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 4A. 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 d349374dex11.htm
EX-4.1 d349374dex41.htm
EX-12.1 d349374dex121.htm
EX-13.1 d349374dex131.htm

Woori Bank Earnings 2016-12-31

Balance SheetIncome StatementCash Flow

20-F 1 d349374d20f.htm FORM 20-F Form 20-F
Table of Contents

As filed with the Securities and Exchange Commission on April 27, 2017

 

 

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

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

For the fiscal year ended December 31, 2016

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                     

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)

Jeong Soo Lee

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

Telephone No.: +82-2-2125-2110

Facsimile No.: +82-2-0505002-3080

(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.     ☒  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    ☒  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.     ☒  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, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

☒     Large accelerated filer

  

☐    Accelerated Filer

   ☐    Non-accelerated filer    ☐    Emerging growth company

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act.    ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

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

 

☐    U.S. GAAP

  

☒    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    ☒  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

     36  
 

Item 4A.

 

History and Development of the Company

     36  
 

Item 4B.

 

Business Overview

     42  
 

Item 4C.

 

Organizational Structure

     109  
 

Item 4D.

 

Property, Plants and Equipment

     110  

Item 4A.

 

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.

     147  
 

Item 5D.

 

Trend Information

     147  
 

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

     151  
 

Item 6C.

 

Board Practices

     152  
 

Item 6D.

 

Employees

     154  
 

Item 6E.

 

Share Ownership

     155  

Item 7.

 

Major Shareholders and Related Party Transactions

     156  
 

Item 7A.

 

Major Shareholders

     156  
 

Item 7B.

 

Related Party Transactions

     156  
 

Item 7C.

 

Interest of Experts and Counsel

     157  

Item 8.

 

Financial Information

     157  
 

Item 8A.

 

Consolidated Statements and Other Financial Information

     157  
 

Item 8B.

 

Significant Changes

     158  

Item 9.

 

The Offer and Listing

     158  
 

Item 9A.

 

Offering and Listing Details

     158  
 

Item 9B.

 

Plan of Distribution

     159  
 

Item 9C.

 

Markets

     159  
 

Item 9D.

 

Selling Shareholders

     166  
 

Item 9E.

 

Dilution

     166  
 

Item 9F.

 

Expenses of the Issuer

     166  

Item 10.

 

Additional Information

     167  
 

Item 10A.

 

Share Capital

     167  
 

Item 10B.

 

Memorandum and Articles of Association

     167  
 

Item 10C.

 

Material Contracts

     173  
 

Item 10D.

 

Exchange Controls

     173  
 

Item 10E.

 

Taxation

     174  

 

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Table of Contents
             Page  
 

Item 10F.

 

Dividends and Paying Agents

     180  
 

Item 10G.

 

Statements by Experts

     180  
 

Item 10H.

 

Documents on Display

     180  
 

Item 10I.

 

Subsidiary Information

     180  

Item 11.

 

Quantitative and Qualitative Disclosures about Market Risk

     180  

Item 12.

 

Description of Securities Other Than Equity Securities

     202  

Item 13.

 

Defaults, Dividend Arrearages and Delinquencies

     203  

Item 14.

 

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

     203  

Item 15.

 

Controls and Procedures

     203  

Item 16.

 

Reserved

     204  
 

Item 16A.

 

Audit Committee Financial Expert

     204  
 

Item 16B.

 

Code of Ethics

     204  
 

Item 16C.

 

Principal Accountant Fees and Services

     205  
 

Item 16D.

 

Exemptions from the Listing Standards for Audit Committees

     205  
 

Item 16E.

 

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

     205  
 

Item 16F.

 

Change in Registrant’s Certifying Accountant

     206  
 

Item 16G.

 

Corporate Governance

     206  
 

Item 16H.

 

Mine Safety Disclosure

     207  

Item 17.

 

Financial Statements

     207  

Item 18.

 

Financial Statements

     207  

Item 19.

 

Exhibits

     208  

 

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 21.37% 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,

 

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Table of Contents

Woori FG 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 year ended December 31, 2012 was restated to account for such entities as discontinued operations. However, information derived from our consolidated statement of financial position as of December 31, 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, 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, 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, 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, 2016, which was ₩1,203.7 = 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, 2012, 2013, 2014, 2015 and 2016 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, 2012, 2013, 2014, 2015 and 2016 have been audited by Deloitte Anjin LLC, an independent registered public accounting firm.

