increased reliance on exports to service foreign currency debts, which could cause friction with Korea’s trading partners;
an increase in the level of tensions or an outbreak of hostilities between North Korea and Korea or the United States; and
changes in financial regulations in Korea.
Escalations in tensions with North Korea could have an adverse effect on us and the market price of our ADSs.
Relations between Korea and North Korea have been tense throughout Korea’s modern history. The level of tension between the two Koreas has fluctuated and may increase abruptly as a result of current and future events. In particular, there have been heightened security concerns in recent years stemming from North Korea’s nuclear weapon and ballistic missile programs as well as its hostile military actions against Korea. Some of the significant incidents in recent years include the following:
North Korea renounced its obligations under the Nuclear Non-Proliferation Treaty in January 2003 and conducted six rounds of nuclear tests since October 2006, including claimed detonations of hydrogen bombs, which are more powerful than plutonium bombs, and warheads that can be mounted on ballistic missiles. Over the years, North Korea has also conducted a series of ballistic missile tests, including missiles launched from submarines and intercontinental ballistic missiles that it claims can reach the United States mainland. In response, the Korean government has repeatedly condemned the provocations and flagrant violations of relevant United Nations Security Council resolutions. In February 2016, the government also closed the inter-Korea Gaeseong Industrial Complex in response to North Korea’s fourth nuclear test in January 2016. Internationally, the United Nations Security Council has passed a series of resolutions condemning North Korea’s actions and significantly expanding the scope of sanctions applicable to North Korea, most recently in December 2017, in response to North Korea’s intercontinental ballistic missile test in November 2017. Over the years, the United States and the European Union have also expanded their sanctions applicable to North Korea.inter-
Korea Gaeseong Industrial Complex in response to North Korea’s fourth nuclear test in January 2016. Internationally, the United Nations Security Council has passed a series of resolutions condemning North Korea’s actions and significantly expanding the scope of sanctions applicable to North Korea, most recently in December 2017, in response to North Korea’s intercontinental ballistic missile test in November 2017. Over the years, the United States and the European Union have also expanded their sanctions applicable to North Korea. |
In August 2015, two Korean soldiers were injured in a landmine explosion near the Korean demilitarized zone. Claiming the landmines were set by North Koreans, the Korean army reinitiated its propaganda program toward North Korea utilizing loudspeakers near the demilitarized zone. In retaliation, the North Korean army fired artillery rounds on the loudspeakers, resulting in the highest level of military readiness for both Koreas.
In March 2010, a Korean naval vessel was destroyed by an underwater explosion, killing many of the crewmen on board. The Korean government formally accused North Korea of causing the sinking, while North Korea denied responsibility. Moreover, in November 2010, North Korea fired more than one hundred artillery shells that hit Korea’s Yeonpyeong Island near the Northern Limit Line, which acts as the de facto maritime boundary between Korea and North Korea on the west coast of the Korean peninsula, causing casualties and significant property damage. The Korean government condemned North Korea for the attack and vowed stern retaliation should there be further provocation.
North Korea’s economy also faces severe challenges, which may further aggravate social and political pressures within North Korea. Although a bilateral summit meetings between the two Koreas waswere held onin April 27,2018, May 2018 and there has been an announcement in MarchSeptember 2018 of a potential summitand between the United States and North Korea in June 2018, February 2019 and June 2019, there can be no assurance that the level of tensions affecting the Korean peninsula will not escalate in the future. Any further increase in tensions, which may occur, for example, if North Korea experiences a leadership crisis, high-level contacts between Korea and North Korea break down or military hostilities occur, could have a material adverse effect on the Korean economy and on our business, financial condition and results of operations and the market value of our common stock and ADSs.
Labor unrest in Korea may adversely affect our operations.
Economic difficulties in Korea or increases in corporate reorganizations and bankruptcies could result in layoffs and higher unemployment. Such developments could lead to social unrest and substantially increase
government expenditures for unemployment compensation and other costs for social programs. According to statistics from the Korea National Statistical Office, the unemployment rate increased from 3.6% in 2015 to 3.7% in 20162017 to 3.8% in 2018 and 2017.2019 and 4.5% in 2020. Further increases in unemployment and any resulting labor unrest in the future could adversely affect our operations, as well as the operations of many of our customers and their ability to repay their loans, and could adversely affect the financial condition of Korean companies in general, depressing the price of their securities. Furthermore, the government’s privatization plan with respect to us contemplates the sale of its remaining ownership interest in us to one or more third parties, which may lead to labor unrest among our employees. See “Item 4.A. History and Development of the Company—Privatization Plan.” Any of these developments may have an adverse effect on our financial condition and results of operations.
Risks relating to our common stock and ADSs
We or our major shareholders may sell shares of our common stock in the future, and such sales may adversely affect the market price of our common stock and ADSs and may dilute your investment and relative ownership interest in us.
We have no current plans for any public offerings of our common stock, ADSs or securities exchangeable for or convertible into such securities. However, it is possible that we may decide to offer or sell such securities in the future.
In addition, the KDIC currently owns 124,604,797110,159,443 shares, or 18.43%15.25%, of our outstanding common stock, and IMM Private Equity, Inc., through its special purpose company Nobis1, Inc., currently owns 40,560,000 shares, or 6.00%5.62%, of our outstanding common stock. See “Item 7.A. Major Shareholders.” In the future, such major shareholders or any other shareholder that owns a large number of shares of our outstanding common stock may choose to sell large blocks of our common stock publiclyin a public offering or privately to a strategic or financial investor, including a sale by the KDIC for the purpose of recovering the public funds it injected into us. For example, in accordance with the Korean government’s privatization plan, the KDIC sold 40,143,022 shares of ourWoori Bank’s common stock (representing 5.9% of ourits outstanding common stock) in a private sale in Korea in December 2014 and an aggregate of 200,685,395 shares of ourWoori Bank’s common stock (representing 29.7% of ourits outstanding common stock) in stakes ranging from 3.7% to 6.0% to seven financial companies through a bidding process in December 2016 and January 2017. In 2017, pursuant to a series of transactions related to call options previously granted in connection with the KDIC’s sale of ourWoori Bank’s common stock in December 2014, the KDIC sold an aggregate of 19,852,364 shares of ourWoori Bank’s common stock (representing 2.94% of its outstanding common stock). After our establishment, in April 2021, pursuant to its plan to sell all of our common stock it owned by 2022 that was approved by the Financial Services Commission, the KDIC sold an aggregate of 14,445,354 shares of our common stock (representing 2.00% of our outstanding common stock). As in a result of such transactions, the KDIC’s ownership interest in us was reduced to 18.43%.block trade. See “—Risks relating to our structure and strategy—The implementation of the Korean government’s privatization plan may have an adverse effect on us and your interests as a shareholder.” We expect the KDIC to sell all or a portion of the remaining shares of our common stock it owns to one or more purchasers in the future.
Any future offerings or sales by us of our common stock or ADSs or securities exchangeable for or convertible into such securities, significant sales of our common stock by a major shareholder, or the public perception that such an offering or sale may occur, could have an adverse effect on the market price of our common stock and ADSs. Furthermore, any offerings by us in the future of any such securities could have a dilutive impact on your investment and relative ownership interest in us.
Future sales by the KDIC of the shares of our common stock it owns may result in adverse Korean tax consequences for you.
Under applicable Korean tax laws, a non-Korean holder who held Woori Bank’s common stock or ADSs prior to our establishment as a new financial holding company in January 2019 pursuant to a “comprehensive stock transfer” under Korean law will be able to defer taxation on any capital gains arising from the stock transfer, by virtue of the Special Tax Treatment Control Law of Korea, or the STTCL, until such holder’s sale of our common stock or ADSs received in the stock transfer, at which time the tax basis of such common stock or ADSs will be the acquisition price at which such holder acquired such Woori Bank common stock or ADSs. However, non-Korean holders that are corporations may not defer such portion of tax on capital gains arising from the stock transfer that is attributable to the amount by which the market price of our common stock or ADSs (as calculated in accordance with applicable Korean laws and regulations) is in excess of the market price of Woori Bank’s common stock or ADSs. Any such non-Korean holder of our common stock or ADS, including a corporation, which seeks to defer taxation on capital gains arising from the stock transfer will be required to submit a tax deferral application in prescribed form to the Korean tax authorities when filing its tax return for the 2019 tax year.
Notwithstanding the foregoing, if our largest shareholder, the KDIC, disposes of 50% or more of the shares of our common stock it received in the stock transfer within two years from the end of 2019 (the fiscal year in which the date of the stock transfer falls), the deferral of taxation on capital gains will not be available, and a non-Korean holder who received our common stock or ADSs in the stock transfer will generally be subject to Korean tax on capital gains in an amount equal to the lower of (i) 11.0% (inclusive of local income surtax) of the gross realization proceeds (i.e., the value of our common stock or ADSs such holder received in the stock transfer) or (ii) 22.0% (inclusive of local income surtax) of the net realized gain. However, such capital gains tax may not apply, or may apply at a reduced rate, if such holder establishes its entitlement to an exemption or rate reduction under an applicable tax treaty or Korean tax law. See “Item 10.E. Taxation—Korean Taxation—Tax
Treaties” for information regarding tax treaty benefits. Accordingly, if you received our common stock or ADSs in the stock transfer, future sales by the KDIC of the shares of our common stock it owns may result in adverse Korean tax consequences for you.
Ownership of our common stock is restricted under Korean law.
Under the BankFinancial Holding Company Act, a single shareholder, together with its affiliates, is generally prohibited from owning more than 10.0% of a nationwide bank’s totalthe issued and outstanding shares withof voting rights or more than 15.0%stock of a regional bank’s total issued and outstanding shares with voting rights,bank holding company such as us that controls a nationwide bank, with the exception of certain shareholders that are non-financial business group companies, whose applicable limit was reduced from 9.0% to 4.0% pursuant to an amendment of the BankFinancial Holding Company Act which became effective on February 14, 2014. To the extent that the total number of shares of our common stock (including those represented by ADSs) that you and your affiliates own together exceeds the applicable limits, you will not be entitled to exercise the voting rights for the excess shares, and the Financial Services Commission may order you to dispose of the excess shares within a
period of up to six months. Failure to comply with such an order would result in an administrative fine of up to 0.03% of the book value of such shares per day until the date of disposal. Non-financial business group companies may notcan no longer acquire beneficial ownershipmore than 4.0% of the issued and outstanding shares of voting stock of a nationwide bank in excessholding company pursuant to the amended Financial Holding Company Act, which grants an exception for non-financial business group companies which, at the time of the enactment of the amended provisions, held more than 4.0% of such bank’s outstanding votingthe shares unless they obtainthereof with the approval of the Financial Services Commission and agree not to exercise voting rights in respect of shares in excess ofbefore the 4.0% limit, in which case they may acquire beneficial ownership of up to 10.0% of such nationwide bank’s outstanding voting shares.amendment. See “Item 4.B. Business Overview—Supervision and Regulation—Principal Regulations Applicable to Banks—Financial Holding Companies—Restrictions on Bank Ownership.” In addition, if the shareholding of any single shareholder, together with its affiliates, increases to a level exceeding the applicable limits as a resultOwnership of a merger, such shareholder will be restricted from exercising its voting rights in respect of shares in excess of the applicable limit pursuant to the Bank Act from the effective date of the merger, and will be required to dispose of such excess shares within three years after such effective date.Financial Holding Company.”
You will not be able to exercise dissent and appraisal rights unless you have withdrawn the underlying shares of our common stock and become our direct shareholder.
In some limited circumstances, including the transfer of the whole or any significant part of our business and the merger or consolidation of us with another company, dissenting shareholders have the right to require us to purchase their shares under Korean law. However, if you hold our ADSs, you will not be able to exercise such dissent and appraisal rights if the depositary refuses to do so on your behalf. Our deposit agreement does not require the depositary to take any action in respect of exercising dissent and appraisal rights. In such a situation, holders of our ADSs must withdraw the underlying common stock from the ADS facility (and incur charges relating to that withdrawal) and become our direct shareholder prior to the record date of the shareholders’ meeting at which the relevant transaction is to be approved, in order to exercise dissent and appraisal rights.
You may be limited in your ability to deposit or withdraw common stock.
Under the terms of our deposit agreement, holders of common stock may deposit such stock with the depositary’s custodian in Korea and obtain ADSs, and holders of ADSs may surrender ADSs to the depositary and receive common stock. However, to the extent that a deposit of common stock exceeds any limit that we may specify from time to time, that common stock will not be accepted for deposit unless our consent with respect to such deposit has been obtained. We currently have not set any such limit; however, we have the right to do so at any time. Under the terms of the deposit agreement, no consent would be required if the shares of common stock were to be obtained through a dividend, free distribution, rights offering or reclassification of such stock. We have consented, under the terms of the deposit agreement, to any deposit unless the deposit would be prohibited by applicable laws or violate our articles of incorporation. If we choose to impose a limit on deposits in the future, however, we might not consent to the deposit of any additional common stock. In that circumstance, if you surrender ADSs and withdraw common stock, you may not be able to deposit the stock again to obtain ADSs. See “Item 9.C. Markets—4.B. Business Overview—Supervision and Regulation—Restrictions Applicable to Shares” and “Item 10.D. Exchange Controls—Restrictions Applicable to Shares.”
You will not have preemptive rights in some circumstances.
The Korean Commercial Code, as amended, and our articles of incorporation require us, with some exceptions, to offer shareholders the right to subscribe for new shares of our common stock in proportion to their
existing shareholding ratio whenever new shares are issued. If we offer any rights to subscribe for additional shares of our common stock or any rights of any other nature, the depositary, after consultation with us, may make the rights available to holders of our ADSs or use commercially feasible efforts to dispose of the rights on behalf of such holders, in a riskless principal capacity, and make the net proceeds available to such holders. The depositary will make rights available to holders of our ADSs only if:
we have requested in a timely manner that those rights be made available to such holders;
the depositary has received the documents that are required to be delivered under the terms of the deposit agreement, which may include confirmation that a registration statement filed by us under the U.S. Securities Act of 1933, as amended, or the Securities Act, is in effect with respect to those shares or that the offering and sale of those shares is exempt from or is not subject to the registration requirements of the Securities Act; and
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the depositary determines, after consulting with us, that the distribution of rights is lawful and commercially feasible.
Holders of our common stock located in the United States may not exercise any rights they receive absent registration or an exemption from the registration requirements under the Securities Act.
We are under no obligation to file any registration statement with the U.S. Securities and Exchange Commission or to endeavor to cause such a registration statement to be declared effective. Moreover, we may not be able to establish an exemption from registration under the Securities Act. Accordingly, you may be unable to participate in our rights offerings and may experience dilution in your holdings. If a registration statement is required for you to exercise preemptive rights but is not filed by us or is not declared effective, you will not be able to exercise your preemptive rights for additional ADSs and you will suffer dilution of your equity interest in us. If the depositary is unable to sell rights that are not exercised or not distributed or if the sale is not lawful or feasible, it will allow the rights to lapse, in which case you will receive no value for these rights.
Your dividend payments and the amount you may realize upon a sale of your ADSs will be affected by fluctuations in the exchange rate between the U.S. dollar and the Won.
Our common stock is listed on the KRX KOSPI Market of the Korea Exchange and quoted and traded in Won. Cash dividends, if any, in respect of the shares represented by the ADSs will be paid to the depositary in Won and then converted by the depositary into U.S. dollars, subject to certain conditions. Accordingly, fluctuations in the exchange rate between the Won and the U.S. dollar will affect, among other things, the amounts you will receive from the depositary in respect of dividends, the U.S. dollar value of the proceeds that you would receive upon a sale in Korea of the shares of our common stock obtained upon surrender of ADSs and the secondary market price of ADSs. Such fluctuations will also affect the U.S. dollar value of dividends and sales proceeds received by holders of our common stock.
The market value of your investment may fluctuate due to the volatility of, and government intervention in, the Korean securities market.
Our common stock is listed on the KRX KOSPI Market, which has a smaller market capitalization and is more volatile than the securities markets in the United States and many European countries. The market value of ADSs may fluctuate in response to the fluctuation of the trading price of shares of our common stock on the KRX KOSPI Market. The KRX KOSPI Market has experienced substantial fluctuations in the prices and volumes of sales of listed securities and the KRX KOSPI Market has prescribed a fixed range in which share prices are permitted to move on a daily basis. The KOSPI was 2,476.333,186.1 on April 20, 2018.23,2021. There is no guarantee that the stock prices of Korean companies will not decline again in the future. Like other securities markets, including those in developed markets, the Korean securities market has experienced problems including market manipulation, insider trading and settlement failures. The recurrence of these or similar problems could have a material adverse effect on the market price and liquidity of the securities of Korean companies, including our common stock and ADSs, in both the domestic and the international markets.
The Korean government has the potential ability to exert substantial influence over many aspects of the private sector business community, and in the past has exerted that influence from time to time. For example, the Korean government has induced mergers to reduce what it considers excess capacity in a particular industry and has also induced private companies to publicly offer their securities. Similar actions in the future could have the effect of depressing or boosting the Korean securities market, whether or not intended to do so. Accordingly, actions by the government, or the perception that such actions are taking place, may take place or has ceased, may cause sudden movements in the market prices of the securities of Korean companies in the future, which may affect the market price and liquidity of our common stock and ADSs.
If the Korean government deems that emergency circumstances are likely to occur, it may restrict you and the depositary from converting and remitting dividends and other amounts in U.S. dollars.
If the Korean government deems that certain emergency circumstances, including, but not limited to, severe and sudden changes in domestic or overseas economic circumstances, extreme difficulty in stabilizing the balance of payments or implementing currency, exchange rate and other macroeconomic policies, have occurred or are likely to occur, it may impose certain restrictions provided for under the Foreign Exchange Transaction Law, including the suspension of payments or requiring prior approval from governmental authorities for any transaction. See “Item 10.D. Exchange Controls—General.”
Other Risks
You may not be able to enforce a judgment of a foreign court against us.
We are a corporation with limited liability organized under the laws of Korea. Substantially allA majority of our directors and officers and other persons named in this annual report reside in Korea, and all or a significant portion of the assets of our directors and officers and other persons named in this annual report and a substantial majority of our assets are located in Korea. As a result, it may not be possible for you to effect service of process within the United States, or to enforce against them or us in the United States judgments obtained in United States courts based on the civil liability provisions of the federal securities laws of the United States. There is doubt as to the enforceability in Korea, either in original actions or in actions for enforcement of judgments of United States courts, of civil liabilities predicated on the United States federal securities laws.
| Item 4. | INFORMATION ON THE COMPANY |
| Item 4.A. | History and Development of the Company |
Overview
We were originally established in 1899 and operated as the Commercial Bank of Korea until 1998. In 1998, we were acquired by the KDIC and merged with another commercial bank, Hanil Bank, which had been established in 1932. We were the surviving entity in the merger and were renamed Hanvit Bank.
In March 2001, the KDIC establishedare a financial holding company Woori Finance Holdings,that was newly established on January 11, 2019 pursuant to consolidate its ownership interests in four commercial banks (including us), one merchant bank and a number of smaller financial institutions. See “—History.” We were renamed Woori Bank in 2002 and operated as a wholly-owned subsidiary of Woori Finance Holdings through October 2014. Woori Finance Holdings registered its common“comprehensive stock transfer” under Section 12(b)Korean law, whereby holders of the Exchange Act and listed ADSs representing its common stock on the New York Stock Exchange, in September 2003.
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 received one share of our common stock for each share of common stock of Woori Finance Holdings they held. See “—Privatization Plan—MergerBank and certain of its subsidiaries transferred all of their shares to us and in return received shares of our common stock. We were established under the Financial Holding Company Act of Korea, which, together with associated regulations and a related Enforcement Decree, enables banks and other financial institutions, including insurance companies, invest trust companies, credit card companies and securities companies, to be organized and managed under the auspices of a single financial holding company. As a result of the stock transfer, Woori Bank and certain of its former wholly-owned subsidiaries, Woori FIS Co., Ltd., Woori Finance Holdings.” Research Institute Co., Ltd., Woori Credit Information Co., Ltd., Woori Fund Services Co., Ltd. and Woori Private Equity Asset Management Co., Ltd., became our direct and wholly-owned subsidiaries. Accordingly, our overall business and operations after the stock transfer, on a consolidated basis, are identical to those of Woori Bank on a consolidated basis immediately prior to the stock transfer.
The mergerstock transfer 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,stock transfer, we file reports under the Exchange Act as the successor issuer to Woori Finance Holdings.Bank.
Our legal and commercial name is Woori Bank, and we are a commercial bank established under the laws of the Republic of Korea.Financial Group Inc. Our registered office and corporate headquarters are located at 51, Sogong-ro, Jung-gu, Seoul, Korea. Our telephone number is 822-2002-3000.822-2125-2000. Our website address ishttp://www.wooribank.com.www.woorifg.com.
The U.S. Securities and Exchange Commission, or the SEC, maintains a website (http://www.sec.gov), which contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
History
Establishment of Woori Bank
The predecessor of Woori Bank was originally established in 1899 and operated as the Commercial Bank of Korea until 1998, when it was acquired by the KDIC and merged with another commercial bank, Hanil Bank, which had been established in 1932. The surviving entity in the merger was renamed Hanvit Bank, which name was changed to Woori Bank in May 2002.
Establishment of Woori Finance Holdings
In response to a financial and economic downturn in Korea beginning in late 1997, the Korean government announced and implemented a series of comprehensive policy packages to address structural weaknesses in the
Korean economy and the financial sector. As part of these measures, on October 1, 1998, the KDIC purchased 95.0% of the outstanding shares of the Commercial Bank of Korea and 95.6% of the outstanding shares of Hanil Bank, and subsequently merged Hanil Bank into the Commercial Bank of Korea (which was renamed Hanvit Bank). These banks had suffered significant losses in 1997 and 1998. The Korean government took pre-emptive measures to ensure the survival of these and other banks as it believed that bank failures would have a substantial negative impact on the Korean economy.
In December 2000, the Korean government wrote down the capital of Hanvit Bank, as well as Kyongnam Bank, Kwangju Bank and Peace Bank of Korea, to zero. It accomplished this by having the Financial Services Commission issue a capital reduction order with respect to these banks pursuant to its regulatory authority. The Korean government also decided to recapitalize these banks by injecting public funds through the KDIC. In December 2000, the KDIC made initial capital injections to Hanvit Bank (￦2,764 billion), Kyongnam Bank (￦259 billion), Kwangju Bank (￦170 billion) and Peace Bank of Korea (￦273 billion), in return for new shares of those banks. The KDIC also agreed to make additional capital contributions, not involving the issuance of new shares, in the future, which were made in September 2001 to Hanvit Bank (￦1,877 billion), Kyongnam Bank (￦94 billion), Kwangju Bank (￦273 billion) and Peace Bank of Korea (￦339 billion).
In addition, in November 2000, the KDIC established Hanaro Merchant Bank to restructure substantially all of the assets and liabilities of four failed merchant banks (Yeungnam Merchant Banking Corporation, Central Banking Corporation, Korea Merchant Banking Corporation and H&S Investment Bank) that were transferred to it.
In March 2001, the KDIC established Woori Finance Holdings as a new financial holding company and transferred all of the shares in each of Hanvit Bank, Kyongnam Bank, Kwangju Bank, Peace Bank of Korea and Hanaro Merchant Bank held by the KDIC to Woori Finance Holdings in exchange for its newly issued shares. Accordingly, Woori Finance Holdings became the sole owner of those entities. Woori Finance Holdings subsequently listed its common stock on the KRX KOSPI Market in June 2002 and listed ADSs representing its common stock on the New York Stock Exchange in September 2003.
Our name was changed from Hanvit Bank to Woori Bank in May 2002.
Memoranda of Understanding
In connection with the recapitalization by the KDIC of the entities (including us) that became subsidiariesReorganization and Expansion of Woori Finance Holdings and its establishment, such entities, Woori Finance Holdings and the KDIC entered into a number of memoranda of understanding, including the following.
Memoranda of Understanding between Woori Finance Holdings’ Subsidiaries and the KDIC. In December 2000, in connection with the capital contributions made by the KDIC into each of us, Kwangju Bank Kyongnam Bank, Peace Bank of Korea and Hanaro Merchant Bank, these entities entered into separate memoranda of understanding with the KDIC that included business normalization plans. The memoranda of understanding were substantially identical with respect to each entity and primarily dealt with each entity’s obligation to implement a two-year business normalization plan covering 2001 and 2002. To the extent that any entity were to fail to implement its business normalization plan or to meet financial targets specified in the plan, the KDIC had the right to impose sanctions on that entity’s directors or employees, or to require the entity to take certain actions. In addition, each entity was required to take all actions necessary to enable it to return to the KDIC any public funds injected into them, so long as that action would not cause a material adverse effect on the normalization of business operations as contemplated by the memorandum of understanding.
Each entity prepared a two-year business normalization plan that was approved by the KDIC. Each plan included recapitalization goals and deadlines, econometric models, plans to dispose of non-performing loans, cost reduction initiatives, future management and business strategies and other restructuring plans. Each plan also set forth financial targets for each quarter of 2001 and 2002 that the applicable entity was required to meet.
Since 2000, we periodically entered into new business normalization plans with the KDIC, with new restructuring measures and financial targets. The other entities did so as well, until their merger or disposition by
Woori Finance Holdings, pursuant to which their memoranda of understanding with the KDIC were terminated. See “—Privatization Plan.” Our memorandum of understanding with the KDIC was terminated in December 2016 in connection with the reduction in its ownership of our common stock from a majority stake to a minority stake after its sale of an aggregate of 200,685,395 shares of our common stock in December 2016 and January 2017. The KDIC’s current ownership interest in us is 18.43%. See “—Privatization Plan—Sales of the KDIC’s Ownership Interest.”
Memorandum of Understanding between Woori Finance Holdings and the KDIC. In July 2001, Woori Finance Holdings entered into a memorandum of understanding with the KDIC, which included a business normalization plan. Under this memorandum, Woori Finance Holdings was required to take all actions necessary (including making dividend payments and share buybacks and cancellations) to return the public funds injected into it by the KDIC, but only to the extent that these actions would not cause a material adverse effect on the contemplated normalization of its operations.
The business normalization plan included in the memorandum of understanding set financial targets for Woori Finance Holdings’ capital ratio, return on total assets, expense-to-revenue ratio, operating income per employee, non-performing loan ratio and holding company expense ratio, which it was required to meet on a semi-annual basis. Woori Finance Holdings periodically entered into a new business normalization plan with the KDIC, with new restructuring measures and financial targets. Woori Finance Holdings’ memorandum of understanding with the KDIC was terminated in connection with its merger with and into us in November 2014. See “—Privatization Plan—Merger with Woori Finance Holdings.”
Reorganization and Expansion Plans
Following its establishment and its acquisition of its subsidiaries, Woori Finance Holdings developed a reorganization and integration plan designed to reorganize the corporate structure of some of its subsidiaries and integrate its operations under a single management structure. As part of this plan:
From December 2001 through February 2002, Peace Bank of Korea was restructured by:
splitting off its commercial banking operations and merging them into us;Woori Bank;
changing the name of Peace Bank of Korea to Woori Credit Card; and
transferring ourthe credit card operations of Woori Bank to Woori Credit Card.
In March 2003, the credit card operations of Kwangju Bank were transferred to Woori Credit Card.
In August 2003, Woori Investment Bank (formerly named Hanaro Merchant Bank) was merged with us.Woori Bank.
In succeeding years, Woori Finance Holdings adopted plans toand Woori Bank further reorganizereorganized and expand itsexpanded their operations, including through mergers, acquisitions and investments. Pursuant to such reorganization and expansion plans:For example:
In March 2004, Woori Credit Card was merged with us.Woori Bank.
In October and December 2004, Woori Finance Holdings acquired an aggregate 27.3% voting interest in LG Investment & Securities Co., Ltd., which was subsequently renamed Woori Investment & Securities.
In May 2005, Woori Finance Holdings acquired a 90.0% interest in LG Investment Trust Management Co., Ltd., which was subsequently renamed Woori Asset Management.
In October 2005, weWoori Bank established Woori Private Equity as a consolidated subsidiary.
In April 2008, Woori Finance Holdings acquired a 51.0% interest in LIG Life Insurance Co., Ltd., which was subsequently renamed Woori Aviva Life Insurance.
In March 2011, Woori Finance Holdings acquired certain assets and assumed certain liabilities of Samhwa Mutual Savings Bank through a newly established subsidiary, Woori FG Savings Bank.
In September 2012, Woori FG Savings Bank acquired certain assets and assumed certain liabilities of Solomon Mutual Savings Bank.
In April 2013, weWoori Bank effected a spin-off of ourits credit card business into a newly established wholly-owned subsidiary of Woori Finance Holdings, Woori Card.
In June 2013, through an internal reorganization, Kumho Investment Bank (previously a subsidiary of Woori Private Equity and subsequently renamed Woori Investment Bank), in which Woori Finance Holdings held a 41.6% interest, became its consolidated subsidiary, and ￦70 billion of new capital was injected into such entity.
In January 2014, weWoori Bank completed the purchase of an additional 27% equity interest (in addition to the 6% equity interest weit previously acquired through ourits subsidiary PT. Bank Woori Indonesia) in PT. Bank Himpunan Saudara 1906, an Indonesian commercial bank with a network of over 100 branches and offices throughout Indonesia. In December 2014, PT. Bank Woori Indonesia merged with and into PT. Bank Himpunan Saudara 1906. The merged entity, in which we holdWoori Banks holds a 79.9% equity interest, was renamed PT Bank Woori Saudara Indonesia 1906, Tbk and became ourits consolidated subsidiary.
In October 2016, weWoori Bank acquired a 51% equity interest in Wealth Development Bank Corp., a thrift bank in the Philippines with a network of 16 branches and approximately 300 employees, by purchasing newly issued shares for approximately US$21 million.employees.
In November 2016, we establishedWoori Bank obtained a banking license to establish a local subsidiary in Vietnam, Woori Bank Vietnam, which commenced operations in January 2017.
In June 2018, Woori Bank acquired VisionFund (Cambodia) Ltd., a microfinance deposit-taking institution in Cambodia, which was renamed WB Finance Co., Ltd. In February 2020, with the approval of the Cambodian financial authorities, Woori Finance (Cambodia) Plc., a microfinance institution, merged with and into WB Finance Co., Ltd.
In November 2018, Woori Bank established a German subsidiary, Woori Bank Europe GmbH, which is headquartered in Frankfurt.
Privatization Plan
In June 2013, the Korean government, through the Public Funds Oversight Committee of the Financial Services Commission, announced an updated plan to privatize Woori Finance Holdings and its former subsidiaries, including us.Woori Bank. The privatization plan provided for the segregation of such entities into three groups and the disposal of the Korean government’s interest in these entities held through the KDIC in a series of transactions, many of which have been completed.
Spin-off of Kwangju Bank and Kyongnam Bank
In August 2013, the board of directors of Woori Finance Holdings approved a plan to establish two new companies, KJB Financial Group and KNB Financial Group (which we refer to as the New Holdcos), through a spin-off (which we refer to as the 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. The Spin-offspin-off was approved at an extraordinary general meeting of the shareholders of Woori Finance Holdings held onin January 28, 2014 and was effected onin May 1, 2014. After the Spin-off,spin-off, KJB Financial Group owned the shares of Kwangju Bank previously held by Woori Finance Holdings, and KNB Financial Group owned 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 the New Holdcos were its subsidiaries, after theSpin-off.spin-off. Following the Spin-off,spin-off, each of these banks was merged with the relevant New Holdco.
As of December 31, 2013, Kwangju Bank had total assets of ￦18,873 billion (including total loans of ￦13,447 billion) and total liabilities of ￦17,429 billion (including total deposits of ￦13,531 billion), on a consolidated basis. For the year ended December 31, 2013, Kwangju Bank’s interest income amounted to ￦832 billion, its interest expense amounted to ￦417 billion and its net income amounted to ￦61 billion, on a consolidated basis. As of December 31, 2013, Kyongnam Bank had total assets of ￦31,714 billion (including total loans of ￦24,572 billion) and total liabilities of ￦29,454 billion (including total deposits of ￦23,773 billion), on a consolidated basis. For the year ended December 31, 2013, Kyongnam Bank’s interest income amounted to ￦1,324 billion, its interest expense amounted to ￦672 billion and its net income amounts to ￦130 billion, on a consolidated basis.
The Spin-off was accomplished through a pro rata distribution of common stock, par value ￦5,000 per share, of KJB Financial Group and KNB Financial Group to the holders of Woori Finance Holdings’ common stock. Specifically, on May 21, 2014, each holder of Woori Finance Holdings’ common stock as of the record date of April 30, 2014 received 0.0637 shares of common stock of KJB Financial Group and 0.0973 shares of common stock of KNB Financial Group for each share of Woori Finance Holdings’ common stock held by such holder. Holders of Woori Finance Holdings’ ADSs did not receive any common stock of the New Holdcos in connection with the Spin-off. Instead, the depositary for Woori Finance Holdings’ American depositary receipts program sold the New Holdcos’ common stock it received in the Spin-off, in a riskless principal capacity, and distributed the net proceeds of such sale to holders of the ADSs, after deducting applicable fees and expenses of the depositary and applicable taxes and other governmental charges. Neither of the New Holdcos issued any ADSs or established any American depositary receipts program following the Spin-off.
As a result of the Spin-off, pursuant to share consolidation procedures under Korean law, the outstanding shares of Woori Finance Holdings’ common stock were consolidated as of May 1, 2014 such that the shareholders recorded in its shareholder register as of the record date of April 30, 2014 were allotted 0.8390 shares of its common stock in exchange for each previously outstanding share. Woori Finance Holdings’ outstanding ADSs were also consolidated as of May 1, 2014 such that holders of such ADSs recorded in the transfer books of the depositary as of the record date of April 30, 2014 were allotted 0.8390 ADSs in exchange for each previously outstanding ADS.
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.
Disposal of Woori Financial, Woori Asset Management, Woori F&I, Woori Investment & Securities, Woori Aviva Life Insurance and Woori FG Savings Bank
OnIn March 20, 2014, Woori Finance Holdings sold its 52.0% ownership interest in Woori Financial to KB Financial Group for the sale price of ￦280 billion. As of December 31, 2013, Woori Financial had total assets of ￦3,940 billion and total liabilities of ￦3,528 billion on a consolidated basis. For the year ended December 31, 2013, Woori Financial’s operating revenues amounted to ￦338 billion, and its net income amounted to ￦54 billion, on a consolidated basis.
In May 2014, Woori Finance Holdings sold its 100.0% ownership interest in Woori Asset Management to Kiwoom Securities for the sale price of ￦76 billion. As of December 31, 2013, Woori Asset Management had total assets of ￦85 billion and total liabilities of ￦17 billion on a consolidated basis. For the year ended December 31, 2013, Woori Asset Management’s operating revenues amounted to ￦32 billion, and its net income amounted to ￦4 billion, on a consolidated basis.
In June 2014, Woori Finance Holdings sold its 100.0% ownership interest in Woori F&I to Daishin Securities for the sale price of ￦368 billion. As of December 31, 2013, Woori F&I had total assets of ￦1,641 billion and total liabilities of ￦1,336 billion on a consolidated basis. For the year ended December 31, 2013, Woori F&I’s operating revenues amounted to ￦184 billion, and its net income amounted to ￦49 billion, on a consolidated basis.
In June 2014, Woori Finance Holdings also sold its 37.9% ownership interest in Woori Investment & Securities, its 51.6% ownership interest in Woori Aviva Life Insurance and its 100.0% ownership interest in Woori FG Savings Bank to NongHyup Financial Group Inc. for the sale price of ￦1,039 billion in a collective sale. As of December 31, 2013, Woori Investment & Securities, Woori Aviva Life Insurance and Woori FG Savings Bank had total assets of ￦29,982 billion, ￦4,466 billion and ￦823 billion, respectively, on a consolidated basis, and total liabilities of ￦26,534 billion, ￦4,309 billion and ￦699 billion, respectively, on a consolidated basis. For the year ended December 31, 2013, operating revenues
Merger of Woori Investment & Securities, Woori Aviva Life InsuranceBank and Woori FG Savings Bank amounted to ￦4,027 billion, ￦982 billion and ￦85 billion, respectively, on a consolidated basis, and net income of Woori Investment & Securities and Woori Aviva Life Insurance amounted to ￦48 billion and ￦2 billion, respectively, on a consolidated basis. For the year ended December 31, 2013, Woori FG Savings Bank had a net loss of ￦34 billion.
Merger with Woori Finance Holdings
In July 2014, weWoori Bank entered into a merger agreement with Woori Finance Holdings, providing for the merger of Woori Finance Holdings with and into us.Woori Bank. The merger agreement was approved by the
shareholders of Woori Finance Holdings at an extraordinary general meeting held on October 10, 2014. Pursuant to the merger agreement, Woori Finance Holdings merged with and into usWoori Bank on November 1, 2014, such that weWoori Bank 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 ourWoori Bank’s common stock for each share of common stock of Woori Finance Holdings they held.
As a result of the merger, the other remaining subsidiaries of Woori Finance Holdings, including Woori Card, Woori Private Equity, Woori FIS, Woori Investment Bank and Woori Finance Research Institute, became ourWoori Bank’s subsidiaries. Accordingly, ourWoori Bank’s overall business and operations after the merger, on a consolidated basis, arewere substantially identical to those of Woori Finance Holdings on a consolidated basis prior to the merger.
The following chart sets forth the corporate organization of Woori Finance Holdings and its subsidiaries prior to the merger:
The following chart sets forth our corporate organization following the merger:
We wereBank was an unlisted corporation prior to the merger, while Woori Finance Holdings had its common stock listed on the KRX KOSPI Market and its ADSs listed on the New York Stock Exchange. Following the merger, weWoori Bank became newly listed on the KRX KOSPI Market and succeeded to Woori Finance Holdings’ listing on the New York Stock Exchange.
The shareholders of Woori Finance Holdings were entitled to exercise appraisal rights with respect to its common stock held by them at a purchase price of ￦12,422 per share, in accordance with Korean law. The period for exercise of appraisal rights started on October 11, 2014 and ended on October 21, 2014, during which shareholders exercised appraisal rights with respect to an aggregate of 64,832 shares of common stock of Woori Finance Holdings. The payment of the purchase price for such common stock held by the exercising shareholders was made on October 30, 2014, in the aggregate amount of ￦805 million. Such common stock purchased by Woori Finance Holdings was exchanged for our common stock in the merger and are held by us as treasury shares. We are required under applicable Korean law to dispose of such treasury shares within five years after the date of their acquisition.
Sales of the KDIC’s Ownership Interest
Pursuant to the Korean government’s privatization plan, in December 2014, the KDIC sold 40,143,022 shares of ourWoori Bank’s common stock (representing 5.9% of ourits outstanding common stock) in a private sale in Korea. In addition, in December 2016 and January 2017, the KDIC sold an aggregate of 200,685,395 shares of ourWoori Bank’s common stock (representing 29.7% of ourits outstanding common stock) in stakes ranging from 3.7% to 6.0% to seven financial companies through a bidding process. Pursuant to a commitment made by the KDIC in connection with such bidding process, five persons, each nominated by one of the winning bidders, were elected as new outside directors at an extraordinary general meeting of ourWoori Bank’s shareholders held in December 2016. In December 2018, five persons, each nominated by one of such winning bidders, were elected at an extraordinary general meeting of Woori Bank’s shareholders to serve as our outside directors upon our establishment. See “Item 6.A. Directors and Senior Management—Board of Directors—Outside Directors.” In 2017, pursuant to a series of transactions related to call options previously granted in connection with the KDIC’s sale of ourWoori Bank’s common stock in December 2014, the KDIC sold an aggregate of 19,852,364 shares of ourWoori Bank’s common stock (representing 2.94% of ourits outstanding common stock). As a result of such transactions, the KDIC’s ownership interest in usWoori Bank was reduced to 18.43%. We expectIn connection with our establishment in January 2019 as a new financial holding company pursuant to a “comprehensive stock transfer” under Korean law, the KDIC received 124,604,797 shares of our outstanding common stock in exchange for the common stock of Woori Bank it owned. In June 2019, the Financial Services Commission approved the KDIC’s plan to sell all or a portion ofsuch common stock in multiple transactions by 2022. In April 2021, pursuant to such plan, the remainingKDIC sold 14,445,354 shares of our common stock it(representing 2.00% of our outstanding common stock) in a block trade. As a result of such transaction, the KDIC currently owns to one or more purchasers in the future.15.25% of our outstanding common stock.
In December 2016, in connection with the KDIC’s sale of shares of ourWoori Bank’s common stock, weWoori Bank entered into an agreement with the KDIC, pursuant to which we areWoori Bank was required to use ourits best efforts to cause an employee of the KDIC nominated by it to be appointed as our Woori Bank’s non-standing director, so long as the KDIC either (x) ownsowned 10% or more of ourWoori Bank’s total issued shares with voting rights or (y) ownsowned more than 4% but less than 10% of ourWoori Bank’s total issued shares with voting rights and remains ourremained its largest shareholder (other than the National Pension Service of Korea). While such agreement with Woori Bank expired, in July 2019, we entered into an agreement with the KDIC with similar terms. See “Item 10.C. Material Contracts.”
Establishment of Woori Financial Group
We were established as a new financial holding company on January 11, 2019 pursuant to a “comprehensive stock transfer” under Korean law, whereby holders of the common stock of Woori Bank and certain of its
subsidiaries transferred all of their shares to us and in return received shares of our common stock. The stock transfer was approved by the shareholders of Woori Bank at an extraordinary general meeting held on December 28, 2018. In the stock transfer, each holder of one share of Woori Bank’s common stock recorded in its shareholder register as of November 15, 2018 received one share of our common stock. In addition, we issued our common stock to Woori Bank in exchange for the outstanding common stock of certain of Woori Bank’s wholly-owned subsidiaries that became our wholly-owned direct subsidiaries. Specifically, in connection with the stock transfer, Woori Bank transferred all shares of common stock held by it of Woori FIS Co., Ltd., Woori Finance Research Institute Co., Ltd., Woori Credit Information Co., Ltd., Woori Fund Services Co., Ltd. and Woori Private Equity Asset Management Co., Ltd., all of which were Woori Bank’s wholly-owned subsidiaries, to us and, as consideration for such transferred shares, received shares of our common stock in accordance with the specified stock transfer ratio applicable to each such subsidiary. Following the completion of the stock transfer, Woori Bank, Woori FIS Co., Ltd., Woori Finance Research Institute Co., Ltd., Woori Credit Information Co., Ltd., Woori Fund Services Co., Ltd. and Woori Private Equity Asset Management Co., Ltd. became our direct and wholly-owned subsidiaries.
The following chart illustrates the organizational structure of Woori Bank prior to the completion of the stock transfer:
The following chart illustrates our organizational structure after the completion of the stock transfer:
In connection with the stock transfer, Woori Bank’s common stock was suspended from trading from January 9, 2019 and was de-listed from the KRX KOSPI Market on February 13, 2019. Following the stock transfer, our common stock was newly listed on the KRX KOSPI Market on February 13, 2019, and our ADSs succeeded to the listing of Woori Bank’s ADSs on the New York Stock Exchange on January 11, 2019.
The shareholders of Woori Bank were entitled to exercise appraisal rights with respect to its common stock held by them at a purchase price of￦16,079 per share, in accordance with Korean law. The period for exercise of appraisal rights started on December 28, 2018 and ended on January 7, 2019, during which shareholders exercised appraisal rights with respect to an aggregate of 11,453,702 shares of common stock of Woori Bank. The payment of the purchase price for such common stock held by the exercising shareholders was made on January 9, 2019, in the aggregate amount of￦184 billion. As a result of the exchange for our common stock of such treasury shares obtained by Woori Bank pursuant to the exercise of appraisal rights by its shareholders and other treasury shares it held, as well as the transfer by Woori Bank of the shares it held in its relevant subsidiaries to us, Woori Bank received 18,346,782 shares of our common stock in the stock transfer, which constituted our treasury shares and represented 2.7% of our total issued common stock as of January 11, 2019. In March 2019, Woori Bank sold all such shares to institutional investors in a block trade, and we no longer hold any treasury shares as of the date of this annual report.
Reorganization and Expansion of Woori Financial Group
After our establishment, we have further reorganized and expanded our operations, including through mergers, acquisitions and investments. For example:
In August 2019, we acquired a 73% equity interest in Woori Asset Management Corp. (formerly known as Tongyang Asset Management Corp.) from Tongyang Life Insurance Co., Ltd., which became our consolidated subsidiary.
In September 2019, we conducted a “comprehensive stock exchange” under Korean law with Woori Bank, the former parent company of Woori Card, whereby Woori Bank transferred all of its Woori Card
shares to us and in return received a combination of 42,103,377 shares of our common stock and |
| • | In September 2019, we acquired a 59.83% equity interest in Woori Investment Bank from Woori Bank, its former parent company, for a purchase price of |
In October 2019, Woori Bank acquired a 20% equity interest in Lotte Card Co., Ltd., the eighth largest credit card issuer in Korea, according to BC Research, which is a quarterly report issued by BC Card. See “Item 4.B. Business Overview—Credit Cards.”
In December 2019, we acquired Woori Global Asset Management Co. (formerly known as ABL Global Asset Management Co.) from Anbang Asset Management (Hong Kong) Co., Limited, which became our consolidated subsidiary.
In December 2019, we acquired an aggregate 51% equity interest in Woori Asset Trust Co., Ltd. (formerly known as Kukje Asset Trust Ltd.), consisting of (i) 44.46% from its majority shareholders, including former chairman Jae-Eun Yoo, and (ii) 6.54% from Woori Bank. As part of the share purchase agreement with the former majority shareholders, we have agreed to additionally acquire a 21.27% equity interest in the future, subject to certain conditions, at which point we will own an aggregate 72.3% equity interest in Woori Asset Trust Co., Ltd., which is currently our consolidated subsidiary.
| • | In December 2020, we acquired a 74.0% equity interest in Woori Financial Capital Co., Ltd. (formerly known as Aju Capital Co., Ltd.) from Well to Sea Investment for a purchase price of |
| Item 4.B. | Business Overview |
We are one of the largest financial holding companies in Korea, in terms of consolidated total assets, and our operations include Woori Bank, one of the largest commercial banks in Korea. Our operations includesubsidiaries collectively engage in a broad range of businesses, including corporate banking, consumer banking, credit card operations, investment banking, capital markets activities and other businesses. We provide a wide range of products and services to our customers, which mainly comprise small- and medium-sized enterprises and individuals, as well as some of Korea’s largest corporations. As of December 31, 2017,2020, we had, on a consolidated basis, total assets of ￦316,295￦399,081 billion, total liabilities of ￦295,730￦372,356 billion and total equity of ￦20,565￦26,725 billion.
As one of the leading financial services groups in Korea, we believe our core competitive strengths include the following:
Strong and long standing relationships with corporate customers.Historically our operations concentrated on large corporate customers. As a result, we believe that we have strong relationships with many of Korea’s
leading corporate groups, and we are the main creditor bank to 139 of the 3628 largest Korean corporate borrowers. Further enhancing our corporate loan portfolio is our ability to lend to small- and medium-sized enterprise customers. As of December 31, 2017,2020, we had approximately 280,129374,973 small- and medium-sized enterprise borrowers.
Large and loyal retail customer base.With respect to our consumer banking operations, we have the third-largest deposit base among Korean commercial banks, and over 22.623.8 million retail customers, representing about half of the Korean adult population. Of these customers, over 9.29.8 million are active customers, meaning that they have a deposit account with us with a balance of at least ￦300,000￦300,000 or have a loan account with us.
Extensive distribution and marketing network.We serve our customers primarily through one of the largest banking networks in Korea, comprising 876821 branches and 5,9524,531 ATMs and cash dispensers as of December 31, 2017. We2020. Through Woori Bank, we also operate 1011 dedicated corporate banking centers and 8492 general managers for our large corporate customers and 1,009861 relationship managers stationed at 726706 branches (as well as 615280 additional non-stationed employees who serve as relationship managers as needed) for our small- and medium-sized enterprise customers as of December 31, 2017.2020. In addition, we have Internet and mobile banking platforms to enhance customer convenience, reduce service delivery costs and allow our branch staff to focus on marketing and sales.
Strong capital base. As of December 31, 2017,2020, our consolidated equity totaled ￦20.6￦27 trillion, and our total capital adequacy ratio was 15.40%13.84%. Our management team at the holding company carefully coordinates ourthe capital and dividend plans of each of our subsidiaries and for the consolidated group to
ensure that we optimize our capital position. We believe our strong capital base and coordinated capital management enable us to support growth of our core businesses and to pursue franchise-enhancing initiatives such as selective investments and acquisitions.
Strong and experienced management team.Webenefit from our management team’s extensive experience accumulated with usour subsidiaries and ourtheir predecessors. In December 2017, January 2019, Tae-Seung Sohn Son assumed the role of our representative director, president and chief executive officer.officer, which we believe enhanced the quality of our management team and our corporate governance. We also believe that the extensive experience of many members of our management team in the financial sector will help us to continue to strengthen our operations.
Strategy
We aim to continue to build our position as a leading universal banking andcomprehensive financial services companyprovider in Korea, with a view to having our business platform and operating structure on par with those of leading global financial institutions. The key elements of our strategy are as follows:
Provide comprehensive financial services and maximize synergies among our subsidiaries through our financial holding company structure. We plan to become a comprehensive financial services provider capable of developing and cross-selling a diverse range of products and services to our large existing base of retail and corporate banking customers, so that we can more effectively compete with leading domestic and international financial institutions. We believe that the adoption of a financial holding company structure will continue to help us increase customer satisfaction, generate synergies and maximize profitability, by creating an integrated system among our affiliated companies and allowing us to effectively provide various financial services, including comprehensive one-stop asset management services customized for clients, based on active expansion of non-banking and global business operations. One of the intended benefits of our financial holding company structure is that it enhances our ability to engage in mergers and acquisitions which we may decide to pursue as part of our strategy. For example, in an effort to expand our asset management services, we acquired equity interests in Woori Asset Management Corp., Woori Global Asset Management Co. and Woori Asset Trust Co., Ltd. in 2019 and Aju Capital Co., Ltd. in 2020, which became our consolidated subsidiaries. We may consider additionally acquiring or merging with other financial institutions, particularly in the non-banking sector, to achieve more balanced growth and further diversify our revenue base.
In addition, we believe our financial holding company structure gives us a competitive advantage over stand-alone banks and other financial institutions by:
allowing us to offer a more extensive range of financial products and services;
enabling us to share customer information, which is not permitted outside a financial holding company structure, thereby enhancing our risk management and cross-selling capabilities;
enhancing our ability to reduce costs in areas such as back-office processing and procurement;
enabling us to raise and manage capital on a centralized basis.
We aim to maximize the synergies from our diverse financial product and service offerings by cross developing and selling products and encouraging collaboration of operations among our subsidiaries. In particular, we promote collaborative projects across our investment banking, digital, wealth management and global operations.
Further improve our asset quality and strengthen our risk management practices.We wereWoori Bank was one of the earliest and most aggressive banks in Korea to actively reduce non-performing loans through charge-offs and sales to third parties and we havehas taken various measures to facilitate the disposal of ourits substandard or below loans. As a result of these and other initiatives, our ratio of non-performing loans to total loans has been steadily declining and was 0.73%0.41% as of December 31, 2017.2020.
One of our highest priorities is to maintain our strong asset quality and enhance our risk management practices on an ongoing basis. We have created a centralized group-wide risk management organization, installed a comprehensive warning and monitoring system, adopted uniform loan loss provisioning policies across all subsidiaries and implemented an advanced credit evaluation system called “CREPIA.”at Woori Bank. We have undertakenplan to undertake a series of group-wide reviews of our credit risk management procedures, as well as our risk management infrastructure, in order to develop and implement various measures to further standardize and improve our risk management procedures and systems.
In addition, we use a value at risk, or “VaR,” monitoring system for managing market risk. We intend to vigorously maintain a manageable risk profile and balance that risk profile with adequate returns. We believe that our continuous focus on upgrading our risk management systems and practices will enable us to maintain our strong asset quality, improve our financial performance and enhance our competitiveness.
Enhance customer profitability through optimization of channel usage, products and services for each customer segment.Our extensive distribution network and wide range of quality products and services has enabled us to serve our customers effectively. However, we intend to further enhance the value proposition to our customers by differentiating products and delivery channels based on the distinct needs of different customer segments.
Retail customers. We have segmentedgenerally segment our retail customers into four groups: high net worth; mass affluent; middle class; and mass market. We believe we are relatively competitive in our core customer base, which includes mass affluent and middle class customers, and we serve these customers via our team of financial planners inthrough our branches who sellby selling customized higher margin services and products, such as investment advice, mutual funds, insurance and personal loans. For our mass market customers, we offer simple, easy-to-understand and relatively more standardized products such as basic deposit and lending products, including mortgage loans, and we encourage the use of alternative distribution channels such as the Internet, mobile banking and ATMs by our mass market customers such that we can serve them in a cost efficientcost-efficient manner. We serve our high net worth individuals via branches and dedicated private banking centers staffed with experienced private bankers who offer sophisticated tailored financial services. In addition to serving retail customers based on segment, we also offer products and services based on customers’ life cycles to optimize our financial solutions for such customers.
Corporate customers.We continuouslycontinually and vigorously review our portfolio of large corporate and small- and medium-sized enterprise customers to refine our database of core accounts and industries in terms of profitability potential. We seek to expand our relationship beyond a pure lending relationship by promoting our foreign exchange, factoring, trade finance and investment banking services to our core small- and medium-sized enterprise customers and cross-selling our investment banking services, derivatives and other risk hedging products, as well as employee retirement products, to our core large corporate customers.
In addition to our customer segment-based marketing strategy, we aim to improve customer loyalty by strengthening customer retention and implementing a customer-focused sales culture and thereby develop a system pursuant to which our growth is facilitated by the growth of our customers.
Diversify our revenue base with a view to reducing our exposure to interest rate cycles and increasing profitability. Currently, in line with the Korean banking industry, we derive a substantial majority of our revenues from our loan and other credit products. To reduce our traditional reliance on lending as a source of revenue and to increase our profitability, we have been seeking to further diversify our earnings base, in particular by focusing on fee-based services, such as foreign exchange, trade finance and derivatives products, investment banking and advisory investment trust services for our corporate customers and asset management and mutual funds, investment trust products and beneficiary certificates, and life and non-life insurance products for our retail customers.
In addition, we intend to continue to enter into business alliances with other leading financial service providers so that we can offer a full range of “best of class” products and services to our targeted customers. We actively evaluate alliances and joint venture opportunities when they arise in order to diversify our revenue stream and provide our customers with a range of sophisticated and tailored products that will complement our existing products and services. We also intend to carefully consider potential acquisitions or other strategic investments that fit within our overall strategy. When considering acquisitions, we will focus on opportunities that supplement the range of products and services we offer and strengthen our existing customer base, enable us to maintain our standard for asset quality and profitability and provide us with a reasonable return on our investment. We may also consider acquiring or merging with other financial institutions, particularly in the non-banking sector, to achieve more balanced growth and further diversify our revenue base.
Increase “fintech” capabilitiesAccelerate digital innovation. The digital finance market has recently seen major growth due to the entry of fintech firms and the rapid digital transformations of our competitors, and the recent social distancing trends resulting from the COVID-19 pandemic have only accelerated the digitalization of finance. We have been enhancing our financial technology, or “fintech,” capabilitiesactively engaged in ordersuch trends through the adoption of innovative initiatives and aim to expand our non-traditional financial service delivery channels for our customers. We havebecome a leader in digitization. As part of such efforts, in May 2015, Woori Bank established a mobile financial service platform through the launch of the first mobile-only banking service in Korea called WiBee Bank, in May 2015 and the additions of a mobile messenger application called WiBee Talk and a comprehensive membership point service called WiBee Members in January and July 2016, respectively. In addition, in April 2017, K bank, formed by a consortium with KT Corporation and 20 other companies, in which we, through Woori Bank, own 13.8%19.9% of the equity with voting rights, launched its services to become the first Internet-only bank in Korea. K bank also offers its services through convenience stores and phone booths in addition to our ATMs.
We have also strengthened our alliances with information technology companies to provide innovative electronic payment methods, including Woori Samsung Pay with Samsung Electronics, which is a cardless ATM withdrawal system that utilizes smartphones. Through such partnership with Samsung Electronics, we introduced additional services that allow customers to open checking accounts and apply for debit cards from April 2019, and utilize currency exchange services using the Samsung Pay mobile application from May 2019.
In August 2016, we commenced iris-scanning authentication atalso launched a program to discover and provide support to innovative fintech startup companies in Korea, currently known as Digital Innovation Lab, or DinnoLab. In October 2019, DinnoLab established an office in Vietnam to support the overseas expansion of such startup companies. In June 2019, we introduced a robotic process automation system to improve our operations, minimize human error, support business activities and increase efficiency and productivity. In August 2019, we launched Woori WON Banking, our main mobile banking application, to provide enhanced digital platform services to our customers.
In May 2020, we launched our “Digital First, Change Everything” campaign and established the Digital Innovation Committee, which comprises certain executive officers, to focus on such group-wide digital strategies. In August 2020, we entered into a memorandum of our ATMs, which allowsunderstanding with KT Corporation to form a joint venture to collaborate on data-based financial services, including a business utilizing MyData, a government initiative for cardless ATM withdrawals.the pooling of customers’ data for the provision of financial services, and in January 2021, the Financial Services Commission granted MyData business licenses to Woori Bank and Woori Card. We expect to provide services utilizing MyData, including personal financial management (PFM) and personal expenditure management (PEM) services.
Expand presence in the global market. We continually expand our global network mainly through Woori Bank and Woori Card and aim to strengthen our overseas operations to diversify our profit base, which is
currently concentrated in Korea. We currently maintain, in aggregate, over 470 branches in over 20 countries and have continuously expandedmade major strides in our overseas operations since our establishment of the first overseas branch of a Korean commercial bank in Tokyo, Japan in 1968. In December 2014, weWoori Bank became the first Korean bank to be involved in a merger with a listed overseas bank when ourits subsidiary PT. Bank Woori Indonesia merged with and into PT. Bank Himpunan Saudara 1906, which was renamed PT Bank Woori Saudara Indonesia 1906, Tbk. In October 2016, weWoori Bank acquired a 51% equity interest in Wealth Development Bank Corp., a thrift bank in the Philippines, and have partnered with Vicsal Development Corporation, an operator of department stores and supermarkets in the Philippines and another major shareholder of Wealth Development Bank Corp., to actively expand ourits base of local customers. In addition, in November 2016, we establishedWoori Bank obtained a banking license to establish a local subsidiary in Vietnam, Woori Bank Vietnam, which commenced operations in January 2017 and manages the local operations of ourWoori Bank’s branches in Vietnam. In 2017, weFurthermore, Woori Bank has expanded the scope of ourits operations in Myanmar, Indonesia, Cambodia and the Philippines in order to capitalize on the potential for high growth and profitability in Southeast Asia and established a representative office in Poland as well as additional branches in India,India. In 2018, Woori Bank acquired VisionFund (Cambodia) Ltd., a microfinance deposit-taking institution in Cambodia, which was renamed WB Finance Co., Ltd., and established a German subsidiary, Woori Bank Europe GmbH, which is headquartered in Frankfurt. In February 2020, with the approval of the Cambodian financial authorities, Woori Finance (Cambodia) Plc., a microfinance institution, merged with and into WB Finance Co., Ltd., and further expanded Woori Bank’s network of local deposit-taking services, as a result of which we haveWoori Bank has a presence in 25over 20 countries with 301over 440 branches and offices outside Korea.
Enhance operational efficiencies and synergies. We have been seeking to improve our operational efficiency and synergies and reduce our expenses In 2016, Woori Card expanded overseas by integrating our businesses, unifying our business procedures, eliminating duplication, centralizing processes and procurement, implementing continuous automation and migrating to low cost distribution channels. Among other measures, we have established a centralized information technology center to increase information sharing and synergies among our different business operations.
We believe that the integration of our accounting, information technology and other back-office systems allows us to further eliminate redundant functions and equipment and reduce our long-term expense. We also
believe that these measures, together with our effort to encourage migration of our mass market customers to low-cost alternative channels, will reduce our costs and enhance our operating efficiencies. We are also continuing our efforts to maximize synergies among our businesses.establishing TuTu Finance-WCI Myanmar Co., Ltd., microfinance firm, in Myanmar.
Develop and increase productivity of our professional workforce. We aim to retain the most qualified and highly-trained professionals in the market, and we intend to continue to focus on the development and training of our core professionals. In order to boost employee morale and productivity, we aim to create an environment that nurtures development and growth and accordingly have implemented performance-based incentive programs to recognize high performers on both an individual and business group level. In addition, a rigorous ethics management program and related measures have been instituted to reduce operational risk and help ensure compliance with our internal standards and policies.
Corporate Banking
We provide commercial banking services to large corporate customers (including government-owned enterprises) and small- and medium-sized enterprises in Korea. Currently, our corporate banking operations consist mainly of lending to and taking deposits from our corporate customers. We also provide ancillary services on a fee basis, such as inter-account transfers, transfers of funds from branches and agencies of a company to its headquarters and transfers of funds from a company’s customer accounts to the company’s main account. We provide our corporate banking services predominantly through Woori Bank.
The following table sets forth the balances and percentages of our total lending and total deposits represented by our large corporate and small- and medium-sized enterprise customer loans and deposits, respectively, and the number of such customers as of the dates indicated:
| As of December 31, | As of December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||||||||||||||||||||||||||||||||||
| Amount | % of Total | Amount | % of Total | Amount | % of Total | Amount | % of Total | Amount | % of Total | Amount | % of Total | |||||||||||||||||||||||||||||||||||||
| (in billions of Won, except percentages) | (in billions of Won, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
Loans(1): | ||||||||||||||||||||||||||||||||||||||||||||||||
Small- and medium-sized enterprise(2) | ￦ | 67,115 | 29.5 | % | ￦ | 68,434 | 28.9 | % | ￦ | 74,906 | 29.6 | % | ||||||||||||||||||||||||||||||||||||
Small- and medium-sized enterprise(2) | ￦ | 79,371 | 30.3 | % | ￦ | 85,367 | 31.4 | % | ￦ | 97,476 | 32.1 | % | ||||||||||||||||||||||||||||||||||||
Large corporate(3) | 40,780 | 18.0 | 36,176 | 15.3 | 43,372 | 17.2 | 38,256 | 14.6 | 31,058 | 11.4 | 35,994 | 11.8 | ||||||||||||||||||||||||||||||||||||
Others(4) | 19,727 | 8.7 | 21,033 | 8.9 | 18,398 | 7.3 | 19,260 | 7.4 | 23,167 | 8.5 | 23,833 | 7.8 | ||||||||||||||||||||||||||||||||||||
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Total | ￦ | 127,622 | 56.2 | % | ￦ | 125,643 | 53.1 | % | ￦ | 136,676 | 54.1 | % | ￦ | 136,887 | 52.3 | % | ￦ | 139,592 | 51.3 | % | ￦ | 157,303 | 51.8 | % | ||||||||||||||||||||||||
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Deposits: | ||||||||||||||||||||||||||||||||||||||||||||||||
Small- and medium-sized enterprise | ￦ | 37,067 | 17.7 | % | ￦ | 39,564 | 17.9 | % | ￦ | 42,693 | 18.2 | % | ￦ | 46,753 | 18.8 | % | ￦ | 52,998 | 20.0 | % | ￦ | 56,809 | 19.5 | % | ||||||||||||||||||||||||
Large corporate | 64,114 | 30.7 | 62,899 | 28.5 | 68,340 | 29.1 | 75,128 | 30.2 | 76,943 | 29.1 | 91,972 | 31.6 | ||||||||||||||||||||||||||||||||||||
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Total | ￦ | 101,181 | 48.4 | % | ￦ | 102,463 | 46.4 | % | ￦ | 111,033 | 47.3 | % | ￦ | 121,881 | 49.0 | % | ￦ | 129,941 | 49.1 | % | ￦ | 148,781 | 51.0 | % | ||||||||||||||||||||||||
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Number of borrowers: | ||||||||||||||||||||||||||||||||||||||||||||||||
Small- and medium-sized enterprise | 256,592 | 262,311 | 280,129 | 306,424 | 325,749 | 374,973 | ||||||||||||||||||||||||||||||||||||||||||
Large corporate | 3,297 | 3,771 | 4,169 | 5,389 | 6,046 | 6,620 | ||||||||||||||||||||||||||||||||||||||||||
| (1) | Not including due from banks, other |
| (2) | Loans to “small- and medium-sized enterprises” as defined in the Framework Act on Small and Medium Enterprises of Korea and related regulations (and including project finance loans to such enterprises). See “—Small- and Medium-Sized Enterprise Banking.” |
| (3) | Loans to companies that are not “small- and medium-size enterprises” as defined in the Framework Act on Small and Medium Enterprises of Korea and related regulations, and typically including companies that have assets of ￦12 billion or more and are therefore subject to external audit under the Act on External Audits of Stock Companies. See “—Large Corporate Banking.” |
| (4) | Includes loans to governmental agencies, foreign loans and other corporate loans. |
Corporate loans we provide consist principally of the following:
| • | working capital loans, which are loans used for general working capital purposes, typically with a maturity of one year or less, including notes discounted and trade finance; and |
| • | facilities loans, which are loans to finance the purchase of materials, equipment and facilities, typically with a maturity of three years or more. |
On the deposit-taking side, we currently offer our corporate customers several types of corporate deposit products. These products can be divided into two general categories: demand deposits that have no restrictions on deposits or withdrawals, but which offer a relatively low interest rate; and time deposits from which withdrawals are restricted for a period of time, but offer higher interest rates. We also offer installment deposits, certificates of deposit and repurchase instruments. We offer varying interest rates on our deposit products depending upon the rate of return on our income-earning assets, average funding costs and interest rates offered by other nationwide commercial banks.
Small- and Medium-Sized Enterprise Banking
We use the term “small- and medium-sized enterprises” as defined in the Framework Act on Small and Medium Enterprises of Korea and related regulations. Under the amended Framework Act on Small and Medium Enterprises of Korea which became effective on April 27, 2016, and related regulations, in order to qualify as a small- and medium-sized enterprise, (i) the enterprise’s total assets at the end of the immediately preceding fiscal year must be less than ￦500 billion, (ii) the enterprise must meet the average or annual sales revenue standards prescribed by the Enforcement Decree of the Framework Act on Small and Medium Enterprises that are applicable to the enterprise’s primary business, and (iii) the enterprise must meet the standards of management independence from ownership as prescribed by
the Enforcement Decree of the Framework Act on Small and Medium Enterprises, including non-membership in a conglomerate as defined in the Monopoly Regulations and Fair Trade Act.Enterprises. However, even ifpursuant to an enterprise that qualified as a small- and medium-sized enterprise underamendment to the Framework Act on Small and Medium Enterprises, prior to the amendments thereof no longer met the definition due to such amendments, suchwhich became effective in June 2020, an enterprise continued to be deemedthat qualifies as a small- and medium-sized enterprise until March 31, 2018.pursuant to the above definition shall no longer be considered a small- and medium-sized enterprise if it is incorporated into, or is deemed to be incorporated into, a business group subject to certain disclosure requirements under the Monopoly Regulation and Fair Trade Act. Furthermore, certified social enterprises (as defined in the Social Enterprise Promotion Act of Korea), as well as cooperatives, or federations of cooperatives, social cooperatives and federations of social cooperatives (as defined in the Framework Act on Cooperatives), as well as cooperatives, federations and national federations (as defined in the Consumer Cooperatives Act) that satisfy the requirements prescribed by the Framework Act on Small and Medium Enterprises, may also qualify as small- and medium-sized enterprises. The small- and medium-sized enterprise segment of the corporate banking market has grown significantly in recent years, including as a result of government measures to encourage lending to these enterprises. As of December 31, 2017, 26.0%2020, 21.5% of our small- and medium-sized enterprise loans were extended to borrowers in the manufacturing industry, 15.8%16.6% were extended to borrowers in the retail and wholesale industry,industries, and 7.2% were extended to borrowers in the hotel, leisure and transportation industries.
We service our small- and medium-sized enterprise customers primarilythrough ourWoori Bank’s network of branches and small- and medium-sized enterprise relationship managers. As of December 31, 2017, we2020, Woori Bank had stationed one or more relationship managers at 726706 branches, of which 370331 were located in the Seoul metropolitan area. The relationship managers specialize in servicing the banking needs of small- and medium-sized enterprise customers and concentrate their marketing efforts on developing new customers in this segment. As of December 31, 2017, we2020, Woori Bank had a total of 1,009861 small- and medium-sized enterprise relationship managers stationed at ourits branches (as well as 615 280 non-stationed employees who serve as relationship managers as needed).
In addition to increasing our dedicated staffing and branches, our strategy for this banking segment is to identify promising industry sectors and to develop and market products and services targeted towards customers in these sectors. We have also developed in-house industry specialists who can help us identify leading small- and medium-sized enterprises in, and develop products and marketing strategies for, these targeted industries. In addition, we operate customer loyalty programs at Woori Bank for our most profitable small- and medium-sized enterprise customers and provide them with benefits and services such as preferential rates, free seminars and workshops and complementary invitations to cultural events.
Lending Activities.We provide both working capital loans and facilities loans to our small- and medium-sized enterprise customers. As of December 31, 2017,2020, working capital loans and facilities loans accounted for 47.1%45.3% and 49.4%,52.0% respectively, of our total small- and medium-sized enterprise loans. As of December 31, 2017,2020, we had approximately 280,129374,973 small- and medium-sized enterprise borrowers.
As of December 31, 2017,2020, secured loans and loans guaranteed by a third party accounted for 68.8%80.5% and 6.1%5.2%, respectively, of our small- and medium-sized enterprise loans. As of December 31, 2017,2020, approximately 78.5%74.3% of the secured loans were secured by real estate and 1.6%0.7% were secured by deposits. Working capital loans generally have a maturity of one year, but may be extended on an annual basis for an aggregate term of three to five years if periodic payments are made.years. Facilities loans have a maximum maturity of 1015 years.
When evaluating the extension of working capital loans and facilities loans, we review the creditworthiness and capability to generate cash of the small- and medium-sized enterprise customer. Furthermore, we take corporate guarantees and credit guarantee letters from other financial institutions and use deposits that the borrower has with us or securities pledged to us as collateral.
The value of any collateral is defined using a formula that takes into account the appraised value of the property, any prior liens or other claims against the property and an adjustment factor based on a number of considerations including, with respect to property, the value of any nearby property sold in a court-supervised auction during the previous five years. We generally revalue any collateral on a periodic basis (every year for real estate (with apartments being revalued every month, subject to the availability of certain specified market
value information), every year for equipment, every month for deposits and every week for stocks listed on a major Korean stock exchange) or if a trigger event occurs with respect to the loan in question.
Pricing.We establish the pricing for our small- and medium-sized enterprise loan products based principally on transaction risk, our cost of funding and market considerations. Our lending rates are generally determined using our CREPIACredit Wizard system. We use our CREPIACredit Wizard system to manage our lending activities, and input data gathered from loan application forms, credit scores of borrowers and the appraisal value of collateral provided by external valuation experts into the CREPIACredit Wizard system and update such information periodically to reflect changes in such information. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Credit Risk Management—Credit Evaluation and Approval.” We measure transaction risk using factors such as the credit rating assigned to a particular borrower and the value and type of collateral. Our system also takes into account cost factors such as the current market interest rate, opportunity cost and cost of capital, as well as a spread calculated to achieve a target rate of return. Depending on the price and other terms set by competing banks for similar borrowers, we may reduce the interest rate we charge to compete more effectively with other banks. Loan officers have limited discretion in deciding what interest rates to offer, and significant variations require review at higher levels. As of December 31, 2017,2020, approximately 81.3%67.9% of our small- and medium-sized enterprise loans had interest rates that varied with reference to current market interest rates.
Large Corporate Banking
Our large corporate customers consist of companies that are not “small- and medium-size enterprises” as defined in the Framework Act on Small and Medium Enterprises of Korea and related regulations, and typically include companies that have assets of ￦12 billion or more and are therefore subject to external audit under the Act on External Audits of Stock Companies. As a result of our history and development, particularly the history of Woori Bank, we remain the main creditor bank to many of Korea’s largest corporate borrowers.
In terms of our outstanding loan balance, as of December 31, 2017, 40.9%2020, 36.8% of our large corporate loans were extended to borrowers in the finance and insurancemanufacturing industry, 33.0%36.8% were extended to borrowers in the manufacturing industry,finance and 6.9%insurance industries, and 7.3% were extended to borrowers in the retail and wholesale industry.industries.
We service our large corporate customers primarily through ourWoori Bank’s network of dedicated corporate banking centers and general managers. We operate 10Woori Bank operates 11 dedicated corporate banking centers, all of which are located in the Seoul metropolitan area. Each center is staffed with one or more general managers, and certain centers are headed by a senior general manager. Depending on the center, each such manager is responsible for large
corporate customers that either are affiliates of a particularchaebol or operate in a particular industry or region. As of December 31, 2017, we2020, Woori Bank had a total of 8492 generalmanagers who focus on marketing to and managing the accounts of large corporate customers.
Our strategy for the large corporate banking segment is to develop new products and cross-sell our existing products and services to our core base of large corporate customers. In particular, we continue to focus on marketing fee-based products and services such as foreign exchange and trade finance services, derivatives and other risk hedging products, investment banking services and advisory services. We have also been reviewing the credit and risk profiles of our existing customers as well as those of our competitors, with a view to identifying a target group of high-quality customers on whom we can concentrate our marketing efforts. In addition, we are seeking to continue to increase thechaebol-, region- and industry-based specialization of the managers at our dedicated corporate banking centers, including through the operation of a knowledge management database that allows greater sharing of marketing techniques and skills.
Lending Activities. We provide both working capital loans and facilities loans to our large corporate customers. As of December 31, 2017,2020, working capital loans (including domestic usuance,usance, bills bought and securities sold under repurchase agreements) and facilities loans accounted for 78.7%70.2% and 12.9%,17.9% respectively, of our total large corporate loans.
Loans to large corporate customers may be secured by real estate or deposits or be unsecured. As of December 31, 2017,2020, secured loans and loans guaranteed by a third party accounted for 13.0%17.2% and 4.1%, respectively, of our large corporate loans. Since a relatively low percentage of our large corporate loan portfolio
is secured by collateral, we may be required to establish larger allowances for credit losses with respect to any such loans that become non-performing or impaired. See “—Assets and Liabilities—Asset Quality of Loans—Loan Loss Provisioning Policy.” As of December 31, 2017,2020, approximately 65.0%62.9% of the secured loans were secured by real estate and approximately 4.9%2.7% were secured by deposits. Working capital loans generally have a maturity of one year but may be extended on an annual basis for an aggregate term of three to five years. Facilities loans have a maximum maturity of 1015 years.
We evaluate creditworthiness and collateral for our loans to large corporate customers in essentially the same way as we do for loans to small- and medium-sized enterprise customers. See “—Corporate Banking—Small- and Medium-Sized Enterprise Banking—Lending Activities.”
Pricing. We determine the pricing of our loans to large corporate customers in the same way that we determine the pricing of our loans to small- and medium-sized enterprise customers. See “—Corporate Banking—Small- and Medium-Sized Enterprise Banking—Pricing.” As of December 31, 2017,2020, approximately 93.3%86.9% of these loans had interest rates that varied with reference to current market interest rates.
Consumer Banking
We provide retail banking services to consumers in Korea. Our consumer banking operations consist mainly of lending to and taking deposits from our retail customers. We also provide ancillary services on a fee basis, such as wire transfers. While we have historically attracted and held large amounts of consumer deposits through our extensive branch network, our substantial consumer lending growth occurred principally in recent years, in line with the increase in the overall level of consumer debt in Korea. We provide our consumer banking services primarily through Woori Bank. See “—Branch Network and Other Distribution Channels.”
We classify our consumer banking customers based on their individual net worth and contribution to our consumer banking operations into four groups: high net worth; mass affluent; middle class; and mass market. We differentiate our products, services and service delivery channels with respect to these segments and target our marketing and cross-selling efforts based on this segmentation. With respect to the high net worth and mass affluent segments, we have established private banking operations to better service customers in these segments. See “—Private Banking Operations.” With respect to the middle class segment, we seek to use our branch-level sales staff to maximize the overall volume of products and services we provide. With respect to the mass market segment, we have focused on increasing our operating efficiency by encouraging customers to migrate to low-cost alternative service delivery channels, such as the Internet, call centers, mobile banking and ATMs.
Lending Activities
We offer a variety of consumer loan products to households and individuals. We differentiate our product offerings based on a number of factors, including the customer’s age group, the purpose for which the loan is used, collateral requirements and maturity. The following table sets forth the balances and percentage of our total lending represented by our consumer loans as of the dates indicated:
| As of December 31, | As of December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||||||||||||||||||||||||||||||||||
| Amount(1) | % of Total Loans(2) | Amount(1) | % of Total Loans(2) | Amount(1) | % of Total Loans(2) | Amount(1) | % of Total Loans(2) | Amount(1) | % of Total Loans(2) | Amount(1) | % of Total Loans(2) | |||||||||||||||||||||||||||||||||||||
| (in billions of Won, except percentage) | (in billions of Won, except percentage) | |||||||||||||||||||||||||||||||||||||||||||||||
General purpose household loans | ￦ | 28,193 | 12.4 | % | ￦ | 32,368 | 13.7 | % | ￦ | 36,301 | 14.4 | % | ￦ | 39,492 | 15.1 | % | ￦ | 40,870 | 15.0 | % | ￦ | 43,850 | 14.4 | % | ||||||||||||||||||||||||
Mortgage loans | 40,598 | 17.9 | 47,630 | 20.1 | 47,476 | 18.8 | 51,280 | 19.6 | 54,511 | 20.1 | 62,274 | 20.5 | ||||||||||||||||||||||||||||||||||||
Home equity loans | 24,657 | 10.9 | 24,486 | 10.3 | 25,513 | 10.1 | 26,324 | 10.0 | 28,622 | 10.5 | 31,995 | 10.5 | ||||||||||||||||||||||||||||||||||||
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Total | ￦ | 93,448 | 41.2 | % | ￦ | 104,484 | 44.1 | % | ￦ | 109,290 | 43.2 | % | ￦ | 117,096 | 44.7 | % | ￦ | 124,003 | 45.6 | % | ￦ | 138,119 | 45.4 | % | ||||||||||||||||||||||||
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| (1) | Not including outstanding credit card balances, and prior to deducting allowance for credit losses and present value discount or reflecting deferred origination costs. |
| (2) | Total loans do not include other |
Our consumer loans consist of:
| • | general purpose household loans, which are loans made to customers for any purpose (other than mortgage and home equity loans), and include overdraft loans, which are loans extended to customers to cover insufficient funds when they withdraw funds from their demand deposit accounts with us in excess of the amount in such accounts up to a limit established by us; and |
| • | mortgage loans,which are loans made to customers to finance home purchases, construction, improvements or rentals, andhome equity loans, which are loans made to customers secured by their homes to ensure loan repayment. |
For secured loans, including mortgage and home equity loans, we generally lend up to 70% of the collateral value (except in areas of high speculation designated by the government where we generally limit our lending to 40% of the appraised value of collateral) minus the value of any lien or other security interest that is prior to our security interest. In calculating the collateral value for real estate for such secured consumer loans (which principally consists of residential properties), we generally use the fair value of the collateral as appraised by Korea Investors Service which is collated in our CREPIACredit Wizard system. We generally revalue collateral on a periodic basis. As of December 31, 2017,2020, the revaluation frequency was every year for real estate (with apartments being revalued every month, subject to the availability of certain specified market value information), every year for equipment, every month for deposits and every week for stocks listed on a major Korean stock exchange.
A borrower’s eligibility for general purpose household loans is primarily determined by such borrower’s creditworthiness. In reviewing a potential borrower’s loan application, we also consider the suitability of the borrower’s proposed use of funds, as well as the borrower’s ability to provide a first-priority mortgage. A borrower’s eligibility for a home equity loan is primarily determined by such borrower’s creditworthiness (including as determined by our internal credit scoring protocols) and the value of the collateral property, as well as any third party guarantees of the borrowed amounts.
We also offer a variety of collective housing loans, including loans to purchase property or finance the construction of housing units, loans to contractors to be used for working capital purposes, and loans to educational institutions and non-profit entities to finance the construction of dormitories. Collective housing loans subject us to the risk that the housing units will not be sold. As a result, we review the probability of the sale of the housing unit when evaluating the extension of a loan. We also review the borrower’s creditworthiness and the suitability of the borrower’s proposed use of funds. Furthermore, we take a lien on the land on which the
housing unit is to be constructed as collateral. If the collateral is not sufficient to cover the loan, we also take a guarantee from the Housing Finance Credit Guarantee Fund as security.
General Purpose Household Loans
Our general purpose household loans may be secured by real estate (other than homes), deposits or securities. As of December 31, 2017,2020, approximately ￦26,978￦32,014 billion, or 74.3%73.0%, of our general purpose household loans were unsecured, although some of these loans were guaranteed by a third party. Overdraft loans are primarily unsecured and typically have a maturity between one and three years, and the amount of such loans has been steadily declining. As of December 31, 2017, this amount was approximately ￦44 million.years.
Pricing. The interest rates on our general purpose household loans are either a periodic floating rate (which is based on a base rate determined for three-month, six-month or twelve-month periods, further adjusted to account for the borrower’s credit score and our opportunity cost) or a fixed rate that reflects our internal cost of funding and similar adjustments, but taking into account interest rate risks. In 2010, we began usingWe currently use the “Cost of Fund Index” (or COFIX) benchmark rate, as announced by the Korea Federation of Banks, as the base rate for our general purpose household loans with periodic floating rates in place of the benchmark certificate of deposit rate that we had traditionally used for such purpose.
Our interest rates also incorporate a margin based on, among other things, the type of collateral (if any), priority with respect to any security, our target loan-to-value ratio and loan duration. We also can adjust the applicable rate based on current or expected profit contribution of the customer. Our lending rates are generally
determined by our CREPIACredit Wizard system. The applicable interest rate is determined at the time of the drawdown of the loan. We also charge a termination fee in the event a borrower repays the loan prior to maturity. As of December 31, 2017,2020, approximately 66.9%58.9% of our general purpose household loans had floating interest rates.
Mortgage and Home Equity Lending
We provide customers with a number of mortgage and home equity loan products that have flexible features, including terms, repayment schedules, amounts and eligibility for loans. The maximum term of our mortgage and home equity loans is typically 35 years. Most of our mortgage and home equity loans provided prior to January 2016 have an interest-only payment period of 10 years or less. However, the Korea Federation of Banks’ implementation of its Guidelines on Banks’ Mortgage Loan Screening changed the default interest-only payment period to one year or less, which applies to loans that were originated subsequent to the effective date of the Guidelines in January 2016. With respect to mortgage and home equity loans, we determine the eligibility of borrowers based on the borrower’s personal information, transaction history and credit history using our CREPIACredit Wizard system. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Credit Risk Management—Credit Evaluation and Approval.” The eligibility of a borrower that is participating in a housing lottery will depend on proof that it has paid a deposit or can obtain a guarantee from a Korean government-related housing fund.
As of December 31, 2017,2020, approximately 64.9%65.5% of our mortgage and home equity loans were secured by residential or other property, 25.9%25.1% of our mortgage and home equity loans were guaranteed by Korean government-related housing funds and 5.7%3.4% of our mortgage and home equity loans, contrary to general practices in the United States, were unsecured (although the use of proceeds from mortgage and home equity loans is restricted for the purpose of financing home purchases and some of these loans were guaranteed by a third party). One reason that a portion of our mortgage and home equity loans are unsecured is that we, along with other Korean banks, provide advance loans to borrowers for the down payment of new housing (particularly apartments) that is in the process of being built. Once construction is completed, which may take several years, these mortgage and home equity loans become secured by the new housing purchased by these borrowers. As of December 31, 2017,2020, we had issued unsecured construction loans relating to housing where construction was not completed in the amount of ￦4,130￦3,197 billion. For the year ended December 31, 2017,2020, the average initial loan-to-value ratio of our mortgage loansand home equity loans was approximately 59.1%54.8% and 55.6%39.2%, respectively, compared to 60.3%58.3% and 54.8%45.4% for the year ended December 31, 2016.2019. The average loan-to-value ratio of our
mortgage loans and home equity loans as of December 31, 20172020 was approximately 51.5%48.2% and 50.4%40.7%, respectively, compared to 56.8%53.2% and 52.2%46.4% as of December 31, 2016.2019.
Pricing. The interest rates for our mortgage and home equity loans are determined on essentially the same basis as our general purpose household loans, except that for mortgage and home equity loans we place significantly greater weight on the value of any collateral that is being provided to secure the loan. The base rate we use in determining the interest rate for our mortgage and home equity loans is identical to the base rate we use to determine pricing for our general purpose household loans. As of December 31, 2017,2020, approximately 66.1%55.8% of our outstanding mortgage and home equity loans had floating interest rates.
Private Banking Operations
Our private banking operations within Woori Bank aim to service our high net worth and mass affluent retail customers. As of December 31, 2017,2020, we had over 179,200220,119 customers who qualified for private banking services, representing 0.8%0.9% of our total retail customer base. Of ourthe total retail customer deposits of ￦97our retail unit of￦109.5 trillion as of December 31, 2017,2020, high net worth and mass affluent customers accounted for 55.1%62.0%.
Through our private bankers, we provide financial and real estate advisory services to our high net worth and mass affluent customers. We also market differentiated investment and banking products and services to these segments, including beneficiary certificates, overseas mutual fund products, specialized bank accounts and credit cards. In addition, we have developed a customer loyalty program for our private banking customers that provides preferential rate and fee benefits and awards. We have also segmented our private banking operations by introducing exclusive private client services for high net worth customers who individually maintain a deposit
balance of at least ￦100￦100 million. We believe that our private banking operations will allow us to increase our revenues from our existing high net worth and mass affluent customers, as well as attract new customers in these segments.
We have 668 Woori Bank has 689branches that offer private banking services. These branches are staffed by 686715 private bankers, and almost all of the branches are located in metropolitan areas, including Seoul.
WeWoori Bank also operateoperates an advisory center in Seoul for ourits private banking clients, which employs 2017 specialists advising on matters of law, tax, real estate, risk assessment and investments.investments.
Deposit-Taking Activities
AsWe are one of December 31, 2017, we were the third-largestlargest deposit holderholders among Korean banks, in large part due to our nation-wide branch network. The balance of our deposits from retail customers was ￦73,364￦95,146 billion as of December 31, 2015, ￦80,6552018, ￦106,255 billion as of December 31, 20162019, and ￦95,757￦115,835 billion as of December 31, 20172020 which constituted 35.1%38.2%, 36.5%40.1% and 40.8%39.7%, respectively, of the balance of our total deposits.
We offer diversified deposit products that target different customers with different needs and characteristics. These deposit products fall into five general categories:
| • | demand deposits, which either do not accrue interest or accrue interest at a lower rate than time, installment or savings deposits. The customer may deposit and withdraw funds at any time and, if the deposits are interest-bearing, they accrue interest at a fixed or variable rate depending on the period and/or amount of deposit; |
| • | time deposits,which generally require a customer to maintain a deposit for a fixed term during which interest accrues at a fixed or floating rate. Early withdrawals require penalty payments. The term for time deposits typically ranges from one month to five years; |
| • | savings deposits, which allow the customer to deposit and withdraw funds at any time and accrue interest at a fixed rate set by us depending upon the period and amount of deposit; |
| • | installment deposits, which generally require the customer to make periodic deposits of a fixed amount over a fixed term during which interest accrues at a fixed rate. Early withdrawals require penalty payment. The term for installment deposits range from six months to five years; and |
| • | certificates of deposit, the maturities of which range from 30 days to five years, with a required minimum deposit of ￦10 million. Interest rates on certificates of deposit vary with the length of deposit and prevailing market rates. Certificates of deposit may be sold at face value or at a discount with the face amount payable at maturity. |
The following table sets forth the percentage of our total retail and corporate deposits represented by each deposit product category as of December 31, 2017:2020:
Demand Deposits | Time Deposits | Savings Deposits | Installment Deposits | Certificates of Deposit | Time Deposits | Savings Deposits | Installment Deposits | Certificates of Deposit | ||||||||
| 10.08% | 52.34% | 35.68% | 0.01% | 1.89% | ||||||||||||
| 11.13% | 48.88% | 39.27% | 0.01% | 0.71% | ||||||||||||
We offer varying interest rates on our deposit products depending on market interest rates as reflected in average funding costs, the rate of return on our interest-earning assets and the interest rates offered by other commercial banks. Generally, the interest payable is the highest on installment deposits and decreases with certificate of deposit accounts and time deposits and savings deposit accounts receiving relatively less interest, and demand deposits accruing little or no interest.
We also offer deposits in foreign currencies and a specialized deposit product, the apartment application comprehensive deposit, which is a monthly installment comprehensive savings program providing the holder with a preferential right to subscribe for new national housing units constructed under the Housing Act or new privately constructed housing units. This deposit product requires monthly installments of ￦20,000 to ￦500,000, terminates when the holder is selected as a subscriber for a housing unit and accrues interest at variable rates depending on the term.
The Monetary Policy Committee of the Bank of Korea imposes a reserve requirement on Won currency deposits of commercial banks based generally on the type of deposit instrument. The minimum reserve requirement ratio is 7%. See “—Supervision and Regulation—Principal Regulations Applicable to Banks—Liquidity.” Ongoing regulatory reforms have removed all controls on lending rates and deposit rates (except for the prohibition on interest payments on current account deposits).
The Depositor Protection Act provides for a deposit insurance system where the KDIC guarantees to depositors the repayment of their eligible bank deposits. The deposit insurance system insures up to a total of ￦50 million per depositor per bank. See “—Supervision and Regulation—Principal Regulations Applicable to Banks—Deposit Insurance System.” We pay a quarterly premium of 0.02% of our average deposits and a quarterly special contribution of 0.025% of our average deposits, in each case for the relevant quarter. For the year ended December 31, 2017,2020, we paid an aggregate of ￦305￦371 billion of such premiums and contributions.
Branch Network and Other Distribution Channels
WeWoori Bank had a total of 876821 banking branches in Korea as of December 31, 2017,2020, which was one of the most extensive networks of branches among Korean commercial banks. In recent years, demand in Korea for mutual funds and other asset management products as well as bancassurance products has been rising. These products require an extensive sales force and customer interaction to sell, further emphasizing the need for a large branch network. As a result, an extensive branch network is important to attracting and maintaining retail customers, as they generally conduct a significant portion of their financial transactions through bank branches. We believe that our extensive branch network in Korea helps us to maintain our retail customer base, which in turn provides us with a stable and relatively low cost funding source.
The following table presents the geographical distribution of ourWoori Bank’s banking branch network in Korea as of December 31, 2017:2020:
| Total | Total | |||||||||||||||
| Number | % of Total | Number | % of Total | |||||||||||||
Area | ||||||||||||||||
Seoul | 402 | 46 | % | 370 | 45.1 | |||||||||||
Six largest cities (other than Seoul) | 150 | 17 | 138 | 16.8 | ||||||||||||
Other | 324 | 37 | 313 | 38.1 | ||||||||||||
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Total | 876 | 100 | % | 821 | 100.0 | |||||||||||
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In order to maximize access to our products and services, we have established an extensive network of ATMs and cash dispensers, which are located in branches as well as unmanned outlets. WeWoori Bank had 5,9524,531 ATMs and cash dispensers as of December 31, 2017.2020.
We actively promote the use of alternative service delivery channels in order to provide convenient service to customers. We also benefit from customers’ increasing use of these channels, as they allow us to maximize the marketing and sales functions at the branch level, reduce employee costs and improve profitability. The following tables set forth information, for the periods indicated, relating to the number of transactions and the fee revenue of our alternative service delivery channels.channels with respect to Woori Bank.
| For the year ended December 31, | For the year ended December 31, | |||||||||||||||||||||||
| 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||||||||||
ATMs(1): | ||||||||||||||||||||||||
Number of transactions (millions) | 378 | 346 | 316 | 296 | 272 | 213 | ||||||||||||||||||
Fee income (billions of Won) | ￦ | 44 | ￦ | 40 | ￦ | 40 | ￦ | 36 | ￦ | 32 | ￦ | 25 | ||||||||||||
Telephone banking: | ||||||||||||||||||||||||
Number of users | 6,058,318 | 6,419,017 | 6,384,164 | 6,360,743 | 6,336,310 | 6,315,007 | ||||||||||||||||||
Number of transactions (millions) | 106 | 105 | 104 | 148 | 143 | 126 | ||||||||||||||||||
Fee income (billions of Won) | ￦ | 3 | ￦ | 3 | ￦ | 3 | ￦ | 2 | ￦ | 1.5 | ￦ | 0.9 | ||||||||||||
Internet banking: | ||||||||||||||||||||||||
Number of users | 14,775,540 | 15,631,766 | 16,554,353 | 17,387,658 | 17,975,675 | 18,545,393 | ||||||||||||||||||
Number of transactions (millions) | 6,567 | 6,994 | 7,566 | 7,660 | 10,116 | 17,082 | ||||||||||||||||||
Fee income (billions of Won) | ￦ | 141 | ￦ | 150 | ￦ | 160 | ￦ | 178 | ￦ | 199 | ￦ | 191 | ||||||||||||
| (1) | Includes cash dispensers. |
Most of our electronic banking transactions do not generate fee income as many of those transactions are free of charge, such as balance inquiries, consultations with customer representatives or transfers of money. This is particularly true for telephone banking services, where a majority of the transactions are balance inquiries or consultations with customer representatives, although other services such as money transfers are also available.
Our automated telephone banking system offers a variety of services, including inter-account fund transfers, balance and transaction inquiries and customer service inquiries. We also operate a call center that handles calls from customers, engages in telemarketing and assists in our collection efforts.
Our Internet banking services include balance and transaction inquiries, money transfers, loan applications, bill payment and foreign exchange transactions. We seek to maintain and increase our Internet banking customer base by focusing largely on our younger customers and those that are able to access the Internet easily (such as office workers) as well as by developing additional Internet-based financial services and products. We also develop new products to target different types of customers with respect to our Internet banking services, and have developed a service that enables private banking customers to access their accounts on a website that provides specialized investment advice. We also offer online escrow services.
In addition, we provide mobile banking services to our customers, which is available to all our Internet-registered users. These services allow our customers to complete selected banking transactions through major
Korean telecommunications networks using their smart phones or other mobile devices. In May 2015, we launched the first mobile-only banking service in Korea, called WiBee Bank, andBank. In addition, we provide general mobile banking services through our Woori WON Banking mobile application. We are expanding itsour mobile banking services to Southeast Asia.
We also offer our “Win-CMS”“Win-CMS” service to our corporate customers of Woori Bank, which provides an integrated electronic cash management system and in-house banking platform for such customers.
Credit Cards
We offer credit card products and services mainly to consumers and corporate customers in Korea. In April 2013, as a part of our strategy to enhance our credit card operations and increase its synergies with our other businesses, weWoori Bank effected a horizontal spin-off of ourits credit card business. As a result, ourbusiness, and the former credit card business isof Woori Bank was operated by aits wholly-owned subsidiary, Woori Card. Card, until September 2019, when we conducted a “comprehensive stock exchange” under Korean law with Woori Bank, pursuant to which Woori
Card became our direct and wholly-owned subsidiary. See “Item 4.A. History and Development of the Company—Establishment of Woori Financial Group—Reorganization and Expansion of Woori Financial Group.”
As of December 31, 2017,2020, Woori Card’s market share based on transaction volume was approximately 8.7%8.5%, which ranked Woori Card as the sixth largest credit card issuer in Korea, according to BC Research, which is a quarterly report issued by BC Card.
Our credit card operations benefit from Woori Card’s ownership of a 7.65% equity stake in BC Card. BC Card is co-owned by KT Corporation, which is one of Korea’s largest telecommunications companies, and other Korean financial institutions, and operates the largest merchant payment network in Korea as measured by transaction volume. This ownership stake allows us to outsource production and delivery of new credit cards, the preparation of monthly statements, management of merchants and other ancillary services to BC Card for our credit card operations. In addition, in October 2019, Woori Bank acquired a 20% equity interest in Lotte Card Co., Ltd., the eighth largest credit card issuer in Korea, according to BC Research.
Products and Services
We currently have the following principal brands of credit cards outstanding:
a “Woori” brand;
a “BC Card” brand; and
a “Visa” brand.
We issue “Visa” brand cards under a non-exclusive license agreement with Visa International Service Association and also issue “MasterCard,” “JCB” and “Union Pay” brand cards under a non-exclusive, co-branding agreement with BC Card.
We offer a number of different services to holders of our credit cards. Generally, these services include:
credit purchase services, which allow cardholders to purchase merchandise or services on credit and repay such credit on a lump-sum or installment basis;
cash advance services from ATMs and bank branches; and
credit card loans, which are loans that cardholders can obtain based on streamlined application procedures.
Unlike in the United States and many other countries, where most credit cards are revolving cards that allow outstanding balances to be rolled over from month to month so long as a required minimum percentage is repaid, cardholders in Korea are generally required to pay for their non-installment purchases as well as cash advances within approximately 15 to 60 days of purchase or advance, depending on their payment cycle.
The following tables set forth certain data relating to the credit card operations of Woori Card (including BC Cards and Visa Cards issued through the BC Card consortium) as of the dates or for the period indicated:
| As of or for the year ended December 31, | As of or for the year ended December 31, | |||||||||||||||||||||||
| 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||||||||||
| (in billions of Won, unless indicated otherwise) | (in billions of Won, unless indicated otherwise) | |||||||||||||||||||||||
Number of credit card holders (at year end) (thousands of holders) | ||||||||||||||||||||||||
General accounts | 11,789 | 12,125 | 12,509 | 12,525 | 13,000 | 13,157 | ||||||||||||||||||
Corporate accounts | 642 | 481 | 550 | 460 | 555 | 563 | ||||||||||||||||||
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Total | 12,431 | 12,606 | 13,059 | 12,985 | 13,555 | 13,720 | ||||||||||||||||||
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Active ratio(1) | 47.20 | % | 49.00 | % | 50.70 | % | 52.73 | % | 55.00 | % | 56.53 | % | ||||||||||||
Credit card interest and fees | ||||||||||||||||||||||||
Installment and cash advance interest | ￦ | 223 | ￦ | 236 | ￦ | 225 | ￦ | 224 | ￦ | 243 | ￦ | 226 | ||||||||||||
Annual membership fees | 43 | 56 | 72 | 78 | 86 | 90 | ||||||||||||||||||
Merchant fees | 763 | 831 | 896 | 943 | 918 | 888 | ||||||||||||||||||
Other fees | 343 | 421 | 570 | 606 | 640 | 644 | ||||||||||||||||||
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Total | ￦ | 1,372 | ￦ | 1,544 | ￦ | 1,763 | ￦ | 1,851 | ￦ | 1,885 | ￦ | 1,848 | ||||||||||||
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Charge volumes | ||||||||||||||||||||||||
General purchase | ￦ | 50,761 | ￦ | 59,678 | ￦ | 58,454 | ￦ | 58,952 | ￦ | 64,762 | ￦ | 60,228 | ||||||||||||
Installment purchase | 5,454 | 6,231 | 6,796 | 8,201 | 7,912 | 10,225 | ||||||||||||||||||
Cash advance | 4,404 | 4,620 | 4,700 | 4,859 | 4,862 | 4,314 | ||||||||||||||||||
Card loan | 2,984 | 2,991 | 2,944 | 3,306 | 3,664 | 4,610 | ||||||||||||||||||
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Total | ￦ | 63,603 | ￦ | 73,520 | ￦ | 72,894 | ￦ | 75,318 | ￦ | 81,200 | ￦ | 79,377 | ||||||||||||
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Outstanding balances (at year end) | ||||||||||||||||||||||||
General purchase | ￦ | 2,275 | ￦ | 2,580 | ￦ | 2,595 | ￦ | 3,057 | ￦ | 3,243 | ￦ | 3,060 | ||||||||||||
Installment purchase | 1,315 | 1,383 | 1,559 | 2,089 | 1,969 | 2,022 | ||||||||||||||||||
Cash advance | 565 | 573 | 574 | 607 | 585 | 483 | ||||||||||||||||||
Card loan | 1,951 | 2,146 | 2,107 | 2,305 | 2,611 | 2,997 | ||||||||||||||||||
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Total | ￦ | 6,106 | ￦ | 6,682 | ￦ | 6,835 | ￦ | 8,058 | ￦ | 8,408 | ￦ | 8,562 | ||||||||||||
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Average outstanding balances | ||||||||||||||||||||||||
General purchase | ￦ | 2,299 | ￦ | 2,591 | ￦ | 2,822 | ￦ | 3,036 | ￦ | 3,292 | ￦ | 3,199 | ||||||||||||
Installment purchase | 1,208 | 1,375 | 1,520 | 1,911 | 2,046 | 1,934 | ||||||||||||||||||
Cash advance | 558 | 576 | 581 | 596 | 591 | 523 | ||||||||||||||||||
Card loan | 1,748 | 2,047 | 2,174 | 2,391 | 2,567 | 2,861 | ||||||||||||||||||
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Total | ￦ | 5,813 | ￦ | 6,589 | ￦ | 7,097 | ￦ | 7,934 | ￦ | 8,496 | ￦ | 8,517 | ||||||||||||
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Delinquency ratios(2) | ||||||||||||||||||||||||
Less than 1 month | 1.68 | 1.37 | 1.78 | 1.53 | 1.19 | 0.85 | ||||||||||||||||||
From 1 month to 3 months | 0.83 | 0.76 | 0.72 | 0.72 | 0.65 | 0.51 | ||||||||||||||||||
From 3 months to 6 months | 0.76 | 0.44 | 0.57 | 0.64 | 0.65 | 0.51 | ||||||||||||||||||
Over 6 months | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | ||||||||||||||||||
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Total | 3.27 | % | 2.57 | % | 3.07 | % | 2.89 | % | 2.49 | % | 1.88 | % | ||||||||||||
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Non-performing loan ratio(3) | 1.12 | % | 0.76 | % | 0.83 | % | 0.87 | % | 0.87 | % | 0.71 | % | ||||||||||||
Gross charge-offs | ￦ | 198 | ￦ | 242 | ￦ | 228 | ￦ | 242 | ￦ | 281 | ￦ | 246 | ||||||||||||
Recoveries | 34 | 44 | 51 | 57 | 60 | 65 | ||||||||||||||||||
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Net charge-offs | ￦ | 164 | ￦ | 198 | ￦ | 177 | ￦ | 185 | ￦ | 221 | ￦ | 181 | ||||||||||||
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Gross charge-off ratio(4) | 3.41 | % | 3.66 | % | 3.22 | % | 3.04 | % | 3.31 | % | 2.89 | % | ||||||||||||
Net charge-off ratio(5) | 2.82 | % | 3.00 | % | 2.49 | % | 2.33 | % | 2.61 | % | 2.13 | % | ||||||||||||
| (1) | Represents the ratio of accounts used at least once within the past month to total accounts as of the end of the relevant year. |
Our delinquency ratios may not fully reflect all delinquent amounts relating to our outstanding balances since a certain portion of delinquent credit card balances (defined as balances one day or more past due) were restructured into loans and were not treated as being delinquent at the time of conversion or for a period of time thereafter. Including all restructured loans, outstanding balances overdue by more than one month accounted for |
| (3) | Represents the ratio of balances that are more than three months overdue to total outstanding balances as of the end of the relevant year. These ratios do not include the following amounts of previously delinquent credit card balances restructured into loans that were classified as normal or precautionary as of December 31, |
| As of December 31, | ||||||||||||
| 2015 | 2016 | 2017 | ||||||||||
| (in billions of Won) | ||||||||||||
Restructured loans | ￦ | 73 | ￦ | 102 | ￦ | 122 | ||||||
| As of December 31, | ||||||||||||
| 2018 | 2019 | 2020 | ||||||||||
| (in billions of Won) | ||||||||||||
Restructured loans | ￦ | 137 | ￦ | 154 | ￦ | 123 | ||||||
| (4) | Represents the ratio of gross charge-offs for the year to average outstanding balances for the year. Our charge-off policy is to charge off balances which are more than six months past due (including previously delinquent credit card balances restructured into loans that are more than six months overdue from the point at which the relevant balances were so restructured), except for those balances with a reasonable probability of recovery. |
| (5) | Represents the ratio of net charge-offs for the year to average outstanding balances for the year. |
We offer a diverse range of credit card products within our various brands. Factors that determine which type of card a particular cardholder may receive include net worth, age, location, income level and the particular programs or services that may be associated with a particular card. Targeted products that we offer include:
cards that offer additional benefits, such as frequent flyer miles and award program points that can be redeemed for services, products or cash;
gold cards, platinum cards and other preferential members’ cards that have higher credit limits and provide additional services;
corporate and affinity cards that are issued to employees or members of particular companies or organizations; and
revolving credit cards and cards that offer travel services and insurance.
In recent years, credit card issuers in Korea have agreed with selected cardholders to restructure their delinquent credit card account balances as loans that have more gradual repayment terms, in order to retain fundamentally sound customers who are experiencing temporary financial difficulties and to increase the likelihood of eventual recovery on those balances. In line with industry practice, we have restructured a portion of our delinquent credit card account balances as loans. The general qualifications to restructure delinquent credit card balances as loans are that the delinquent amount be more than one month overdue and in excess of ￦1 million. The terms of the restructured loans usually require the payment of approximately 10% to 20% of the outstanding balance as a down payment and that they be guaranteed by a third party and carry higher interest rates than prevailing market rates. These loans are usually required to be repaid by the borrower in installments over terms ranging from three months to 60 months. As of December 31, 2017,2020, the total amount of our restructured loans was ￦131 billion. Because restructured loans are not initially recorded as being delinquent, our delinquency ratios do not fully reflect all delinquent amounts relating to our outstanding credit card balances.
Payments and Charges
Revenues from our credit card operations consist principally of cash advance charges, merchant fees, interest income from credit card loans, interest on late and deferred payments, and annual membership fees paid by cardholders.
Each cardholder is allocated an aggregate credit limit in respect of all cards issued under his or her account and each month. We advise each cardholder of the credit limit relating to the cards in his or her monthly billing statement. Credit limits in respect of card loans are established separately. We conduct ongoing monitoring of all cardholders and accounts, and may reduce the credit limit or cancel an existing cardholder’s card based on current economic conditions, receipt of new negative credit data from third party sources or the cardholder’s score under the credit risk management systems we use to monitor their behavior, even if the cardholder continues to make timely payments in respect of his or her cards. We consider an account delinquent if the payment due is not received on the first monthly payment date on which such payment was due, and late fees are immediately applied. Late fee charges and computation of the delinquency period are based on each outstanding
unpaid transaction or installment, as applicable. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Credit Risk Management—Credit Review and Monitoring.”
Payments on amounts outstanding on our credit cards must be made (at the cardholder’s election at the time of purchase) either in full on each monthly payment date, in the case of lump-sum purchases, or in equal monthly installments over a fixed term from two months to 36 months, in the case of installment purchases. Cardholders may prepay installment purchases at any time without penalty. Payment for cash advances must be made on a lump sum basis. Payments for card loans must be made on an equal principal installment basis over a fixed term from three months up to a maximum of 36 months, up to a maximum loan amount of ￦30 million.
No interest is charged on lump-sum purchases that are paid in full by the monthly payment date. For installment purchases, we charge a fixed rate of interest on the outstanding balance of the transaction amount, based on the installment period selected at the time of purchase. For a new cardholder, we currently apply an interest rate between approximately 9.5% and 19.5%20.5% per annum as determined by the cardholder’s application system score. See “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Credit Risk Management—Credit Evaluation and Approval—Credit Card Approval Process” and “—Credit Review and Monitoring—Credit Card Review and Monitoring.”
For cash advances, finance charges start accruing immediately following the cash withdrawal. We currently charge a periodic finance charge on the outstanding balance of cash advance of approximately 6.4% to 26.4%23.8% per annum. The periodic finance charge assessed on such balances is calculated by multiplying the daily installment balances for each day during the billing cycle by the applicable periodic finance charge rate, and aggregating the results for each day in the billing period. In addition to finance charges, cardholders using cash advance networks operated by companies that are not financial institutions (such as Hannet and NICE) are charged a minimum commission of ￦800￦700 and a maximum of ￦1,300￦1,000 per withdrawal.
We also generally charge a basic annual membership fee of ￦2,000 to ￦25,000 for regular and gold cards and ￦30,000up to ￦1,000,000 for platinum cards. The determination of the annual feeour credit cards, which is determined based on various factors including the type of card, and whether affiliation options are selected by the cardholder. For certain cards, such as the Woori V Card, we will waive membership fees if customers charge above a certain amount.
We outsource the management of merchants to BC Card. We charge merchant fees to merchants for processing transactions. Merchant fees vary depending on the type of merchant and the total transaction amounts generated by the merchant. As of December 31, 2017,2020, we charged merchants an average of 1.37%1.35% of their respective total transaction amounts. In addition to merchant fees, we receive nominal interchange fees for international card transactions.
Capital Markets Activities
We engage in capital markets activities for our own account and for our customers. Our capital markets activities include securities investment and trading, derivatives trading, asset securitization services and investment banking.
Securities Investment and Trading
We invest in and trade securities for our own account, in order to maintain adequate sources of liquidity and to generate interest and dividend income and capital gains. As of December 31, 2017,2020, our investment portfolio, which consists of held-to-maturity financial assets at fair value through other comprehensive income and available-for-sale financial assets,securities at amortized cost, and our trading portfolio, which consists of financial assets held for trading and financial assets designated at fair value through profit or loss (excluding deposits, derivative assets and derivative assets)loans), had a combined total book value of ￦34,804￦54,186 billion and represented 11.0%13.6% of our total assets.
Our trading and investment portfolios consist primarily of Korean treasury securities and debt securities issued by Korean government agencies, including the KDIC, local governments or government-invested enterprises, and debt
securities issued by financial institutions. As of December 31, 2017,2020, we held debt securities with a total book value of ￦32,462￦52,534 billion, of which:
debt securities at amortized cost accounted for ￦16,749￦17,021 billion, or 51.6%32.4%;
debt securities at fair value through other comprehensive income accounted for ￦13,059￦28,948 billion, or 40.2%;
debt securities designated at fair value through profit or loss accounted for ￦10￦6,565 billion, or less than 0.1%12.5%.
Of these amounts, as of December 31, 2017,2020, debt securities issued by the Korean government amounted to ￦3,995￦6,946 billion, or 23.9%40.8% of our held-to-maturity debt securities ￦2,331at amortized cost, ￦2,923 billion, or 17.8%10.1% of our available-for-sale debt securities at fair value through other comprehensive income, and ￦540￦1,020 billion, or 20.4%15.5% of our trading debt securities.securities at fair value through profit or loss.
From time to time, we also purchase and sell equity securities for our securities portfolios. Our equity securities consist primarily of equities listed on the KRX KOSPI Market or the KRX KOSDAQ Market. As of December 31, 2017:2020:
equity securities in our available-for-sale portfolioat fair value through other comprehensive income had a book value of ￦1,411￦1,081 billion, or 9.2%3.6% of our available-for-sale securities at fair value through other comprehensive income portfolio; and
equity securities held for trading accounted for ￦22 billion, or 0.8% of our held-for-trading securities portfolio; and
Funds that are not used for lending activities are used for investment and liquidity management purposes, including investment and trading in securities. See “—Assets and Liabilities—Securities Investment Portfolio.”
The following tables show, as of the dates indicated, the gross unrealized gains and losses within our investment portfolio and the amortized cost and fair value of the portfolio by type of investment financial asset:
| As of December 31, 2015 | ||||||||||||||||
| Amortized Cost | Gross Unrealized Gain | Gross Unrealized Loss | Fair Value | |||||||||||||
| (in billions of Won) | ||||||||||||||||
Available-for-sale financial assets: | ||||||||||||||||
Debt securities | ||||||||||||||||
Korean treasury and government agencies | ￦ | 3,530 | ￦ | 29 | ￦ | — | ￦ | 3,559 | ||||||||
Financial institutions | 5,599 | 27 | — | 5,626 | ||||||||||||
Corporate | 3,809 | 79 | — | 3,888 | ||||||||||||
Asset-backed securities | 260 | — | (2 | ) | 258 | |||||||||||
Foreign currency bonds | 650 | 1 | (13 | ) | 638 | |||||||||||
Others | 12 | 8 | — | 20 | ||||||||||||
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Subtotal | 13,860 | 144 | (15 | ) | 13,989 | |||||||||||
Equity securities | 968 | 376 | (6 | ) | 1,338 | |||||||||||
Beneficiary certificates(1) | 1,119 | 24 | (25 | ) | 1,118 | |||||||||||
Others | 723 | 3 | — | 726 | ||||||||||||
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Total available-for-sale financial assets | ￦ | 16,670 | ￦ | 547 | ￦ | (46 | ) | ￦ | 17,171 | |||||||
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| |||||||||
Held-to-maturity financial assets: | ||||||||||||||||
Debt securities | ||||||||||||||||
Korean treasury and government agencies | ￦ | 3,367 | ￦ | 64 | ￦ | — | ￦ | 3,431 | ||||||||
Financial institutions | 4,138 | 26 | — | 4,164 | ||||||||||||
Corporate | 6,021 | 107 | (5 | ) | 6,123 | |||||||||||
Foreign currency bonds | 96 | — | — | 96 | ||||||||||||
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|
|
|
|
|
|
| |||||||||
Total held-to-maturity financial assets | ￦ | 13,622 | ￦ | 197 | ￦ | (5 | ) | ￦ | 13,814 | |||||||
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|
|
|
|
|
|
| |||||||||
| As of December 31, 2016 | ||||||||||||||||
| Amortized Cost | Gross Unrealized Gain | Gross Unrealized Loss | Fair Value | |||||||||||||
| (in billions of Won) | ||||||||||||||||
Available-for-sale financial assets: | ||||||||||||||||
Debt securities | ||||||||||||||||
Korean treasury and government agencies | ￦ | 3,779 | ￦ | 14 | ￦ | (4 | ) | ￦ | 3,789 | |||||||
Financial institutions | 6,311 | 7 | (4 | ) | 6,314 | |||||||||||
Corporate | 4,336 | 94 | (21 | ) | 4,409 | |||||||||||
Asset-backed securities | 250 | — | (1 | ) | 249 | |||||||||||
Foreign currency bonds | 1,227 | 1 | (16 | ) | 1,212 | |||||||||||
Others | 73 | 2 | — | 75 | ||||||||||||
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|
|
|
|
| |||||||||
Subtotal | 15,976 | 118 | (46 | ) | 16,048 | |||||||||||
Equity securities | 1,034 | 420 | — | 1,454 | ||||||||||||
Beneficiary certificates(1) | 2,803 | 40 | (21 | ) | 2,822 | |||||||||||
Others | 494 | 3 | (3 | ) | 494 | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total available-for-sale financial assets | ￦ | 20,307 | ￦ | 581 | ￦ | (70 | ) | ￦ | 20,818 | |||||||
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|
|
|
|
|
|
| |||||||||
Held-to-maturity financial assets: | ||||||||||||||||
Debt securities | ||||||||||||||||
Korean treasury and government agencies | ￦ | 3,754 | ￦ | 27 | ￦ | (7 | ) | ￦ | 3,774 | |||||||
Financial institutions | 5,169 | 9 | (5 | ) | 5,173 | |||||||||||
Corporate | 4,823 | 58 | (7 | ) | 4,874 | |||||||||||
Foreign currency bonds | 164 | — | — | 164 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total held-to-maturity financial assets | ￦ | 13,910 | ￦ | 94 | ￦ | (19 | ) | ￦ | 13,985 | |||||||
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|
|
|
|
|
|
| |||||||||
| As of December 31, 2017 | ||||||||||||||||
| Amortized Cost | Gross Unrealized Gain | Gross Unrealized Loss | Fair Value | |||||||||||||
| (in billions of Won) | ||||||||||||||||
Available-for-sale financial assets: | ||||||||||||||||
Debt securities | ||||||||||||||||
Korean treasury and government agencies | ￦ | 2,339 | ￦ | 1 | ￦ | (9 | ) | ￦ | 2,331 | |||||||
Financial institutions | 5,225 | 2 | (10 | ) | 5,217 | |||||||||||
Corporate | 2,727 | 4 | (6 | ) | 2,725 | |||||||||||
Asset-backed securities | 310 | — | (2 | ) | 308 | |||||||||||
Foreign currency bonds | 2,450 | 3 | (10 | ) | 2,443 | |||||||||||
Others | 35 | — | — | 35 | ||||||||||||
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|
|
|
|
|
|
| |||||||||
Subtotal | 13,086 | 10 | (37 | ) | 13,059 | |||||||||||
Equity securities | 982 | 431 | (2 | ) | 1,411 | |||||||||||
Beneficiary certificates(1) | 698 | 19 | (4 | ) | 713 | |||||||||||
Others | 169 | 1 | — | 170 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total available-for-sale financial assets | ￦ | 14,935 | ￦ | 461 | ￦ | (43 | ) | ￦ | 15,353 | |||||||
|
|
|
|
|
|
|
| |||||||||
Held-to-maturity financial assets: | ||||||||||||||||
Debt securities | ||||||||||||||||
Korean treasury and government agencies | ￦ | 3,995 | ￦ | 7 | ￦ | (15 | ) | ￦ | 3,987 | |||||||
Financial institutions | 7,245 | 3 | (15 | ) | 7,233 | |||||||||||
Corporate | 5,312 | 12 | (25 | ) | 5,299 | |||||||||||
Foreign currency bonds | 197 | 1 | (1 | ) | 197 | |||||||||||
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|
|
|
|
|
|
| |||||||||
Total held-to-maturity financial assets | ￦ | 16,749 | ￦ | 23 | ￦ | (56 | ) | ￦ | 16,716 | |||||||
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| |||||||||
For a discussion of our risk management policies with respect to our securities trading activities, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Market Risk Management—Market Risk Management for Trading Activities.”
Derivatives Trading
We offer derivatives products and engage in derivatives trading, mostly for our corporate customers. Our trading volume was ￦203,956￦324,410 billion in 2015, ￦233,8712018, ￦371,500 billion in 20162019 and ￦268,734￦353,659 billion in 2017.2020. Our aggregate net trading revenuegain (loss) from derivatives for the years ended December 31 2015, 20162018, 2019 and 20172020 was ￦174￦91 billion, ￦176￦(12) billion and ￦(53)￦320 billion, respectively.
We provide and trade a number of derivatives products principally through sales or brokerage accounts for our customers, including:
interest rate swaps, options and futures, relating principally to Won interest rate risks;
index futures and options, relating to stock market fluctuations;
cross currency swaps, relating to foreign exchange risks, largely for Won against U.S. dollars;
foreign exchange forwards, swaps, options and futures, relating to foreign exchange risks;
commodity derivatives, which we provide to customers that wish to hedge their commodities exposure; and
credit derivatives, which we provide to financial institutions that wish to hedge existing credit exposures or take on credit exposure to generate revenue.
Our derivatives operations focus on addressing the needs of our corporate clients to hedge their risk exposure and on hedging our risk exposure resulting from such client contracts. We also engage in derivatives trading activities to hedge the interest rate and foreign currency risk exposure that arises from our own assets and liability positions. In addition, we engage in proprietary trading of derivatives, such as index options and futures within our regulated open position limits, for the purpose of generating capital gains.
The following shows the estimated fair value of derivatives we held or had issued for trading purposes as of the dates indicated:
| As of December 31, | As of December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||||||||||||||||||||||||||||||||||
| Estimated Fair Value of Assets | Estimated Fair Value of Liabilities | Estimated Fair Value of Assets | Estimated Fair Value of Liabilities | Estimated Fair Value of Assets | Estimated Fair Value of Liabilities | Estimated Fair Value of Assets | Estimated Fair Value of Liabilities | Estimated Fair Value of Assets | Estimated Fair Value of Liabilities | Estimated Fair Value of Assets | Estimated Fair Value of Liabilities | |||||||||||||||||||||||||||||||||||||
| (in billions of Won) | (in billions of Won) | |||||||||||||||||||||||||||||||||||||||||||||||
Currency derivatives | ￦ | 1,441 | ￦ | 1,439 | ￦ | 2,331 | ￦ | 2,246 | ￦ | 2,732 | ￦ | 2,782 | ￦ | 1,623 | ￦ | 1,571 | ￦ | 2,433 | ￦ | 2,146 | ￦ | 5,926 | ￦ | 5,288 | ||||||||||||||||||||||||
Interest rate derivatives | 938 | 975 | 491 | 532 | 236 | 267 | 229 | 279 | 313 | 423 | 325 | 530 | ||||||||||||||||||||||||||||||||||||
Equity derivatives | — | 155 | 73 | 229 | 147 | 100 | 174 | 241 | 176 | 274 | 651 | 642 | ||||||||||||||||||||||||||||||||||||
Commodity derivatives | 11 | 12 | 3 | 3 | 1 | 1 | ||||||||||||||||||||||||||||||||||||||||||
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Total | ￦ | 2,390 | ￦ | 2,581 | ￦ | 2,898 | ￦ | 3,010 | ￦ | 3,116 | ￦ | 3,150 | ￦ | 2,026 | ￦ | 2,091 | ￦ | 2,922 | ￦ | 2,843 | ￦ | 6,902 | ￦ | 6,460 | ||||||||||||||||||||||||
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For a discussion of our risk management policies with respect to our derivatives trading activities, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Market Risk Management—Market Risk Management for Trading Activities.”
Asset Securitization Services
We are active in the Korean asset-backed securities market. WeThrough Woori Bank, we participate in asset securitization transactions in Korea by acting as arranger, trustee or liquidity provider. In 2017,2020, we were involved in asset securitization transactions with an initial aggregate issue amount of ￦583￦1,860 billion and generated total fee income
of approximately ￦16￦1.1 billion in connection with such transactions. The securities issued in asset securitization transactions are sold mainly to institutional investors buying through Korean securities firms.
Investment Banking
WeThrough Woori Bank and Woori Investment Bank, we engage in investment banking activities in Korea. In addition, we provide project finance and financial advisory services, in the area of social overhead capital projects such as highway, port, power and water and sewage projects, as well as structured finance, leveraged buy-out financing, equity and venture financing and mergers and acquisitions financing services. In 2017,2020, we generated investment banking revenue of approximately ￦153￦505 billion from gains on investment in foreign bonds and equity securities and fees from advisory and other services.
We believe that significant opportunities exist for us to leverage our existing base of large corporate and small- and medium-sized banking customers to cross-sell investment banking services. We intend to expand our investment banking operations to take advantage of these opportunities, with a view to increasing our fee income and further diversifying our revenue base.
International Banking
WeThrough Woori Bank, we engage in various international banking activities, including foreign exchange services and dealing, import and export-related services, offshore lending, syndicated loans and foreign currency securities investment. These services are provided primarily to our domestic customers and overseas subsidiaries and affiliates of Korean corporations and, to a limited extent, to local companies and individuals. We also raise foreign currency funding through our international banking operations. In addition, we provide commercial banking services to retail and corporate customers in select overseas markets.
The table below sets forth certain information regarding our foreign currency assets and borrowings:
| As of December 31, | ||||||||||||
| 2015 | 2016 | 2017 | ||||||||||
| (in millions of US$) | ||||||||||||
Total foreign currency assets | US$ | 33,329 | US$ | 33,670 | US$ | 35,678 | ||||||
Foreign currency borrowings | ||||||||||||
Call money | US$ | 1,097 | US$ | 1,131 | US$ | 593 | ||||||
Long-term borrowings | 4,883 | 4,841 | 4,290 | |||||||||
Short-term borrowings | 7,247 | 4,797 | 6,191 | |||||||||
|
|
|
|
|
| |||||||
Total foreign currency borrowings | US$ | 13,227 | US$ | 10,769 | US$ | 11,074 | ||||||
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|
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|
|
| |||||||
| As of December 31, | ||||||||||||
| 2018 | 2019 | 2020 | ||||||||||
| (in millions of US$) | ||||||||||||
Total foreign currency assets | US$ | 35,587 | US$ | 40,060 | US$ | 46,150 | ||||||
Foreign currency borrowings | ||||||||||||
Call money | 872 | 115 | 383 | |||||||||
Long-term borrowings | 4,167 | 4,427 | 3,858 | |||||||||
Short-term borrowings | 6,336 | 7,509 | 7,681 | |||||||||
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|
|
|
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| |||||||
Total foreign currency borrowings | US$ | 11,375 | US$ | 12,051 | US$ | 11,922 | ||||||
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The table below sets forth ourthe overseas subsidiaries and direct branches of Woori Bank in operation as of December 31, 2017:2020:
Business Unit(1) | Location | |
Subsidiaries: | ||
Woori America Bank | United States | |
PT Bank Woori Saudara Indonesia 1906, Tbk | Indonesia | |
Woori Global Markets Asia Limited | China (Hong Kong) | |
Woori Bank (China) Limited | China | |
AO Woori Bank | Russia | |
Banco Woori Bank do Brasil S.A. | Brazil | |
Woori Finance | ||
| Myanmar | |
Wealth Development Bank | Philippines | |
Woori Bank Vietnam Limited | Vietnam | |
WB Finance Co., Ltd. | Cambodia | |
Woori Bank Europe GmbH | Germany | |
Branches, Agencies and Representative Offices: | ||
London Branch | United Kingdom | |
Tokyo Branch | Japan | |
Singapore Branch | Singapore | |
Hong Kong Branch | China (Hong Kong) | |
Bahrain Branch | Bahrain | |
Dhaka Branch | Bangladesh | |
Gaeseong Branch(2) | Korea | |
New York Agency | United States | |
Los Angeles Branch | United States | |
Chennai Branch | India | |
Sydney Branch | Australia | |
Dubai Branch | United Arab Emirates | |
Gurgaon Branch | India | |
Mumbai Branch | India | |
Kuala Lumpur Representative Office | Malaysia | |
Yangon Representative Office | Myanmar | |
Iran Representative Office(3) | Iran | |
Katowice Representative Office | Poland |
| (1) | Does not include subsidiaries and branches in liquidation or dissolution. |
| (2) | Due to the shutdown of the Gaeseong Industrial Complex in February 2016, the Gaeseong Branch is currently located at our corporate headquarters in Seoul. |
| (3) | No longer operational (i.e., no employees or office space) since December 2018 following the re-imposition of sanctions. |
The principal activities of ourthe overseas branches and subsidiaries of Woori Bank are providing trade financing and local currency funding for Korean companies and Korean nationals operating in overseas markets as well as servicing local customers and providing foreign exchange services in conjunction with our headquarters. On a limited basis, such overseas branches and subsidiaries also engage in the investment and trading of securities of foreign issuers.
Woori America Bank currently operates 21over 25 branches in states including New York, New Jersey, Maryland, Virginia, Pennsylvania and California and provides retail and corporate banking services targeted towards the Korean-American community. As of December 31, 2020, Woori America Bank had total assets of US$1,8312,306 million asand shareholders’ equity of December 31, 2017 and net profit of US$10 million in 2017.304 million.
In November 2007, weWoori Bank established a local subsidiary in China, Woori Bank (China) Limited, which currently has branches in Beijing, Shanghai, Shenzhen, Suzhou, Tianjin, Dalian, Chengdu, Weihai, Chongqing and Shenyang. WeWoori Bank also established a local subsidiary in Russia, AO Woori Bank, in January 2008 and it currently has branches in Moscow and St. Petersburg and a representative office in Vladivostok.
In January 2014, weWoori Bank completed the purchase of an additional 27% equity interest (in addition to the 6% equity interest weit previously acquired through ourits subsidiary PT. Bank Woori Indonesia) in PT. Bank Himpunan Saudara 1906, an Indonesian commercial bank with a network of over 100 branches and offices throughout Indonesia. In December 2014, PT. Bank Woori Indonesia merged with and into PT. Bank Himpunan Saudara 1906. The merged entity, in which we holdWoori Bank holds a 79.9% equity interest, was renamed PT Bank Woori Saudara Indonesia 1906, Tbk and became ourWoori Bank’s consolidated subsidiary. As of December 31, 2017,2020, PT Bank Woori Saudara Indonesia 1906, Tbk had total assets of approximately US$2,0902,743 million and shareholders’ equity of US$455515 million.
In May 2016, we established a new representative office in Tehran, Iran, in light of the lifting of certain international sanctions against Iran, including U.S. secondary sanctions. The representative office engages only in the collection of local market information and does not conduct any banking operations.
In October 2016, weWoori Bank acquired a 51% equity interest in Wealth Development Bank Corp., a thrift bank in the Philippines with a network of 1625 branches and approximately 300over 400 employees by purchasing newly issued shares for approximately US$21 million.as of December 31, 2020.
In November 2016, we establishedWoori Bank obtained a banking license to establish a local subsidiary in Vietnam, Woori Bank Vietnam, which commenced operations in January 2017 and currently operates 14 branches throughout the branches in Hanoi, Bac Ninh and Ho Chi Minh City that we previously operated directly.country.
We areWoori Bank is also expanding ourits network of branches in South and Southeast Asia through our other local subsidiaries, including PT Bank Woori Saudara Indonesia 1906, Tbk, Woori Finance Myanmar and Wealth Development Bank Corp. andIn June 2018, Woori Bank acquired VisionFund (Cambodia) Ltd., a microfinance deposit-taking institution in Cambodia, which was renamed WB Finance Co., Ltd. In February 2020, with the approval of the Cambodian financial authorities, Woori Finance Cambodia.(Cambodia) Plc., a microfinance institution, merged with and into WB Finance Co., Ltd. As of December 31, 2020, WB Finance Co., Ltd. had total assets of US$779 million and shareholders’ equity of US$229 million.
In November 2018, Woori Bank established a German subsidiary, Woori Bank Europe GmbH, which is headquartered in Frankfurt and conducts our European operations. As of December 31, 2020, Woori Bank Europe GmbH had total assets of US$297 million and shareholders’ equity of US$42 million.
Asset Management
Trust Management Services
Money Trusts. WeThrough Woori Bank, we offer money trust products to our customers and manage the funds they invest in money trusts. The money trusts we manage are generally trusts with a fixed life that allow investors to share in the investment performance of the trust in proportion to the amount of their investment in the trust. We principally offer the following types of money trust products:
| • | retirement trusts, which invest funds received from corporations or organizations and manage these funds until they are withdrawn to pay retirement funds to a corporation’s officers or employees or an organization’s members; |
| • | pension trusts, which invest funds received until pension benefits are due to be disbursed to a pension beneficiary; and |
| • | specified money trusts, which invest cash received as trust property at the direction of the trustors and, once the trust matures, disburse the principal and any gains to the trust beneficiaries. |
We also offer other types of money trusts that have a variety of differing characteristics with respect to, for example, maturities and tax treatment.
Under Korean law, the assets of our money trusts are segregated from our assets and are not available to satisfy the claims of our creditors. We are, however, permitted to maintain deposits of surplus funds generated by trust assets in certain circumstances as set forth under the Financial Investment Services and Capital Markets Act and the regulations thereunder. Except for specified money trusts, we have investment discretion over all money trusts, which are pooled and managed jointly for each type of trust. Specified money trusts are established on behalf of individual customers, typically corporations, which direct our investment of trust assets.
We receive fees for our trust management services that are generally based upon a percentage, ranging between 0.01% and 2.0%1.2%, of the net asset value of the assets under management. We also receive penalty payments when customers terminate their trust deposit prior to the original contract maturity. Fees that we received for trust management services (including those fees related to property trust management services,
described below, but excluding those fees relating to guaranteed trusts, which are eliminated in consolidation), net of expenses, amounted to ￦49￦177 billion in 2015, ￦782018, ￦171 billion in 20162019 and ￦142￦86 billion in 2017.2020.
For some of the money trusts we manage, we have guaranteed the principal amount of an investor’s investment as well as a fixed rate of interest. We no longer offer new money trust products where we guarantee both the principal amount and a fixed rate of interest. We continue to offer pension-type money trusts that provide a guarantee of the principal amount of an investor’s investment.
The following table shows the balances of our money trusts by type as of the dates indicated. We consolidate within our financial statements trust accounts for which we guarantee both the repayment of the principal amount and a fixed rate of interest and trust accounts for which we guarantee only the repayment of the principal amount, while we do not consolidate performance trusts on which we do not guarantee principal or interest:
| As of December 31, | As of December 31, | |||||||||||||||||||||||
| 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||||||||||
| (in billions of Won) | (in billions of Won) | |||||||||||||||||||||||
Principal and interest guaranteed trusts | ￦ | 1 | ￦ | 1 | ￦ | 1 | ￦ | 1 | ￦ | 1 | ￦ | — | ||||||||||||
Principal guaranteed trusts | 1,287 | 1,344 | 1,401 | 1,409 | 1,401 | 1,361 | ||||||||||||||||||
Performance trusts | 21,324 | 25,767 | 29,252 | 36,451 | 36,288 | 37,315 | ||||||||||||||||||
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|
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| |||||||||||||||||||
Total | ￦ | 22,612 | ￦ | 27,112 | ￦ | 30,654 | ￦ | 37,861 | ￦ | 37,690 | ￦ | 38,676 | ||||||||||||
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The trust assets we manage consist principally of investment securities, loans made from the trusts and amounts due from banks. The investment securities consist of government-related debt securities, corporate debt securities, including bonds and commercial paper, equity securities and other securities. As of December 31, 2017,2020, our money trusts had invested in securities with an aggregate book value of ￦9,712￦10,645 billion, which accounted for approximately 22.1%26.9% of our money trust assets. Debt securities accounted for ￦4,156￦6,170 billion of this amount.
Our money trusts also invest, to a lesser extent, in equity securities, including beneficiary certificates issued by investment trust management companies. As of December 31, 2017,2020, equity securities held by our money trusts amounted to ￦5,556￦4,475 billion, which accounted for approximately 12.7%11.3% of our money trust assets. Of this amount, ￦1,248￦13 billion was from money trusts over which we had investment discretion and the remainder was from specified money trusts.
Loans made by our money trusts are similar in type to the loans made by our banking operations. As of December 31, 2017,2020, our money trusts had made loans in the aggregate principal amount of ￦12,852￦8,675 billion (excluding
(excluding loans to our banking operations of ￦2,712￦1,792 billion), which accounted for approximately 29.3%21.9% of our money trust assets.
The amounts due from banks consist of local currency and foreign currencies. As of December 31, 2017,2020, such amounts due from banks totaled ￦13,349￦17,919 billion, which accounted for approximately 30.4%45.3% of our money trust assets.
If the income from a money trust for which we provide a guarantee is less than the amount of the payments we have guaranteed, we will need to pay the amount of the shortfall with funds from special reserves maintained in our trust accounts, followed by basic fees from that money trust and funds from our banking operations. We net any payments we make as a result of these shortfalls against any gains we receive from other money trusts. No material payments of any such shortfall amounts were made in 2017.2020.
Property Trusts. WeThrough Woori Bank and Woori Asset Trust Co., Ltd., we also offer property trust management services, where we manage non-cash assets in return for a fee. Non-cash assets include mostly receivables (including those securing asset-backed securities), real property and securities, but can also include movable property such as artwork. Under these arrangements, we render escrow or custodial services for the property in question and collect fees in return.
In 2017,2020, our property trust fees generally ranged from 0.003% to 0.04%5.00% of total assets under management, depending on the type of trust account product. As of December 31, 2017,2020, the balance of our property trusts totaled ￦12,608￦60,208 billion.
Property trusts are not consolidated within our financial statements.
Investment Trust Management
Through Woori Asset Management Corp., Woori Global Asset Management Co. and Woori Private Equity Asset Management Co. Ltd., we offer investment trust products to our customers and manage the assets invested by them in investment trusts. The investment trust products we offer generally take the form of beneficiary certificates evidencing an ownership interest in a particular investment trust. We currently offer various different types of investment trust products, including:
| • | securities funds, where securities (excluding certain securities relating to, among others, real estate, ship investment companies, social infrastructure and overseas resource development) consist of more than 50% of their assets; |
| • | real estate funds, where real estate (including investments in, among others, derivatives based on underlying assets consisting of real estate and loans to corporations relating to real estate development) consist of more than 50% of their assets; |
| • | special asset funds, where assets other than securities and real estate consist of more than 50% of their assets; |
| • | mixed asset funds, which do not have the restrictions that apply to securities funds, real estate funds and special asset funds; and |
| • | money market funds, which invest in short-term financial products, such as call loans, commercial paper, certificates of deposit and short-term treasury notes and corporate bonds. |
The investment trusts we manage are generally trusts that allow investors to share in the investment performance of the trust in proportion to the amount of their investment in the trust. We have investment discretion over all investment trusts. Investment trusts calculate the value of their assets as often as required by the relevant laws and regulations, and any change in the overall valuation of their assets will be reflected in the price of their beneficiary certificates. The trust will disburse principal and any return on investment based on the price of their beneficiary certificates at maturity or upon the receipt of a redemption request, as applicable. In addition to investment trust products, we provide our institutional clients with various investment advisory and discretionary asset investment services.
The following table shows the balances of our investment trusts by type as of December 31, 2020. Under IFRS, we do not consolidate investment trusts due to the fact that the assets invested are not our assets but customer assets:
| As of December 31, | ||||
| 2020(1) | ||||
| (in billions of Won) | ||||
Securities funds | ￦ | 23,101 | ||
Real estate funds | 567 | |||
Special asset funds | 1,287 | |||
Mixed asset funds | 56 | |||
Money market funds | 5,381 | |||
Total | ￦ | 30,392 | ||
| (1) | Includes assets under management by Woori Private Equity Asset Management Co., Ltd. See “—Other Businesses—Private Equity.” |
We receive fees for our investment trust management services consisting of management fees in connection with establishing, operating and managing the investment trust, asset management fees and related advisory fees. These fees are calculated by multiplying the daily net asset value of the trust by a percentage provided in the trust documentation. Fees accrue on a daily basis and are paid out as expenses periodically. Fees from our investment trust management services amounted to ￦17 billion in 2020.
Although our current customer base consists mainly of institutional investors, we have been seeking to market our investment trust products to retail customers through our consumer banking network. We believe that significant opportunities exist for us to leverage our existing base of consumer banking customers to cross-sell our investment trust products. We intend to focus on the development of new products tailored to particular customer segments and the enhancement of sales and distribution capabilities through each of our marketing channels to meet our customers’ needs.
Trustee and Custodian Services Relating to Securities Investment Trusts
AsThrough Woori Bank, as of December 31, 2017,2020, we acted as a trustee for 2,4914,077 securities investment trusts, mutual funds and other investment funds. We receive a fee for acting as a trustee and generally perform the following functions:
receiving payments made in respect of such securities;
executing trades in respect of such securities on behalf of the investment fund, based on instructions from the relevant investment fund management company; and
in certain cases, authenticating beneficiary certificates issued by investment trust management companies and handling settlements in respect of such beneficiary certificates.
For the year ended December 31, 2017,2020, our fee income from such services was ￦12￦16 billion.
Other Businesses
Management of National Housing and Urban Fund
In April 2008, through Woori Bank, we were selected to be the lead manager of the National Housing and Urban Fund. The National Housing and Urban Fund provides financial support to low-income households in Korea by providing mortgage financing and construction loans for projects to build small- and medium-sized housing. As of December 31, 2017,2020, outstanding housing loans from the National Housing and Urban Fund amounted to approximately ￦95.9￦122.5 trillion, of which we originated approximately ￦50.9￦66.7 trillion. The activities of the National Housing and Urban Fund are funded primarily by the issuance of national housing bonds, which must be purchased by persons and legal entities wishing to make real estate-related registrations and filings, and by subscription savings deposits held at the National Housing and Urban Fund.
In return for managing the operations of the National Housing and Urban Fund, we receive a monthly fee. This fee consists of a fund raising fee, a loan origination fee and a management fee. The fund raising fee is based on the number of National Housing and Urban Fund subscription savings deposit accounts opened and the level of activity for existing accounts and the number of National Housing and Urban Fund bonds issued or redeemed. The loan origination fee is based on the number of new National Housing and Urban Fund loans and the number of National Housing and Urban Fund mortgage loans to contractors constructing housing units that are assumed by the individual buyers of housing units and the level of activity for existing loans during each month. The management fee is based on the monthly average of the number of outstanding accounts and the monthly average of the number of overdue loans owed to the National Housing and Urban Fund. We received total fees of approximately ￦51￦48.3 billion for managing the National Housing and Urban Fund in 2017.2020.
Bancassurance
The term “bancassurance” refers to the marketing and sale by commercial banks of insurance products manufactured within a group of affiliated companies or by third-party insurance companies. WeThrough Woori Bank, we market a wide range of bancassurance products. In 2017,2020, we generated fee income of approximately ￦86.5￦84.2 billion through the marketing of bancassurance products. We believe that we will be able to continue to develop an important new source of fee-based revenues by expanding our offering of these products. We have entered into bancassurance marketing arrangements with 2930 insurance companies, including TongYang Life Insurance, Hanwha Life Insurance, Samsung Life Insurance, Samsung Fire and Marine Insurance, Hanwha Life Insurance, Hyundai Fire and Marine Insurance and American International Assurance, and plan to enter into additional insurance product marketing arrangements with other leading insurance companies whose names and reputation are likely to be familiar to our customer base.
Private Equity
In 2016, Woori Private Equity Co., Ltd., which was established in October 2005, registered as a specialized private placement collective investment business under the Financial Investment Services and Capital Markets Act and changed its name to Woori Private Equity Asset Management Co., Ltd., or Woori PEAM. Such registration enabled it to manage specialized private placement collective investment vehicles (which include hedge funds) targeting professional investors, in addition to its existing business of making long-term and strategic investments in buyout target companies and actively involving itself in their management. In 2017,2018 and 2019, Woori PEAM launched three of the private equity funds for which Woori PEAMit acted as general partner, WooriWoori-Hanwha Eureka Private Equity Fund, the size of which was approximately ￦344￦43.5 billion, Woori Blackstone Korea OpportunityWoori-Shinyoung Growth-Cap Private Equity Fund I, the size of which was approximately ￦606￦163 billion, and Woori ColumbusWoori-Q Corporate Restructuring Private Equity Fund, I, the size of which was approximately ￦61 billion, were successfully liquidated after meeting their respective￦155 billion. As of December 31, 2020, Woori PEAM managed a total of 17 alternative investment objectives.funds (other than the three private equity funds mentioned above) with total investments of ￦1.4 trillion and total managed assets of ￦791 billion. We expect that Woori PEAM will continue to provide us with investment opportunities, through identifying potential investees suffering from inefficient management and effecting financial restructuring and strategic reorientation in those investees so as to enhance their enterprise value, as well as serve as a source of business for other segments by managing specialized private placement collective investment vehicles for professional investors.
Competition
We compete with other financial institutions in Korea, including principally nationwide and regional Korean commercial banks and branches of foreign banks operating in Korea. In addition, in particular segments such as credit cards, asset management and bancassurance, we compete with specialized financial institutions focusing on such segments. Some of the financial institutions we compete with are larger in terms of asset size and customer base and have greater financial resources or more specialized capabilities than us.us or our subsidiaries.
Competition in the Korean financial market has been and is likely to remain intense. In particular, in the area of our core banking operations, most Korean banks have been focusing on retail customers and small- and medium-sized enterprises in recent years, although they have begun to increase their exposure to large corporate
borrowers, and have been focusing on developing fee income businesses, including bancassurance, as increasingly important sources of revenue. In the area of credit cards, Korean banks and credit card companies have in the past engaged in aggressive marketing activities and made significant investments, contributing to some extent to the lower profitability and asset quality problems previously experienced with respect to credit card receivables.
In addition, the following general regulatory reforms in the Korean financial industry have increased competition among banks and other financial institutions in Korea. Korea:
In the second half of 2015, the Korean government implemented measures to facilitate bank account portability of retail customers by requiring commercial banks to establish systems that allow retail customers to easily switch their bank accounts at one commercial bank to another and automatically transfer the automatic payment settings of their former accounts to the new ones. Such measures are expected to further intensify competition among financial institutions in Korea.
Furthermore, the introduction of Internet-only banks in Korea is expected to increase competition in the Korean banking industry. Internet-only banks generally operate without branches and conduct most of their operations through electronic means, which enable them to minimize costs and offer customers higher interest rates on deposits or lower lending rates.
In April 2017, K bank, the first Internet-only bank in Korea, in which we own 13.8% of the equity with voting rights, commenced operations. Kakao Bank, a mobile-only bank, commenced operations in July 2017.
Moreover, in March 2016, the Financial Services Commission introduced an individual savings account scheme in Korea, which enables individuals to efficiently manage a wide range of retail investment vehicles, including cash deposits, investment funds and securities investment products, from a single integrated account with one financial institution and offers tax benefits on investment returns. Since the scheme backed by the Korean government allows only one individual savings account per person, financial institutions have been competing to retain existing customers and attract new customers since the launch of the individual savings
account scheme. Over 30 financial institutions, including banks, securities companies and insurance companies, have registered with the Financial Services Commission to sell their individual savings account products, and we expect fierce competition among these institutions.
In April 2019, the Financial Services Commission approved and is currently conducting test procedures for a financial institutionsregulatory sandbox, a framework set up to allow financial service providers to test new business models in a less regulated environment, as part of its efforts to work closely with the fintech sector and provide support to facilitate its development. We plan to implement several new innovative financial services through such financial regulatory sandbox, such as Woori Card’s non-resident foreigner services for international wire transfers and credit card rent payments, in the third quarter of 2021. Over 130 financial services have been similarly approved for such testing under the financial regulatory sandbox.
In December 2019, the Financial Services Commission launched an “open banking” system, which allows customers to view banking account information, regardless of institution, through a single mobile application. Such integrated system is expected to remain intense.allow fintech firms to share payment networks with banks, thereby lowering transaction fees and encouraging the development of new payment services.
In August 2020, amendments to the Credit Information Use and Protection Act established the framework for MyData services in Korea, which allow the collection of customers’ personal credit information from credit information providers/users or public institutions upon the customer’s request and subject to compliance requirements, so that customers may access such collected personal credit information in whole or in part. In January 2021, the Financial Services Commission granted licenses to 28 companies to operate as MyData service providers, 14 of which were fintech firms. We expect competition between traditional financial institutions and fintech firms to intensify, particularly with respect to asset management services, as MyData services are expected to expand in the second half of 2021.
Overall, such measures may not only intensify competition among traditional financial institutions in Korea, but also allow new market participants such as fintech firms to potentially gain market share in certain areas in which we operate.
Furthermore, the introduction of Internet-only banks in Korea is expected to increase competition in the Korean banking industry. Internet-only banks generally operate without branches and conduct most of their operations through electronic means, which enable them to minimize costs and offer customers higher interest rates on deposits or lower lending rates. In April 2017, K bank, the first Internet-only bank in Korea, in which
Woori Bank owns 19.9% of the equity with voting rights, commenced operations, and in July 2017, Kakao Bank, a mobile-only bank, commenced operations. In December 2019, Toss Bank obtained preliminary approval to operate as an Internet-only bank from the Financial Services Commission and is expected to be granted final approval by June 2021.
Moreover, the Korean financial industry is undergoing significant consolidation. Theconsolidation through which the number of nationwide commercial banks in Korea has significantly decreased from 16 as of December 31, 1997 to six as of December 31, 2017.since the financial crisis in Korea in the late 1990s. A number of significant mergers and acquisitions in the financial industry have also taken place in Korea in recent years, including Hana Financial Group’s acquisition of a controlling interest in Korea Exchange Bank in 2012, the subsequent merger of Hana Bank into Korea Exchange Bank in 2015, KB Financial Group’s acquisition of Hyundai Securities Co., Ltd. in 2016 and the subsequent merger of Hyundai Securities with and into KB Investment & Securities Co., Ltd. in 2016. In 2016, Mirae Asset Securities Co., Ltd. acquired a 43% interest in KDB Daewoo Securities Co., Ltd., which changed its name to Mirae Asset Daewoo Securities Co., Ltd., and subsequently merged with and into Mirae Asset Daewoo Securities to create the largest securities company in Korea in terms of capital. Furthermore, inMirae Asset Daewoo Securities Co., Ltd. In 2014, pursuant to the implementation of the Korean government’s privatization plan with respect to Woori Finance Holdings and its former subsidiaries, Woori Financial, Woori Asset Management and Woori F&I were acquired by KB Financial Group, Kiwoom Securities and Daishin Securities, respectively, and Woori Investment & Securities, Woori Aviva Life Insurance and Woori FG Savings Bank were acquired by NongHyup Financial Group. In addition, in October 2014, the KDIC’s ownership interest in Kwangju Bank and Kyongnam Bank were acquired by JB Financial Group and BS Financial Group, respectively. See “Item 4.A. History and Development of the Company—Privatization Plan.” Orange Life Insurance, Ltd. (formerly known as ING Life Insurance Korea, Ltd.) became a wholly-owned subsidiary of Shinhan Financial Group following the acquisition of equity interests by Shinhan Financial Group in February 2019 and January 2020. Furthermore, in 2020, Hana Financial Group acquired The-K Non-Life Insurance Co., Ltd. to form Hana Insurance Co., Ltd., KB Financial Group acquired The Prudential Life Insurance Company of Korea Ltd., and Shinhan Financial Group acquired the venture capital firm Neoplux.
We expect that consolidation in the Korean financial industry will continue. Other financial institutions may seek to acquire or merge with other entities, and the financial institutions resulting from this consolidation may, by virtue of their increased size and business scope, provide significantly greater competition for us. We also believe that foreign financial institutions, many of which have greater experience and resources than we do, may seek to compete with us in providing financial products and services either by themselves or in partnership with existing Korean financial institutions. See “Item 3.D. Risk Factors—Risks relating to competition.”
Assets and Liabilities
The tables below and accompanying discussions provide selected financial highlights regarding our assets and liabilities on a consolidated basis.
Certain information with respect to our loan portfolio and the asset quality of our loans is presented below on a basis consistent with certain requirements of the Financial Services Commission applicable to Korean financial institutions, which differs (as described below where applicable) from the presentation of such information in our financial statements prepared in accordance with IFRS, as we believe that such alternative presentation allows us to provide additional details regarding our loan portfolio and the asset quality of our loans which would be helpful to our investors.
Loan Portfolio
As of December 31, 2017,2020, the balance of our total loan portfolio was ￦252,793￦303,965 billion. As of December 31, 2017, 89.4%2020, 90.0% of our total loans were Won-denominated loans and 10.6%10.0% of our total loans were denominated in other currencies. Of the ￦26,827￦30,429 billion of foreign currency-denominated loans as of that date, approximately 54.7%73.4% represented “foreign” loans provided by Woori Bank to offshore entities and individuals. We makeWoori Bank extends such foreign loans primarily through ourits overseas branches to affiliates of large Korean manufacturing companies for trade financing and working capital.
Except where we specify otherwise, all loan amounts stated below do not include amounts due from banks and other receivables and are prior to deducting allowance for credit losses and present value discount or
reflecting deferred origination costs, and all corporate loan amounts stated below include loans made to the Korean government and government-owned agencies and banks.
Loan Types
The following table presents loans by type as of the dates indicated. Total loans reflect our loan portfolio, including past due amounts.
| As of December 31, | As of December 31, | |||||||||||||||||||||||||||||||||||||||
| 2013(1) | 2014 | 2015 | 2016 | 2017 | 2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||||||||||||||||||||||
| (in billions of Won) | (in billions of Won) | |||||||||||||||||||||||||||||||||||||||
Domestic: | ||||||||||||||||||||||||||||||||||||||||
Corporate(2): | ||||||||||||||||||||||||||||||||||||||||
Corporate(1): | ||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | ￦ | 91,058 | ￦ | 89,410 | ￦ | 92,802 | ￦ | 88,968 | ￦ | 93,320 | ￦ | 88,968 | ￦ | 93,320 | ￦ | 96,283 | ￦ | 100,829 | ￦ | 114,525 | ||||||||||||||||||||
Lease financing | — | — | — | 7 | 25 | 7 | 25 | 55 | 77 | 858 | ||||||||||||||||||||||||||||||
Trade financing | 10,296 | 11,937 | 11,446 | 10,699 | 9,290 | 10,699 | 9,290 | 9,649 | 6,766 | 7,293 | ||||||||||||||||||||||||||||||
Other commercial | 9,690 | 11,440 | 12,229 | 12,923 | 21,283 | 12,923 | 21,283 | 16,177 | 13,748 | 15,931 | ||||||||||||||||||||||||||||||
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Total corporate | 111,044 | 112,787 | 116,477 | 112,597 | 123,918 | 112,597 | 123,918 | 122,164 | 121,420 | 138,607 | ||||||||||||||||||||||||||||||
Consumer: | ||||||||||||||||||||||||||||||||||||||||
General purpose household | 25,094 | 25,070 | 26,971 | 30,684 | 34,374 | 30,684 | 34,374 | 36,962 | 37,605 | 40,210 | ||||||||||||||||||||||||||||||
Mortgage | 19,952 | 28,988 | 40,598 | 47,630 | 47,476 | 47,630 | 47,476 | 51,280 | 54,511 | 62,274 | ||||||||||||||||||||||||||||||
Home equity | 25,732 | 25,340 | 24,657 | 24,486 | 25,513 | 24,486 | 25,513 | 26,324 | 28,622 | 31,995 | ||||||||||||||||||||||||||||||
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Total consumer | 70,778 | 79,398 | 92,226 | 102,800 | 107,363 | 102,800 | 107,363 | 114,566 | 120,738 | 134,479 | ||||||||||||||||||||||||||||||
Credit cards | 4,209 | 5,114 | 6,099 | 6,674 | 6,827 | 6,674 | 6,827 | 8,051 | 8,399 | 8,543 | ||||||||||||||||||||||||||||||
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Total domestic | 186,031 | 197,299 | 214,802 | 222,071 | 238,108 | 222,071 | 238,108 | 244,781 | 250,557 | 281,629 | ||||||||||||||||||||||||||||||
Foreign: | ||||||||||||||||||||||||||||||||||||||||
Corporate(3): | ||||||||||||||||||||||||||||||||||||||||
Corporate(2): | ||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 6,961 | 7,989 | 9,518 | 10,540 | 9,632 | 10,540 | 9,632 | 11,837 | 15,544 | 16,384 | ||||||||||||||||||||||||||||||
Trade financing | 319 | 725 | 1,421 | 2,156 | 2,655 | 2,156 | 2,655 | 2,186 | 1,782 | 1,482 | ||||||||||||||||||||||||||||||
Other commercial | 192 | 245 | 206 | 350 | 471 | 350 | 471 | 700 | 845 | 829 | ||||||||||||||||||||||||||||||
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Total corporate | 7,472 | 8,959 | 11,145 | 13,046 | 12,758 | 13,046 | 12,758 | 14,723 | 18,171 | 18,695 | ||||||||||||||||||||||||||||||
Consumer | 263 | 819 | 1,222 | 1,684 | 1,927 | 1,684 | 1,927 | 2,530 | 3,265 | 3,641 | ||||||||||||||||||||||||||||||
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Total foreign | 7,735 | 9,778 | 12,367 | 14,730 | 14,685 | 14,730 | 14,685 | 17,253 | 21,436 | 22,336 | ||||||||||||||||||||||||||||||
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Total loans(4) | ￦ | 193,766 | ￦ | 207,077 | ￦ | 227,169 | ￦ | 236,801 | ￦ | 252,793 | ||||||||||||||||||||||||||||||
Total loans(3) | ￦ | 236,801 | ￦ | 252,793 | ￦ | 262,034 | ￦ | 271,993 | ￦ | 303,965 | ||||||||||||||||||||||||||||||
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Less: present value discount | (25 | ) | (17 | ) | (5 | ) | (14 | ) | (11 | ) | (14 | ) | (11 | ) | (10 | ) | (7 | ) | (7 | ) | ||||||||||||||||||||
Less: deferred origination costs (fees) | 295 | 368 | 435 | 464 | 511 | 464 | 511 | 574 | 621 | 744 | ||||||||||||||||||||||||||||||
Less: allowance for credit losses | (3,337 | ) | (2,609 | ) | (2,051 | ) | (1,851 | ) | (1,770 | ) | (1,851 | ) | (1,770 | ) | (1,778 | ) | (1,575 | ) | (1,909 | ) | ||||||||||||||||||||
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Total loans, net | ￦ | 190,699 | ￦ | 204,819 | ￦ | 225,548 | ￦ | 235,400 | ￦ | 251,523 | ￦ | 235,400 | ￦ | 251,523 | ￦ | 260,820 | ￦ | 271,032 | ￦ | 302,793 | ||||||||||||||||||||
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| (1) |
Including loans made to banks and the Korean government and government-owned agencies. |
| (2) | Including loans made to banks. |
| (3) |
Not including due from banks and other |
Loan Concentrations
We limitOn a consolidated basis, our total exposure to any single borrower or any single chaebol is limited by law to 20% and 25%, respectively, of our “net aggregate equity capital,” as required by Korean regulations and pursuant to our internal policies and determine this limit based ondefined under the borrower’s credit rating provided by our CREPIA system. We may adjust our limit if such limit would otherwise exceedEnforcement Decree of the limit imposed by Korean regulations.Financial Holding Company Act. See “—Supervision and Regulation—Principal Regulations Applicable to Banks—Financial Holding Companies—Financial Exposure to Any Individual Customer orand Major Shareholder.Investor.” In
addition, Woori Bank’s exposure to any single borrower or any single chaebol is limited by the Bank Act to 20% and 25%, respectively, of its total Tier I and Tier II capital.
20 Largest Exposures by Borrower
As of December 31, 2017,2020, our exposures to our 20 largest borrowers or issuers totaled ￦47,540￦55,650 billion and accounted for 12.5%11.5% of our total exposures. The following table sets forth our total exposures to those borrowers or issuers as of that date:
| Loans | ||||||||||||||||||||||||||||||||
Company (Credit Rating)(1) | Won currency | Foreign currency | Equity securities | Debt securities | Guarantees and acceptances | Total exposures | Collateral(2) | Amounts classified as substandard or below(3) | ||||||||||||||||||||||||
| (in billions of Won) | ||||||||||||||||||||||||||||||||
The Bank of Korea(4) | ￦ | 1,420 | ￦ | — | ￦ | — | ￦ | 6,610 | ￦ | — | ￦ | 8,030 | ￦ | — | ￦ | — | ||||||||||||||||
Korean Government(4) | — | — | — | 6,760 | — | 6,760 | — | — | ||||||||||||||||||||||||
Korea Development Bank (AAA) | — | 6 | — | 4,253 | — | 4,259 | — | — | ||||||||||||||||||||||||
Korea Housing Finance Corporation (AAA) | — | — | — | 3,172 | — | 3,172 | — | — | ||||||||||||||||||||||||
Korea Land & Housing Corporation (AAA) | 465 | — | — | 2,516 | — | 2,981 | — | — | ||||||||||||||||||||||||
Samsung Electronics (AA) | 200 | 2,274 | 5 | — | — | 2,479 | — | — | ||||||||||||||||||||||||
Mirae Asset Daewoo (AA+) | 2,413 | — | — | — | — | 2,413 | — | — | ||||||||||||||||||||||||
NH Investment & Securities (AA+) | 2,332 | — | — | — | — | 2,332 | — | — | ||||||||||||||||||||||||
Shinhan Investment (AAA) | 1,780 | — | — | — | — | 1,780 | — | — | ||||||||||||||||||||||||
Meritz Securities (AA-) | 1,628 | — | — | — | — | 1,628 | — | — | ||||||||||||||||||||||||
Industrial Bank of Korea (AAA) | 64 | 24 | — | 1,496 | — | 1,584 | — | — | ||||||||||||||||||||||||
Kyobo Securities (A+) | 1,284 | — | — | — | — | 1,284 | — | — | ||||||||||||||||||||||||
Samsung Securities (AA+) | 1,280 | — | — | — | — | 1,280 | — | — | ||||||||||||||||||||||||
KB Securities (AA) | 1,270 | — | — | — | — | 1,270 | — | — | ||||||||||||||||||||||||
Korea Securities Finance Corp. (AAA) | 1,100 | — | 71 | — | — | 1,171 | — | — | ||||||||||||||||||||||||
Hana Financial Investment (AA) | 1,120 | — | — | — | — | 1,120 | — | — | ||||||||||||||||||||||||
Defense Acquisition Program Administration(4) | — | — | — | — | 1,114 | 1,114 | — | — | ||||||||||||||||||||||||
Korea Investment & Securities (AA) | 1,063 | — | — | — | — | 1,063 | — | — | ||||||||||||||||||||||||
Samsung Heavy Industries (BBB+) | 100 | 46 | — | — | 793 | 939 | 50 | — | ||||||||||||||||||||||||
Export-Import Bank of Korea (AAA) | 1 | — | — | 880 | — | 881 | — | — | ||||||||||||||||||||||||
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Total | ￦ | 17,520 | ￦ | 2,350 | ￦ | 76 | ￦ | 25,687 | ￦ | 1,907 | ￦ | 47,540 | ￦ | 50 | ￦ | — | ||||||||||||||||
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| Loans | Guarantees and acceptances | Amounts classified as substandard or below(3) | ||||||||||||||||||||||||||||||
Company (Credit Rating)(1) | Won currency | Foreign currency | Equity securities | Debt securities | Total exposures | Collateral(2) | ||||||||||||||||||||||||||
| (in billions of Won) | ||||||||||||||||||||||||||||||||
Korea Development Bank (AAA) | ￦ | — | ￦ | 33 | ￦ | — | ￦ | 10,559 | ￦ | — | ￦ | 10,592 | ￦ | — | ￦ | — | ||||||||||||||||
Korean Government(4) | — | — | — | 10,475 | — | 10,475 | — | — | ||||||||||||||||||||||||
The Bank of Korea(4) | 1,380 | — | — | 6,237 | — | 7,617 | — | — | ||||||||||||||||||||||||
Industrial Bank of Korea (AAA) | 95 | 33 | — | 5,717 | — | 5,845 | 30 | — | ||||||||||||||||||||||||
Korea Housing Finance Corporation (AAA) | — | — | — | 5,736 | — | 5,736 | — | — | ||||||||||||||||||||||||
NH Investment & Securities Co., Ltd. (AA+). | 2,329 | — | — | — | — | 2,329 | 64 | — | ||||||||||||||||||||||||
Samsung Electronics Co., Ltd. (AAA) | 230 | 1,877 | 5 | — | 1 | 2,113 | — | — | ||||||||||||||||||||||||
Export-Import Bank of Korea (AAA) | — | — | — | 1,615 | — | 1,615 | — | — | ||||||||||||||||||||||||
Meritz Securities Co., Ltd. (AA-) | 1,219 | — | — | — | — | 1,219 | — | — | ||||||||||||||||||||||||
KB Securities (AA+) | 950 | — | — | 10 | — | 960 | — | — | ||||||||||||||||||||||||
Kiwoom Securities Co., Ltd. (AA-) | 910 | — | — | — | — | 910 | — | — | ||||||||||||||||||||||||
NongHyup Bank (AAA) | 390 | 114 | — | 338 | — | 842 | 317 | — | ||||||||||||||||||||||||
LG Display (A+) | 676 | 109 | — | — | — | 785 | — | — | ||||||||||||||||||||||||
Korea SMEs and Startups Agency (AAA) | — | — | — | 763 | — | 763 | — | — | ||||||||||||||||||||||||
Hana Financial Investment Co., Ltd. (AA) | 709 | — | — | — | — | 709 | — | — | ||||||||||||||||||||||||
Kyobo Securities (AA-) | 641 | — | — | — | — | 641 | — | — | ||||||||||||||||||||||||
Defense Acquisition Program Administration (A) | — | — | — | — | 636 | 636 | — | — | ||||||||||||||||||||||||
The Korea Securities Finance Corporation (AAA) | 500 | — | 133 | — | — | 633 | — | — | ||||||||||||||||||||||||
Kookmin Bank (AAA) | 309 | 97 | — | 209 | 4 | 619 | 145 | — | ||||||||||||||||||||||||
Korea Land & Housing Corporation (AAA) | 328 | — | — | 283 | — | 611 | — | — | ||||||||||||||||||||||||
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Total | ￦ | 10,666 | ￦ | 2,263 | ￦ | 138 | ￦ | 41,942 | ￦ | 641 | ￦ | 55,650 | ￦ | 556 | ￦ | — | ||||||||||||||||
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| (1) | Credit ratings are from |
| (2) | The value of collateral is appraised based on future cash flow and observable market price. |
| (3) | Classification is based on the Financial Services Commission’s asset classification criteria. |
| (4) | Credit rating is unavailable. |
As of December 31, 2017, five2020, three of these top 20 borrowers or issuers were companies belonging to the 2427 largestchaebol in Korea. See “Item 3.D. Risk Factors—Risks relating to our corporate credit portfolio—We have exposure to the largest Korean commercial conglomerates, known as “chaebols,” and, as a result, financial difficulties ofchaebols may have an adverse impact on us.”
Exposure to Chaebols
As of December 31, 2017, 6.6%2020, 4.2% of our total exposure was to the 2427 largestchaebolsin Korea. The following table shows, as of December 31, 2017,2020, our total exposures to the 10chaebols to which we have the largest exposure:
| Loans | Loans | Guarantees and acceptances | Amounts Classified as substandard or below(2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chaebol | Won currency | Foreign currency | Equity securities | Debt securities | Guarantees and acceptances | Total exposures | Collateral(1) | Amounts Classified as substandard or below(2) | Won currency | Foreign currency | Equity securities | Debt securities | Total exposures | Collateral(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| (in billions of Won) | (in billions of Won) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Samsung | ￦ | 1,702 | ￦ | 3,180 | ￦ | 8 | ￦ | 20 | ￦ | 1,359 | ￦ | 6,269 | ￦ | 139 | ￦ | — | ￦ | 686 | ￦ | 2,627 | ￦ | 25 | ￦ | 130 | ￦ | 826 | ￦ | 4,294 | ￦ | 41 | ￦ | — | ||||||||||||||||||||||||||||||||
Hyundai Motors | 1,609 | 808 | 1 | 76 | 376 | 2,870 | 26 | — | 1,685 | 967 | 57 | 30 | 621 | 3,360 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Mirae Asset | 2,453 | — | — | — | — | 2,453 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Hyundai Heavy Industries | 684 | 108 | — | — | 1,048 | 1,840 | 11 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SK | 830 | 323 | 1 | 7 | 501 | 1,662 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
LG | 948 | 277 | 1 | 20 | 108 | 1,354 | 6 | — | 1,233 | 198 | 1 | 10 | 61 | 1,503 | 2 | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Hanwha | 867 | 134 | — | 55 | 91 | 1,147 | 156 | — | 965 | 179 | — | 108 | 33 | 1,285 | 503 | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Korea Investment | 1,131 | — | — | — | — | 1,131 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SK | 738 | 78 | 2 | 34 | 266 | 1,118 | 126 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Hyundai Heavy Industries | 244 | 111 | — | 2 | 590 | 947 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Doosan | 435 | 104 | — | — | 492 | 1,031 | 101 | — | 402 | 124 | — | — | 395 | 921 | 8 | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Lotte | 709 | 122 | 1 | — | 111 | 943 | 19 | — | 495 | 337 | — | — | 54 | 886 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||
Kyobo Life Insurance | 652 | — | — | 90 | — | 742 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Hyosung | 213 | 271 | — | 33 | 211 | 728 | 319 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total | ￦ | 11,368 | ￦ | 5,056 | ￦ | 12 | ￦ | 178 | ￦ | 4,086 | ￦ | 20,700 | ￦ | 458 | ￦ | — | ￦ | 7,313 | ￦ | 4,892 | ￦ | 85 | ￦ | 437 | ￦ | 3,057 | ￦ | 15,784 | ￦ | 999 | ￦ | — | ||||||||||||||||||||||||||||||||
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| (1) | The value of collateral is appraised based on future cash flow and observable market price. |
| (2) | Classification is based on the Financial Services Commission’s asset classification criteria. |
Loan Concentration by Industry
The following table shows, as of December 31, 2017,2020, the aggregate balance of our domestic and foreign corporate loans by industry concentration and as a percentage of our total corporate lending:
| Aggregate corporate loan balance | Percentage of total corporate loan balance | Aggregate corporate loan balance | Percentage of total corporate loan balance | |||||||||||||
| (in billions of Won) | (in billions of Won) | |||||||||||||||
Industry | ||||||||||||||||
Manufacturing | ￦ | 36,189 | 26.4 | % | ￦ | 39,005 | 24.8 | % | ||||||||
Financial and insurance | 25,084 | 18.4 | 22,497 | 14.3 | ||||||||||||
Retail and wholesale | 17,036 | 12.5 | 20,866 | 13.3 | ||||||||||||
Hotel, leisure or transportation | 7,378 | 5.4 | ||||||||||||||
Hotel, leisure and transportation | 9,150 | 5.8 | ||||||||||||||
Construction | 4,503 | 3.3 | 4,720 | 3.0 | ||||||||||||
Government and government agencies | 311 | 0.2 | 276 | 0.2 | ||||||||||||
Other | 46,175 | 33.8 | 60,789 | 38.6 | ||||||||||||
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Total | ￦ | 136,676 | 100.0 | % | ￦ | 157,303 | 100.0 | % | ||||||||
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Maturity Analysis
The following table sets out, as of December 31, 2017,2020, the scheduled maturities (time remaining until maturity) of our loan portfolio:
| 1 year or less | Over 1 year but not more than 5 years | Over 5 years | Total | 1 year or less | Over 1 year but not more than 5 years | Over 5 years | Total | |||||||||||||||||||||||||
| (in billions of Won) | (in billions of Won) | |||||||||||||||||||||||||||||||
Domestic | ||||||||||||||||||||||||||||||||
Corporate(1) | ||||||||||||||||||||||||||||||||
Commercial and industrial | ￦ | 62,779 | ￦ | 24,970 | ￦ | 5,571 | ￦ | 93,320 | ￦ | 69,460 | ￦ | 40,667 | ￦ | 4,398 | ￦ | 114,525 | ||||||||||||||||
Lease financing | — | 25 | — | 25 | 37 | 805 | 16 | 858 | ||||||||||||||||||||||||
Trade financing | 9,290 | — | — | 9,290 | 7,293 | — | — | 7,293 | ||||||||||||||||||||||||
Other commercial | 18,438 | 2,085 | 760 | 21,283 | 11,358 | 3,794 | 779 | 15,931 | ||||||||||||||||||||||||
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Total corporate | 90,507 | 27,080 | 6,331 | 123,918 | 88,148 | 45,266 | 5,193 | 138,607 | ||||||||||||||||||||||||
Consumer | ||||||||||||||||||||||||||||||||
General purpose household | 19,219 | 6,399 | 8,756 | 34,374 | 23,831 | 9,537 | 6,842 | 40,210 | ||||||||||||||||||||||||
Mortgage | 10,827 | 9,945 | 26,704 | 47,476 | 12,407 | 18,501 | 31,366 | 62,274 | ||||||||||||||||||||||||
Home equity | 3,737 | 3,437 | 18,339 | 25,513 | 2,738 | 2,778 | 26,479 | 31,995 | ||||||||||||||||||||||||
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Total consumer | 33,783 | 19,781 | 53,799 | 107,363 | 38,976 | 30,816 | 64,687 | 134,479 | ||||||||||||||||||||||||
Credit cards | 5,997 | 766 | 64 | 6,827 | 6,951 | 1,465 | 127 | 8,543 | ||||||||||||||||||||||||
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Total domestic | 130,287 | 47,627 | 60,194 | 238,108 | 134,075 | 77,547 | 70,007 | 281,629 | ||||||||||||||||||||||||
Foreign | ||||||||||||||||||||||||||||||||
Corporate(2) | ||||||||||||||||||||||||||||||||
Commercial and industrial | 5,635 | 3,122 | 875 | 9,632 | 9,676 | 5,016 | 1,692 | 16,384 | ||||||||||||||||||||||||
Trade financing | 2,655 | — | — | 2,655 | 1,481 | 1 | — | 1,482 | ||||||||||||||||||||||||
Other commercial | 260 | 175 | 36 | 471 | 318 | 359 | 152 | 829 | ||||||||||||||||||||||||
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Total corporate | 8,550 | 3,297 | 911 | 12,758 | 11,475 | 5,376 | 1,844 | 18,695 | ||||||||||||||||||||||||
Consumer | ||||||||||||||||||||||||||||||||
Other consumer | 168 | 478 | 1,281 | 1,927 | 517 | 1,195 | 1,929 | 3,641 | ||||||||||||||||||||||||
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Total foreign | 8,718 | 3,775 | 2,192 | 14,685 | 11,992 | 6,571 | 3,773 | 22,336 | ||||||||||||||||||||||||
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Total loans | ￦ | 139,005 | ￦ | 51,402 | ￦ | 62,386 | ￦ | 252,793 | ￦ | 146,067 | ￦ | 84,118 | ￦ | 73,780 | ￦ | 303,965 | ||||||||||||||||
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Including loans made to banks and the Korean government and government-owned agencies. |
| (2) | Including loans made to banks. |
A significant portion of our loans with maturities of one year is renewed annually. We typically roll over our working capital loans and consumer loans (other than those payable in installments) after we conduct our normal loan review in accordance with our loan review procedures. Under our internal guidelines, we may generally extend working capital loans on an annual basis for an aggregate term of five years. Those guidelines also allow us to generally extend consumer loans other than home equity loans for another term on an annual basis for an aggregate term of up to five years (and home equity loans for an aggregate term of up to 10 years).
Interest Rates
The following table shows, as of December 31, 2017,2020, the total amount of our loans due after one year that have fixed interest rates and variable or adjustable interest rates:
| Domestic | Foreign | Total | Domestic | Foreign | Total | |||||||||||||||||||
| (in billions of Won) | (in billions of Won) | |||||||||||||||||||||||
Fixed rate(1) | ￦ | 34,933 | ￦ | 2,206 | ￦ | 37,139 | ￦ | 65,840 | ￦ | 3,589 | ￦ | 69,429 | ||||||||||||
Variable or adjustable rates(2) | 72,888 | 3,761 | 76,649 | 81,714 | 6,754 | 88,468 | ||||||||||||||||||
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Total loans | ￦ | 107,821 | ￦ | 5,967 | ￦ | 113,788 | ￦ | 147,554 | ￦ | 10,343 | ￦ | 157,897 | ||||||||||||
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| (1) | Fixed rate loans are loans for which the interest rate is fixed for the entire term. |
| (2) | Variable or adjustable rate loans are loans for which the interest rate is not fixed for the entire term. |
For additional information regarding our management of interest rate risk, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk—Market Risk Management—Asset and Liability Management.”
Asset Quality of Loans
Except where we specify otherwise, all loan amounts stated below do not include amounts due from banks and other receivables and are prior to deducting allowance for credit losses and present value discount or reflecting deferred origination costs, and all corporate loan amounts stated below include loans made to the Korean government and government-owned agencies and banks.
Loan Classifications
The Financial Services Commission generally requires Korean financial institutions to analyze and classify their assets by quality into one of five categories for reporting purposes. In making these classifications, we take into account a number of factors, including the financial position, profitability and transaction history of the borrower, and the value of any collateral or guarantee taken as security for the extension of credit. This classification method, and our related provisioning policy, is intended to fully reflect the borrower’s capacity to repay.
The following is a summary of the asset classification criteria we apply for corporate and consumer loans, based on the asset classification guidelines of the Financial Services Commission. Credit card receivables are subject to classification based on the number of days past due, as required by the Financial Services Commission. We also apply different criteria for other types of credits such as loans to the Korean government or to government-related or controlled entities, certain bills of exchange and certain receivables.
Asset Classification | Characteristics | |
Normal | Credits extended to customers that, based on our consideration of their business, financial position and future cash flows, do not raise concerns regarding their ability to repay the credits. | |
Precautionary | Credits extended to customers that: | |
• based on our consideration of their business, financial position and future cash flows, show potential risks with respect to their ability to repay the credits, although showing no immediate default risk; or | ||
• are in arrears for one month or more but less than three months. | ||
Asset Classification | Characteristics | |
Substandard | Either: | |
• credits extended to customers that, based on our consideration of their business, financial position and future cash flows, are judged to have incurred considerable default risks as their ability to repay has deteriorated; or |
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• the portion that we expect to collect of total loans (1) extended to customers that have been in arrears for three months or more, (2) extended to customers that have incurred serious default risks due to the occurrence of, among other things, final refusal to pay their debt instruments, entry into liquidation or bankruptcy proceedings, or closure of their businesses, or (3) extended to customers who have outstanding loans that are classified as “doubtful” or “estimated loss.” | ||
Doubtful | Credits exceeding the amount we expect to collect of total credits to customers that: | |
• based on our consideration of their business, financial position and future cash flows, have incurred serious default risks due to noticeable deterioration in their ability to repay; or | ||
• have been in arrears for three months or more but less than | ||
Estimated Loss | Credits exceeding the amount we expect to collect of total credits to customers that: | |
• based on our consideration of their business, financial position and future cash flows, are judged to have to be accounted as a loss as the inability to repay became certain due to serious deterioration in their ability to repay; | ||
• have been in arrears for | ||
• have incurred serious risks of default in repayment due to the occurrence of, among other things, final refusal to pay their debt instruments, liquidation or bankruptcy proceedings or closure of their business. | ||
Loan Loss Provisioning Policy
Under International Accounting StandardIFRS 9 Financial Instruments, which replaced IAS 39, for annual periods commencing on or after January 1, 2018, we establish allowances for credit losses based on expected credit losses instead of incurred losses (as was the case under IAS 39) by assessing changes in expected credit losses and recognizing such changes as impairment loss (or reversal of impairment loss) in profit or loss. Under IFRS 9, the allowance required to be established with respect to a loan or financial asset is the amount of the expected 12-month credit loss or the expected lifetime credit loss for the applicable loan or financial asset, according to three stages of credit risk deterioration since initial recognition.
For financial reporting periods starting prior to January 1, 2018, under IAS 39 Financial Instruments: Recognition and Measurement, we establishestablished allowances for credit losses with respect to loans using either a case-by-case or collective approach. We assessassessed individually significant loans on a case-by-case basis and other loans on a collective basis. In addition, if we determinedetermined that no objective evidence of impairment exists for a loan, we includeincluded such loan in a group of loans with similar credit risk characteristics and assessassessed them collectively for impairment regardless of whether such loan is significant. If there iswas objective evidence that an impairment loss hashad been incurred for individually significant loans, the amount of the loss iswas measured as the difference between the financial asset’s carrying amount and the present value of the estimated future cash flows discounted at such asset’s original effective interest rate. Future cash flows arewere estimated through a case-by-case analysis of individually assessed assets, which takestook into account the benefit of any guarantee or other collateral held. The value and timing of future cash flow receipts arewere based on available estimates in conjunction with facts available at the time of review and reassessed on a periodic basis as new information becomesbecame available.
ForUnder IAS 39, for collectively assessed loans, we basebased the level of allowance for credit losses on a portfolio basis in light of the homogenous nature of the assets included in each portfolio. The allowances arewere determined based on a quantitative review of the relevant portfolio, taking into account such factors as the level of arrears, the value of any security, and historical and projected cash recovery trends over the recovery period. The methodologies we useused to estimate collectively assessed allowances reflectreflected the probability that the performing customer willwould default, our historical loss experience (as adjusted by current economic and credit conditions where appropriate) and the emergence period between an impairment event occurring and a loan being identified and reported as impaired.
IFRS 9Financial Instruments is effective, and replaces International Accounting Standard 39, for annual periods commencing on or after January 1, 2018. See “Item 5.B. Liquidity and Capital Resources—Recent Accounting Pronouncements.” IFRS 9 introduces a new impairment model which requires the calculation of allowance for credit losses based on expected credit losses instead of incurred losses (as is the case under International Accounting Standard 39) by assessing changes in expected credit losses and recognizing such changes as impairment loss (or reversal of impairment loss) in profit or loss. Under IFRS 9, the allowance required to be established with respect to a loan or receivable is the amount of the expected 12-month credit loss or the expected lifetime credit loss for the applicable loan or receivable, according to three stages of credit risk deterioration since initial recognition.
If additions or changes to the allowance for credit losses are required, then we record provisions for credit loss, which are included in impairment losses due to credit loss and treated as charges against current income. Credit exposures that we deem to be uncollectible, including actual loan losses, net of recoveries of previously charged-off amounts, are charged directly against the allowance for credit losses. See “Item 5.A. Operating Results—Critical Accounting Policies—Impairment of Loans and Allowance for Credit Losses.”
We considerconclude that a loan is impaired when it is under one of the following loans to be impaired loans:conditions:
when the principal is past due by 90 days or more;more due to significant deterioration in credit;
for loans overdue for less than 90 days, when it is determined that are subject to legal proceedings related to collection;not even a portion of the loan will be recovered unless a claim action, such as disposal of collateral, is taken; or
when other objective indicators of impairment have been noted for the Korea Federation of Banks indicating that such borrower has exhibited difficulties in making timely payments of principal and interest;
loan.
In addition, if our allowance for credit losses is deemed insufficient for regulatory purposes, we compensate for the difference by recording a planned regulatory reserve for credit loss, which is segregated within our retained earnings. The level of planned regulatory reserve for credit loss required to be recorded is equal to the amount by which our allowance for credit losses under IFRS is less than the greater of (x) the amount of expected loss calculated using the internal ratings-based approach under Basel II and as approved by the Financial Supervisory Service and (y) the required amount of credit loss reserve calculated based on guidelines prescribed by the Financial Services Commission. The following table sets forth the Financial Services Commission’s guidelines applicable to banking institutions for the minimum percentages of the outstanding principal amount of the relevant loans or balances that the credit loss reserve must cover:
Loan classifications | Corporate(1) | Consumer | Credit card | Credit card | Corporate(1) | Consumer | Credit card | Credit card | ||||||||
Normal | 0.85% or above | 1% or above | 1.1% or above | 2.5% or above | 0.85% or above | 1% or above | 1.1% or above | 2.5% or above | ||||||||
Precautionary | 7% or above | 10% or above | 40% or above | 50% or above | 7% or above | 10% or above | 40% or above | 50% or above | ||||||||
Substandard | 20% or above | 20% or above | 60% or above | 65% or above | 20% or above | 20% or above | 60% or above | 65% or above | ||||||||
Doubtful | 50% or above | 55% or above | 75% or above | 75% or above | 50% or above | 55% or above | 75% or above | 75% or above | ||||||||
Estimated loss | 100% | 100% | 100% | 100% | 100% | 100% | 100% | 100% |
| (1) | Subject to certain exceptions pursuant to the Banking Industry Supervision Regulations of Korea. |
| (2) | Applicable for credit card receivables for general purchases of products or services. |
| (3) | Applicable for cash advances, card loans and revolving loan receivables. |
The process to determine the allowances for off-balance sheet positions under IFRS is similar to the methodology used for loans. Any loss amounts are recognized as a provision in the consolidated statements of financial position within liabilities and charged to the consolidated statement of income as a component of the impairment losses due to credit loss.
The actual amount of credit losses we incur may differ from our loss estimates as a result of changing economic conditions, changes in industry or geographic concentrations, or other factors. We monitor the differences between our estimated and actual incurred credit losses, and we undertake detailed periodic assessments of both individual loans and credit portfolios, the models we use to estimate incurred credit losses in those portfolios and the adequacy of our overall allowances.
Problem Loans and Past Due Accruing Loans
We monitor and manage our “problem loans” by generally placing loans on “problem loan” status when payments of interest and/or principal become past due by 90 days. In addition, the following types of loans are classified as problem loans by us even if such loans are not past due:
Loans to creditors with dishonored notes or checks;
Loans for which interest payments are reduced or postponed (e.g., through work-out procedures or debt restructurings); and
Loans to creditors included in the “watch list” maintained by the Korea Federation of Banks.
We reclassify loans as non-problem loans when interest and principal payments are up-to-date and future payments of principal and interest are reasonably assured. In applying payments on problem loans, we first apply payments to the delinquent interest outstanding, then to non-delinquent interest, and then to the outstanding loan balance until the loan is paid in full.
Foregone interest is the portion of the contractual interest due on problem loans that we have not accrued in our books. If we had not foregone interest on our problem loans, we would have recorded gross interest income of ￦164￦61 billion, ￦104￦60 billion and ￦74￦63 billion for 2015, 20162018, 2019 and 2017,2020 respectively, on loans accounted for as problem loans throughout the year, or since origination for loans held for part of the year. The actual amount of interest income on those loans included in our net income for 2015, 20162018 and 20172019 was ￦41￦34 billion, ￦47￦39 billion and ￦34￦28 billion, respectively.
The category “accruing loans which are contractually past due 90 days or more as to principal or interest” includes loans that are still accruing interest based on the contractual rate of interest but on which principal or interest payments are contractually past due 90 days or more. We continue to accrue contractual interest on loans that are fully secured by deposits or on which there are financial guarantees from the Korean government, the KDIC or certain financial institutions.
The following table shows, as of the dates indicated, the amount of loans that were problem loans and accruing loans which were past due 90 days or more:
| As of December 31, | As of December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2013(1) | 2014 | 2015 | 2016 | 2017 | 2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Domestic | Foreign | Total | Domestic | Foreign | Total | Domestic | Foreign | Total | Domestic | Foreign | Total | Domestic | Foreign | Total | Domestic | Foreign | Total | Domestic | Foreign | Total | Domestic | Foreign | Total | Domestic | Foreign | Total | Domestic | Foreign | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans classified as problem loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Corporate(3) | ￦ | 3,645 | ￦ | 23 | ￦ | 3,668 | ￦ | 2,458 | ￦ | 82 | ￦ | 2,540 | ￦ | 1,901 | ￦ | 44 | ￦ | 1,945 | ￦ | 1,200 | ￦ | 67 | ￦ | 1,267 | ￦ | 924 | ￦ | 145 | ￦ | 1,069 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Corporate(2) | ￦ | 1,200 | ￦ | 67 | ￦ | 1,267 | ￦ | 924 | ￦ | 145 | ￦ | 1,069 | ￦ | 627 | ￦ | 35 | ￦ | 662 | ￦ | 688 | ￦ | 42 | ￦ | 730 | ￦ | 510 | ￦ | 181 | ￦ | 691 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer | 600 | — | 600 | 547 | 6 | 553 | 436 | 4 | 440 | 442 | 20 | 462 | 460 | 23 | 483 | 442 | 20 | 462 | 460 | 23 | 483 | 537 | 24 | 561 | 559 | 20 | 579 | 452 | 21 | 473 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sub-total | 4,245 | 23 | 4,268 | 3,005 | 88 | 3,093 | 2,337 | 48 | 2,385 | 1,642 | 87 | 1,729 | 1,384 | 168 | 1,551 | 1,642 | 87 | 1,729 | 1,384 | 168 | 1,551 | 1,164 | 59 | 1,223 | 1,247 | 62 | 1,309 | 962 | 202 | 1,164 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accruing loans which are contractually past due 90 days or more as to principal or interest | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Corporate(3) | — | — | — | 2 | — | 2 | — | — | — | 3 | — | 3 | 2 | — | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Corporate(2) | 3 | — | 3 | 2 | — | 2 | 1 | — | 1 | 11 | — | 11 | 38 | — | 38 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | 83 | — | 83 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sub-total | — | — | — | 2 | — | 2 | — | — | — | 3 | — | 3 | 2 | — | 2 | 3 | — | 3 | 2 | — | 2 | 1 | — | 1 | 11 | — | 11 | 121 | — | 121 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total | ￦ | 4,245 | ￦ | 23 | ￦ | 4,268 | ￦ | 3,007 | ￦ | 88 | ￦ | 3,095 | ￦ | 2,337 | ￦ | 48 | ￦ | 2,385 | ￦ | 1,645 | ￦ | 87 | ￦ | 1,732 | ￦ | 1,386 | ￦ | 168 | ￦ | 1,553 | ￦ | 1,645 | ￦ | 87 | ￦ | 1,732 | ￦ | 1,386 | ￦ | 168 | ￦ | 1,553 | ￦ | 1,165 | ￦ | 59 | ￦ | 1,224 | ￦ | 1,258 | ￦ | 62 | ￦ | 1,320 | ￦ | 1,083 | ￦ | 202 | ￦ | 1,285 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| (1) |
Not including due from banks and other |
Including loans made to banks and the Korean government and government-owned agencies. |
Includes credit card balances of |
The following table shows, as of the dates indicated, the amount of problem loans, potential problem loans and non-performing loans:
| As of December 31, | As of December 31, | |||||||||||||||||||||||
| 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |||||||||||||||||||
| (in billions of Won) | (in billions of Won) | |||||||||||||||||||||||
Problem loans | ￦ | 2,385 | ￦ | 1,729 | ￦ | 1,551 | ￦ | 1,223 | ￦ | 1,309 | ￦ | 1,164 | ||||||||||||
Potential problem loans(1) | 1,603 | 1,158 | 937 | 1,513 | 1,345 | 1,265 | ||||||||||||||||||
Non-performing loans | 2,909 | 2,080 | 1,853 | 1,329 | 1,157 | 1,236 | ||||||||||||||||||
| (1) | Potential problem loans are those classified as precautionary that we determine, through our internal loan review process, as requiring close management due to the borrower’s financial condition, our forecast for the industry in which it operates or as a result of other developments relating to its business. |
Loan Aging Schedule
The following table shows our loan aging schedule (excluding accrued interest) as of the dates indicated. In line with industry practice, we have restructured a portion of our delinquent credit card balances as loans.
| As of December 31, 2017 | As of December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Normal | Past due by 1 month or less | Past due by 1-3 months | Past due by 3-6 months | Past due by more than 6 months | Total | Normal | Past due by 1 month or less | Past due by 1-3 months | Past due by 3-6 months | Past due by more than 6 months | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in billions of Won, except percentages) | (in billions of Won, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amount | % | Amount past due | % | Amount past due | % | Amount past due | % | Amount past due | % | Amount | % | Amount | % | Amount past due | % | Amount past due | % | Amount past due | % | Amount past due | % | Amount | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Corporate(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | ￦ | 92,767 | 36.7 | % | ￦ | 172 | 0.1 | % | ￦ | 81 | 0.0 | % | ￦ | 98 | 0.0 | % | ￦ | 202 | 0.1 | % | ￦ | 93,320 | 36.9 | % | ￦ | 113,988 | 37.6 | % | ￦ | 219 | 0.1 | % | ￦ | 90 | 0.0 | % | ￦ | 106 | 0.0 | % | ￦ | 122 | 0.0 | % | ￦ | 114,525 | 37.7 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
Lease financing | 25 | 0.0 | — | 0.0 | — | 0.0 | — | 0.0 | — | 0.0 | 25 | 0.0 | 849 | 0.3 | 4 | 0.0 | 1 | 0.0 | 1 | 0.0 | 3 | 0.0 | 858 | 0.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade financing | 9,264 | 3.7 | 8 | 0.0 | 4 | 0.0 | 3 | 0.0 | 11 | 0.0 | 9,290 | 3.7 | 7,276 | 2.4 | 1 | 0.0 | 8 | 0.0 | 6 | 0.0 | 2 | 0.0 | 7,293 | 2.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other commercial | 21,238 | 8.4 | 5 | 0.0 | 5 | 0.0 | 1 | 0.0 | 34 | 0.0 | 21,283 | 8.4 | 15,887 | 5.2 | 7 | 0.0 | 3 | 0.0 | 5 | 0.0 | 29 | 0.0 | 15,931 | 5.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total corporate | 123,294 | 48.8 | 185 | 0.0 | 90 | 0.0 | 102 | 0.0 | 247 | 0.1 | 123,918 | 49.0 | 138,000 | 45.5 | 231 | 0.1 | 102 | 0.0 | 118 | 0.0 | 156 | 0.0 | 138,607 | 45.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General purpose household | 34,084 | 13.5 | 165 | 0.1 | 41 | 0.0 | 30 | 0.0 | 54 | 0.0 | 34,374 | 13.6 | 39,852 | 13.1 | 158 | 0.1 | 64 | 0.0 | 51 | 0.0 | 85 | 0.0 | 40,210 | 13.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgages | 47,104 | 18.7 | 277 | 0.1 | 46 | 0.0 | 23 | 0.0 | 26 | 0.0 | 47,476 | 18.8 | 61,938 | 20.4 | 206 | 0.1 | 42 | 0.0 | 30 | 0.0 | 58 | 0.0 | 62,274 | 20.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity | 25,308 | 10.1 | 116 | 0.0 | 27 | 0.0 | 21 | 0.0 | 41 | 0.0 | 25,513 | 10.1 | 31,845 | 10.5 | 90 | 0.0 | 23 | 0.0 | 17 | 0.0 | 20 | 0.0 | 31,995 | 10.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total consumer | 106,496 | 42.3 | 558 | 0.2 | 114 | 0.0 | 74 | 0.0 | 121 | 0.0 | 107,363 | 42.5 | 133,635 | 44.0 | 454 | 0.2 | 129 | 0.0 | 98 | 0.0 | 163 | 0.0 | 134,479 | 44.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards | 6,617 | 2.7 | 122 | 0.0 | 49 | 0.0 | 39 | 0.0 | — | 0.0 | 6,827 | 2.7 | 8,382 | 2.8 | 73 | 0.0 | 44 | 0.0 | 44 | 0.0 | — | 0.0 | 8,543 | 2.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total domestic | 236,407 | 93.8 | 865 | 0.3 | 253 | 0.0 | 215 | 0.0 | 368 | 0.1 | 238,108 | 94.2 | 280,017 | 92.3 | 758 | 0.3 | 275 | 0.0 | 260 | 0.0 | 319 | 0.0 | 281,629 | 92.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Corporate(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 9,579 | 3.8 | 1 | 0.0 | 1 | 0.0 | 8 | 0.0 | 43 | 0.0 | 9,632 | 3.8 | 16,265 | 5.4 | 6 | 0.0 | — | 0.0 | 15 | 0.0 | 98 | 0.0 | 16,384 | 5.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade financing | 2,649 | 1.0 | 4 | 0.0 | 0 | 0.0 | 0 | 0.0 | 2 | 0.0 | 2,655 | 1.0 | 1,482 | 0.5 | — | 0.0 | — | 0.0 | — | 0.0 | — | 0.0 | 1,482 | 0.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other commercial | 471 | 0.2 | 0 | 0.0 | 0 | 0.0 | 0 | 0.0 | 0 | 0.0 | 471 | 0.2 | 829 | 0.3 | — | 0.0 | — | 0.0 | — | 0.0 | — | 0.0 | 829 | 0.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total corporate | 12,699 | 5.0 | 5 | 0.0 | 1 | 0.0 | 8 | 0.0 | 45 | 0.0 | 12,758 | 5.0 | 18,576 | 6.2 | 6 | 0.0 | — | 0.0 | 15 | 0.0 | 98 | 0.0 | 18,695 | 6.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer | 1,864 | 0.8 | 2 | 0.0 | 3 | 0.0 | 1 | 0.0 | 57 | 0.0 | 1,927 | 0.8 | 3,530 | 1.2 | 17 | 0.0 | 11 | 0.0 | 10 | 0.0 | 73 | 0.0 | 3,641 | 1.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total foreign | 14,563 | 5.8 | 7 | 0.0 | 4 | 0.0 | 9 | 0.0 | 102 | 0.0 | 14,685 | 5.8 | 22,106 | 7.4 | 23 | 0.0 | 11 | 0.0 | 25 | 0.0 | 171 | 0.0 | 22,336 | 7.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total loans(3) | ￦ | 250,970 | 99.6 | % | ￦ | 872 | 0.3 | % | ