2011) were restated to retroactively apply such change.

(2)

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

(3)

Won amounts are expressed in U.S. dollars at the rate of ₩1,169.3 to US$1.00, the noon buying rate in effect on December 31, 2015 as quoted by the Federal Reserve Bank of New York in the United States.

(4)

For a description of “other assets,” see Note 19 of the notes to our consolidated financial statements.

(5)

For a description of “other financial liabilities,” see Note 25 of the notes to our consolidated financial statements.

(6)

For a description of “other liabilities,” see Note 25 of the notes to our consolidated financial statements.

(7)

For a description of “other equity,” see Note 30 of the notes to our consolidated financial statements.

 

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Table of Contents

Profitability Ratios and Other Data

 

     Year ended December 31,  
          2011(1)              2012(1)(2)              2013(1)(2)              2014(1)(2)              2015(2)      
     (in billions of Won except percentages)  

Return on average assets(3)

     0.90     0.67     (0.22 )%      0.47     0.37

Return on average equity(4)

     14.20        10.46        (3.45     6.74        5.62   

Net interest spread(5)

     2.01        1.94        1.83        1.72        1.67   

Net interest margin(6)

     2.14        2.07        1.94        1.82        1.74   

Cost-to-income ratio(7)

     46.12        50.79        59.30        68.38        66.22   

Average equity as a percentage of average total assets

     6.36        6.39        6.50        7.03        6.63   

Total revenue(8)

   14,027      12,847      11,185      11,027      10,795   

Operating expense(9)

     9,813        9,499        8,668        9,032        8,478   

Operating margin(10)

     4,214        3,348        2,517        1,995        2,317   

Operating margin as a percentage of total revenue

     30.04     26.06     22.50     18.09     21.46

 

(1)

The amounts for 2011, 2012, 2013 and 2014 exclude certain former subsidiaries classified as discontinued operations.

(2)

The amounts for 2013, 2014 and 2015 reflect a change in our accounting policies pursuant to the adoption of IFRS 10, Consolidated Financial Statements, which became effective beginning in 2013. Pursuant to IFRS 10, corresponding amounts for 2012 (but not for 2011) were restated to retroactively apply such change.

(3)

Represents net income attributable to owners as a percentage of average total assets. Average balances are based on daily balances for us and on quarterly balances for all of our 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 us and on quarterly balances for all of our 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 due to 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 and net gain (loss) on available-for-sale financial assets.

The following table shows how total revenue is calculated:

 

     Year ended December 31,  
     2011(a)      2012(a)(b)      2013(a)(b)      2014(a)(b)      2015(b)  
     (in billions of Won)  

Interest income

   11,095       10,891       9,493       9,211       8,698   

Fees and commissions income

     1,625         1,687         1,565         1,598         1,757   

Dividend income

     143         101         88         97         103   

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

     137         (365      124         190         240   

Net gain (loss) on available-for-sale financial assets

     1,027         533         (85      (69      (3
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total revenue

   14,027       12,847       11,185       11,027       10,795   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a)

The amounts for 2011, 2012, 2013 and 2014 exclude certain former subsidiaries classified as discontinued operations.

  (b)

The amounts for 2013, 2014 and 2015 reflect a change in our accounting policies pursuant to the adoption of IFRS 10, Consolidated Financial Statements, which became effective beginning in 2013. Pursuant to IFRS 10, corresponding amounts for 2012 (but not for 2011) were restated to retroactively apply such change.

(9)

Represents interest expense, fees and commissions expense and net other operating expense, excluding impairment losses due to credit loss of ₩1,923 billion, ₩1,799 billion, ₩2,277 billion, ₩1,097 billion and ₩966 billion for 2011, 2012, 2013, 2014 and 2015, respectively.

 

8


Table of Contents

The following table shows how operating expense is calculated:

 

     Year ended December 31,  
     2011(a)      2012(a)(b)      2013(a)(b)      2014(a)(b)      2015(b)  
     (in billions of Won)  

Interest expense

   6,206       6,043       5,001       4,718       3,936   

Fees and commissions expense

     444         498         639         681         781   

Net other operating expenses

     3,163         2,958         3,028         3,633         3,761   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating expense

   9,813       9,499       8,668       9,032       8,478   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
  (a)

The amounts for 2011, 2012, 2013 and 2014 exclude certain former subsidiaries classified as discontinued operations.

  (b)

The amounts for 2013, 2014 and 2015 reflect a change in our accounting policies pursuant to the adoption of IFRS 10, Consolidated Financial Statements, which became effective beginning in 2013. Pursuant to IFRS 10, corresponding amounts for 2012 (but not for 2011) were restated to retroactively apply such change.

(10)

Represents total revenue less operating expense.

Asset Quality Data

 

    

 

    As of December 31,  
     2011     2012(1)     2013(1)(2)     2014(1)     2015(1)  
           (in billions of Won, except percentages)  

Total loans(3)

   212,492      221,028      193,766      207,077      227,169   

Total non-performing loans(4)

     3,780        3,766        4,996        3,818        2,909   

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

     238        698        690        692        339   

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

     4,018        4,464        5,685        4,510        3,248   

Total allowance for credit losses

     3,759        3,565        3,337        2,609        2,051   

Non-performing loans as a percentage of total loans

     1.78     1.70     2.58     1.84     1.28

Non-performing loans as a percentage of total assets

     1.21        1.15        1.47        1.41        1.00   

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

     1.89        2.02        2.93        2.18        1.43   

Allowance for credit losses as a percentage of total loans

     1.77        1.61        1.72        1.26        0.90   

 

(1)

The amounts as of December 31, 2013, 2014 and 2015 reflect a change in our accounting policies pursuant to the adoption of IFRS 10, Consolidated Financial Statements, which became effective beginning in 2013. Pursuant to IFRS 10, corresponding amounts as of December 31, 2012 (but not as of December 31, 2011) were restated to retroactively apply such change.

(2)

The amounts as of December 31, 2013 exclude certain former subsidiaries classified 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, 2011 and 2012 exclude securitized loans purchased from third parties and held by Woori F&I, a former wholly-owned subsidiary, in the aggregate amount of ₩980 billion and ₩1,207 billion, respectively. While such securitized loans qualify as other impaired loans under IFRS and are accounted for as such in our consolidated financial statements, the expected losses on such securitized loans were reflected in the determination of their fair value at initial recognition. Accordingly, we believe that the exclusion of such securitized loans from other impaired loans eliminates the potential distorting effect they might have on the ratio of total non-performing loans and other impaired loans to total loans as of such dates presented in the above table. Other impaired loans as of December 31, 2013 exclude such securitized loans that were held by Woori F&I as of such date, which were classified as part of a disposal group held for sale. Woori F&I was sold in April 2014. See “Item 4A. History and Development of the Company—Privatization Plan.”

 

9


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 for 2013 and 2014):

 

    Year ended December 31,  
    2013     2014     2015  
    Average
Balance(1)
    Interest
Income(2)
    Average
Yield
    Average
Balance(1)
    Interest
Income(2)
    Average
Yield
    Average
Balance(1)
    Interest
Income(2)
    Average
Yield
 
    (in billions of Won, except percentages)  

Assets

                 

Interest-earning assets

                 

Due from banks

  9,088      120        1.32   11,710      104        0.89   12,483      81        0.65

Loans(3)

                 

Commercial and industrial

    82,875        4,062        4.90        89,030        3,992        4.48        95,241        3,502        3.68   

Trade financing

    12,386        220        1.78        12,371        188        1.52        13,762        200        1.45   

Other commercial

    9,584        351        3.66        8,997        294        3.27        9,890        241        2.44   

General purpose household(4)

    58,770        2,694        4.58        57,720        2,396        4.15        59,003        2,147        3.64   

Mortgage

    15,979        686        4.29        23,970        917        3.83        34,770        1,113        3.20   

Credit cards(2)

    4,197        337        8.03        4,678        397        8.49        5,547        497        8.96   
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total loans

    183,791        8,350        4.54        196,766        8,184        4.16        218,213        7,700        3.53   

Securities

                 

Trading

    3,753        109        2.90        2,639        71        2.69        2,359        63        2.67   

Investment(5)

    26,349        860        3.26        28,076        802        2.86        29,513        808        2.74   
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total securities

    30,102        969        3.22        30,715        873        2.84        31,872        871        2.73   

Other

    8,548        54        0.63        7,954        50        0.63        10,707        46        0.43   
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average interest earning assets

    231,529        9,493        4.10        247,145        9,211        3.73        273,275        8,698        3.18   
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average non-interest earning assets

    8,595                      9,148                      10,892                 
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average assets

  240,124      9,493        3.95   256,293      9,211        3.59   284,167      8,698        3.06
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

 

    Year ended December 31,  
    2013     2014     2015  
    Average
Balance(1)
    Interest
Expense
    Average
Cost
    Average
Balance(1)
    Interest
Expense
    Average
Cost
    Average
Balance(1)
    Interest
Expense
    Average
Cost
 
    (in billions of Won, except percentages)  

Liabilities

                 

Interest-bearing liabilities

                 

Deposits due to customers

                 

Demand deposits

  9,397      38        0.40   9,312      42        0.45   8,376      43        0.51

Time and savings deposits

    140,981        3,369        2.39        153,789        3,190        2.07        168,212        2,573        1.53   

Certificates of deposit

    2,316        65        2.81        1,984        54        2.72        1,880        36        1.91   

Other deposits

    14,243        178        1.25        14,386        165        1.15        19,294        236        1.22   
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total deposits

    166,937        3,650        2.19        179,471        3,451        1.92        197,762        2,888        1.46   

Borrowings

    15,678        254        1.62        16,341        252        1.54        20,269        217        1.07   

Debentures

    21,994        961        4.37        23,218        885        3.81        23,232        708        3.05   

Other

    16,026        136        0.85        15,382        130        0.85        19,283        123        0.64   
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average interest- bearing liabilities

    220,635        5,001        2.27        234,412        4,718        2.01        260,546        3,936        1.51   
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average non-interest-bearing liabilities

    3,879                      3,861                      4,787                 
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average liabilities

    224,514        5,001        2.23        238,273        4,718        1.98        265,333        3,936        1.48   
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average equity

    15,610                      18,020                      18,834                 
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average liabilities and equity

  240,124      5,001        2.08   256,293      4,718        1.84   284,167      3,936        1.39
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

 

(1)

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

(2)

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

 

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(3)

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

(4)

Includes home equity loans.

(5)

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 based on changes in volume and changes in rate for 2014 compared to 2013 and 2015 compared to 2014 (excluding discontinued operations for 2013 and 2014). 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.

 

     2014 vs. 2013
Increase/(decrease)
due to changes in
    2015 vs. 2014
Increase/(decrease)
due to changes in
 
     Volume     Rate     Total     Volume     Rate     Total  
     (in billions of Won)  

Interest-earning assets

  

Due from banks

   35      (51   (16   7      (30   (23

Loans(1)

            

Commercial and industrial

     302        (372     (70     278        (768     (490

Trade financing

            (32     (32     21        (9     12   

Other commercial

     (21     (36     (57     29        (82     (53

General purpose household(2)

     (48     (250     (298     53        (302     (249

Mortgage

     343        (112     231        414        (218     196   

Credit cards

     39        21        60        74        26        100   

Securities

            

Trading

     (32     (6     (38     (8            (8

Investment(3)

     56        (114     (58     41        (35     6   

Other

     (4            (4     17        (21     (4
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

   670      (952   (282   926      (1,439   (513
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest-bearing liabilities

            

Deposits due to customers

            

Demand deposits

        4      4      (4   5      1   

Time and savings deposits

     306        (485     (179     299        (916     (617

Certificate of deposit

     (9     (2     (11     (3     (15     (18

Other deposits

     2        (15     (13     56        15        71   

Borrowings

     11        (13     (2     60        (95     (35

Debentures

     53        (129     (76     1        (178     (177

Other

     (5     (1     (6     33        (40     (7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

   358      (641   (283   442      (1,224   (782
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

   312      (311   1      484      (215   269   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

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

(2)

Includes home equity loans.

(3)

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

 

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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, 2015, which was ₩1,169.3 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 22, 2016, the noon buying rate was ₩1,147.9 = US$1.00.

 

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

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   

2014

     1,008.9         1,117.7         1,052.3         1,090.9   

2015

     1,063.0         1,196.4         1,131.0         1,169.3   

October

     1,120.9         1,180.0         1,143.2         1,140.5   

November

     1,136.5         1,172.7         1,153.5         1,149.4   

December

     1,140.7         1,188.0         1,169.9         1,169.3   

2016 (through April 22)

     1,126.0         1,242.6         1,188.4         1,147.9   

January

     1,190.4         1,217.0         1,203.3         1,210.0   

February

     1,186.1         1,242.6         1,216.2         1,238.1   

March

     1,138.9         1,229.6         1,181.6         1,138.9   

April (through April 22)

     1,126.0         1,158.4         1,145.7         1,147.9   

 

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 ₩60,793 billion (excluding discontinued operations), or 31.4% of our total loans, as of December 31, 2013, ₩62,544 billion, or 30.2% of our total loans, as of December 31, 2014 and ₩67,115 billion, or 29.5% of our total loans, as of December 31, 2015. As of December 31, 2015, Won-denominated loans to small- and medium-sized enterprises that were classified as substandard or below were ₩1,162 billion, representing 1.7% of such loans to those enterprises. See “Item 4B. Business Overview—Corporate Banking—Small and Medium-Sized Enterprise Banking.” We recorded charge-offs of ₩472 billion in respect of our Won-denominated loans to small- and medium-sized enterprises in 2015, compared to charge-offs of ₩319 billion (excluding discontinued operations) in 2014 and ₩517 billion (excluding discontinued operations) in 2013. According to data compiled by the Financial Supervisory Service, the industry-wide delinquency ratios for Won-denominated loans to small- and medium-sized enterprises

 

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decreased in 2014 and 2015. 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 1.5% (excluding discontinued operations) as of December 31, 2013, 1.5% as of December 31, 2014 and 1.4% as of December 31, 2015. Our delinquency ratio may increase in 2016 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 us, 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 we established, which is currently expected to be effective through December 31, 2016, 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. The overall prospects for the Korean economy in 2016 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 us under the “fast track” program was ₩29 billion as of December 31, 2015, which represented 0.04% of our 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 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

 

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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, 2015, the total amount of loans provided by us to construction and shipbuilding companies in Korea amounted to ₩6,018 billion and ₩1,939 billion, or 2.6% and 0.9% 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