The Korean government, which currently owns 21.37% 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, 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,  
     2012(1)     2013(1)     2014(1)     2015     2016     2016(2)  
     (in billions of Won except per share data)     (in millions of
US$ except per
share data)
 

Interest income

   10,891     9,493     9,211     8,698     8,512     US$ 7,072  

Interest expense

     (6,043     (5,001     (4,718     (3,936     (3,492     (2,902
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

     4,848       4,492       4,493       4,762       5,020       4,170  

Fees and commissions income

     1,687       1,565       1,598       1,757       1,865       1,550  

Fees and commissions expense

     (498     (639     (681     (781     (928     (771
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net fees and commissions income

     1,189       926       917       976       937       779  

Dividend income

     101       88       97       103       185       153  

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

     (365     124       190       240       114       95  

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

     533       (85     (69     (3     (1     (1

Impairment losses due to credit loss

     (1,799     (2,277     (1,097     (966     (834     (693

Net other operating expenses(3)

     (2,958     (3,028     (3,633     (3,761     (3,847     (3,195
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     1,549       240       898       1,351       1,574       1,308  

Share of gain (loss) of joint ventures and associates

     45       (1     (68     (70     (20     (16

Other net non-operating income (expense)

     44       49       4       171       (1     (1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Non-operating income (loss)

     89       48       (64     101       (21     (17

Net income before income tax expense

     1,638       288       834       1,452       1,553       1,291  

Income tax expense

     (357     (35     (288     (377     (276     (230
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income from continuing operations

     1,281       253       546       1,075       1,277       1,061  

Net income (loss) from discontinued operations

     566       (966     662                    

Net income (loss)

   1,847     (713   1,208     1,075     1,277     US$ 1,061  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Remeasurement of the net defined benefit liability

     (51     9       (52     (78     34       29  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Items that will not be reclassified to profit or loss

     (51     9       (52     (78     34       29  

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

     (349     (51     (75     72       13       10  

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

     57       (6     (2     3       (8     (7

Gain (loss) on foreign currency translation of foreign operations

     (108     (60     48       34       29       24  

Gain (loss) on valuation of cash flow hedge

     13       (2     (27           10       9  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Items that may be reclassified to profit or loss

     (387     (119     (56     109       44       36  

Other comprehensive gain (loss), net of tax

     (438     (110     (108     31       78       65  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income (loss)

   1,409     (823   1,100     1,106     1,355     US$ 1,126  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to owners

   1,633     (538   1,214     1,059     1,261     US$ 1,048  

Income from continuing operations

     1,164       162       435       1,059       1,261       1,048  

Income (loss) from discontinued operations

     469       (700     779                    

Net income (loss) attributable to non-controlling interests

   214     (175   (6   16     16     US$ 13  

Income from continuing operations

     117       91       111       16       16       13  

Income (loss) from discontinued operations

     97       (266     (117                  

Comprehensive income (loss) attributable to owners

     1,177       (623     1,192       1,095       1,332       1,107  

Comprehensive income (loss) attributable to non-controlling interests

     232       (200     (92     11       23       19  

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

   1,993     (704   1,621     1,301     1,567     US$ 1.30  

Basic and diluted earnings from continuing operations per share

     1,411       165       536       1,301       1,567       1.30  

Per common share data:

            

Net income (loss) per share—basic

   1,993     (704   1,621     1,301     1,567     US$ 1.30  

Weighted average common shares outstanding—basic (in thousands)

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

Net income (loss) per share—diluted

   1,993     (704   1,621     1,301     1,567     US$ 1.30  

Weighted average common shares outstanding—diluted (in thousands)

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

Cash dividends paid per share

   250         500     500     400     US$ 0.33  

 

(1)

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

 

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Table of Contents
(2)

Won amounts are expressed in U.S. dollars at the rate of ₩1,203.7 to US$1.00, the noon buying rate in effect on December 31, 2016 as quoted by the Federal Reserve Bank of New York in the United States.

(3)

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

 

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Consolidated Statement of Financial Position Data

 

    As of December 31,  
    2012     2013(1)     2014     2015     2016     2016(2)  
    (in billions of Won)    

(in millions

of US$)

 

Assets

           

Cash and cash equivalents

  5,778     5,478     5,963     6,644     7,591     US$ 6,307  

Financial assets at fair value through profit or loss

    27,352       4,806       4,554       5,133       5,651       4,694  

Available-for-sale financial assets

    18,889       17,085       18,811       17,171       20,818       17,295  

Held-to-maturity financial assets

    18,685       12,039       13,044       13,622       13,910       11,556  

Loans and receivables

    250,276       211,912       223,370       244,842       258,393       214,665  

Investments in joint ventures and associates

    1,038       618       648       644       439       365  

Investment properties

    492       341       358       351       358       297  

Premises and equipment

    3,186       2,536       2,501       2,471       2,458       2,042  

Intangible assets and goodwill

    433       269       296       420       484       402  

Assets held for sale

    83       1       8       18       2       2  

Current tax assets

    39       143       5       7       6       5  

Deferred tax assets

    155       155       258       210       232       193  

Derivative assets

    281       131       196       183       141       117  

Other assets(3)

    415       179       145       143       200       166  

Disposal group held for sale

          34,685                          

Disposal group held for distribution to owners

          50,312                          
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  327,102     340,690     270,157     291,859     310,683     US$ 258,106  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities

           

Financial liabilities at fair value through profit or loss

  10,986     2,507     2,675     3,461     3,803     US$ 3,160  

Deposits due to customers

    204,210       175,324       188,516       209,142       221,020       183,617  

Borrowings

    33,480       18,232       17,708       20,034       18,770       15,593  

Debentures

    27,960       21,678       24,796       21,899       23,566       19,577  

Provisions

    864       685       692       517       429       356  

Net defined benefit liability

    166       72       75       99       65       54  

Current tax liabilities

    179       10       299       109       171       142  

Deferred tax liabilities

    134       49       22       19       22       18  

Derivative liabilities

    38       2                   7       6  

Other financial liabilities(4)

    25,544       19,914       16,890       16,964       21,985       18,265  

Other liabilities(5)

    508       410       391       305       299       249  

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

  304,069     317,813     252,064     272,549     290,137     US$ 241,037  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity

           

Owners’ equity

           

Capital stock

  4,030     4,030     3,381     3,381     3,381     US$ 2,809  

Hybrid securities

    498       498       2,539       3,334       3,575       2,970  

Capital surplus

    174       177       291       294       286       238  

Other equity(6)

    112       (35     (2,393     (1,547     (1,468     (1,220

Retained earnings

    13,881       13,113       14,165       13,726       14,612       12,139  

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

    4,338       5,028       110       122       160       133  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

  23,033     22,877     18,093     19,310     20,546     US$ 17,069  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

  327,102     340,690     270,157     291,859     310,683     US$ 258,106  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

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

(2)

Won amounts are expressed in U.S. dollars at the rate of ₩1,203.7 to US$1.00, the noon buying rate in effect on December 31, 2016 as quoted by the Federal Reserve Bank of New York in the United States.

(3)

For a description of “other assets,” see Notes 19 and 24 of the notes to our consolidated financial statements.

(4)

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

(5)

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

(6)

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

 

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Profitability Ratios and Other Data

 

     Year ended December 31,  
     2012(1)     2013(1)     2014(1)     2015     2016  
     (in billions of Won except percentages)  

Return on average assets(2)

     0.67     (0.22 )%      0.47     0.37     0.41

Return on average equity(3)

     10.46       (3.45     6.74       5.62       6.26  

Net interest spread(4)

     1.94       1.83       1.72       1.67       1.65  

Net interest margin(5)

     2.07       1.94       1.82       1.74       1.71  

Cost-to-income ratio(6)

     50.79       59.30       68.38       66.22       66.48  

Average equity as a percentage of average total assets

     6.39       6.50       7.03       6.63       6.60  

Total revenue(7)

   12,847     11,185     11,027     10,795     10,675  

Operating expense(8)

     9,499       8,668       9,032       8,478       8,267  

Operating margin(9)

     3,348       2,517       1,995       2,317       2,408  

Operating margin as a percentage of total revenue

     26.06     22.50     18.09     21.46     22.56

 

(1)

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

(2)

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.

(3)

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.

(4)

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

(5)

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

(6)

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.

(7)

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,  
     2012(a)     2013(a)     2014(a)     2015     2016  
     (in billions of Won)  

Interest income

   10,891     9,493     9,211     8,698     8,512  

Fees and commissions income

     1,687       1,565       1,598       1,757       1,865  

Dividend income

     101       88       97       103       185  

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

     (365     124       190       240       114  

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

     533       (85     (69     (3     (1
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

   12,847     11,185     11,027     10,795     10,675  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

  (a)

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

(8)

Represents interest expense, fees and commissions expense and net other operating expense, excluding impairment losses due to credit loss of ₩1,799 billion, ₩2,277 billion, ₩1,097 billion, ₩966 billion and ₩834 billion for 2012, 2013, 2014, 2015 and 2016, respectively.

 

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The following table shows how operating expense is calculated:

 

     Year ended December 31,  
     2012(a)      2013(a)      2014(a)      2015      2016  
     (in billions of Won)  

Interest expense

   6,043      5,001      4,718      3,936      3,492  

Fees and commissions expense

     498        639        681        781        928  

Net other operating expenses

     2,958        3,028        3,633        3,761        3,847  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating expense

   9,499      8,668      9,032      8,478      8,267  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a)

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

(9)

Represents total revenue less operating expense.

Asset Quality Data

 

    

 

    As of December 31,  
     2012     2013(1)     2014     2015     2016  
           (in billions of Won, except percentages)  

Total loans(2)

   221,028     193,766     207,077     227,169     236,801  

Total non-performing loans(3)

     3,766       4,996       3,818       2,909       2,080  

Other impaired loans not included in non-performing loans(4)

     698       690       692       339       335  

Total non-performing loans and other impaired loans(4)

     4,464       5,685       4,510       3,248       2,415  

Total allowance for credit losses

     3,565       3,337       2,609       2,051       1,851  

Non-performing loans as a percentage of total loans

     1.70     2.58     1.84     1.28     0.88

Non-performing loans as a percentage of total assets

     1.15       1.47       1.41       1.00       0.67  

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

     2.02       2.93       2.18       1.43       1.02  

Allowance for credit losses as a percentage of total loans

     1.61       1.72       1.26       0.90       0.78  

 

(1)

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

(2)

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.

(3)

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.”

(4)

Other impaired loans as of December 31, 2012 exclude securitized loans purchased from third parties and held by Woori F&I, a former wholly-owned subsidiary, in the aggregate amount of ₩1,207 billion. 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 date 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.”

 

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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 2014):

 

    Year ended December 31,  
    2014     2015     2016  
    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

  11,710     104       0.89   12,483     81       0.65   14,807     75       0.51

Loans(3)

                 

Commercial and industrial

    89,030       3,992       4.48       95,241       3,502       3.68       98,202       3,220       3.28  

Trade financing

    12,371       188       1.52       13,762       200       1.45       13,159       213       1.62  

Lease financing(4)

                                        4              

Other commercial

    8,997       294       3.27       9,890       241       2.44       9,697       221       2.28  

General purpose household(5)

    57,720       2,396       4.15       59,003       2,147       3.64       61,918       2,111       3.41  

Mortgage

    23,970       917       3.83       34,770       1,113       3.20       45,007       1,323       2.94  

Credit cards(2)

    4,678       397       8.49       5,547       497       8.96       6,300       547       8.68  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total loans

    196,766       8,184       4.16       218,213       7,700       3.53       234,287       7,635       3.26  

Securities

                 

Trading

    2,639       71       2.69       2,359       63       2.67       2,665       63       2.36  

Investment(6)

    28,076       802       2.86       29,513       808       2.74       31,348       700       2.23  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total securities

    30,715       873       2.84       31,872       871       2.73       34,013       763       2.24  

Other

    7,954       50       0.63       10,707       46       0.43       11,157       39       0.35  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average interest earning assets

    247,145       9,211       3.73       273,275       8,698       3.18       294,264       8,512       2.89  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average non-interest earning assets

    9,148                   10,892                   11,289              
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average assets

  256,293     9,211       3.59   284,167     8,698       3.06   305,553     8,512       2.79
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

 

    Year ended December 31,  
    2014     2015     2016  
    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

  9,312     42       0.45   8,376     43       0.51   9,742     76       0.78

Time and savings deposits

    153,789       3,190       2.07       168,212       2,573       1.53       181,073       2,166       1.20  

Certificates of deposit

    1,984       54       2.72       1,880       36       1.91       3,476       59       1.70  

Other deposits

    14,386       165       1.15       19,294       236       1.22       23,405       246       1.05  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total deposits

    179,471       3,451       1.92       197,762       2,888       1.46       217,696       2,547       1.17  

Borrowings

    16,341       252       1.54       20,269       217       1.07       20,054       215       1.07  

Debentures

    23,218       885       3.81       23,232       708       3.05       22,988       619       2.69  

Other

    15,382       130       0.85       19,283       123       0.64       19,994       111       0.56  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average interest-bearing liabilities

    234,412       4,718       2.01       260,546       3,936       1.51       280,732       3,492       1.24  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average non-interest-bearing liabilities

    3,861                   4,787                   4,663              
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average liabilities

    238,273       4,718       1.98       265,333       3,936       1.48       285,395       3,492       1.22  
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average equity

    18,020                   18,834                   20,158              
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

Total average liabilities and equity

  256,293     4,718       1.84   284,167     3,936       1.39   305,553     3,492       1.14
 

 

 

   

 

 

     

 

 

   

 

 

     

 

 

   

 

 

   

 

(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 automobile lease financing to consumer borrowers.

(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 based on changes in volume and changes in rate for 2015 compared to 2014 (excluding discontinued operations for 2014) and 2016 compared to 2015. 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.

 

     2015 vs. 2014
Increase/(decrease)
due to changes in
    2016 vs. 2015
Increase/(decrease)
due to changes in
 
     Volume     Rate     Total     Volume     Rate     Total  
     (in billions of Won)  

Interest-earning assets

  

Due from banks

   7     (30   (23   15     (21   (6

Loans(1)

            

Commercial and industrial

     278       (768     (490     109       (391     (282

Trade financing

     21       (9     12       (9     22       13  

Lease financing(2)

                                    

Other commercial

     29       (82     (53     (5     (15     (20

General purpose household(3)

     53       (302     (249     106       (142     (36

Mortgage

     414       (218     196       328       (118     210  

Credit cards

     74       26       100       67       (17     50  

Securities

            

Trading

     (8           (8     8       (8      

Investment(4)

     41       (35     6       50       (158     (108

Other

     17       (21     (4     2       (9     (7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest income

   926     (1,439   (513   671     (857   (186
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest-bearing liabilities

            

Deposits due to customers

            

Demand deposits

   (4   5     1     7     26     33  

Time and savings deposits

     299       (916     (617     197       (604     (407

Certificate of deposit

     (3     (15     (18     30       (7     23  

Other deposits

     56       15       71       50       (40     10  

Borrowings

     60       (95     (35     (2           (2

Debentures

     1       (178     (177     (7     (82     (89

Other

     33       (40     (7     5       (17     (12
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense

   442     (1,224   (782   280     (724   (444
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest income

   484     (215   269     391     (133   258  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

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

(2)

Includes automobile lease financing to consumer borrowers.

(3)

Includes home equity loans.

(4)

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, 2016, which was ₩1,203.7 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 20, 2017, the noon buying rate was ₩1,136.3 = US$1.00.

 

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

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  

2016

     1,090.0        1,242.6        1,159.3        1,203.7  

October

     1,104.8        1,146.5        1,128.2        1,145.4  

November

     1,131.4        1,181.6        1,162.7        1,175.9  

December

     1,161.7        1,212.2        1,183.1        1,203.7  

2017 (through April 20)

     1,108.3        1,207.2        1,147.2        1,136.3  

January

     1,151.5        1,207.2        1,179.1        1,151.5  

February

     1,129.2        1,154.5        1,140.5        1,129.2  

March

     1,108.3        1,158.1        1,133.9        1,117.5  

April (through April 20)

     1,117.7        1,147.8        1,134.8        1,136.3  

 

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 ₩62,544 billion, or 30.2% of our total loans, as of December 31, 2014, ₩67,115 billion, or 29.5% of our total loans, as of December 31, 2015 and ₩68,434 billion, or 28.9% of our total loans, as of December 31, 2016. As of December 31, 2016, Won-denominated loans to small- and medium-sized enterprises that were classified as substandard or below were ₩789 billion, representing 1.2% of such loans to those enterprises. See “Item 4B. Business Overview—Corporate Banking—Small and Medium-Sized Enterprise Banking.” We recorded charge-offs of ₩469 billion in respect of our Won-denominated loans to small- and medium-sized enterprises in 2016, compared to charge-offs of ₩472 billion in 2015 and ₩319 billion (excluding discontinued operations) in 2014. According to data compiled by the Financial Supervisory Service, the industry-wide delinquency ratios for Won-denominated loans

 

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to small- and medium-sized enterprises decreased in 2015 and 2016. 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% as of December 31, 2014, 1.4% as of December 31, 2015 and 0.9% as of December 31, 2016. Our delinquency ratio may increase in 2017 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, 2017, 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 2017 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 ₩26 billion as of December 31, 2016, 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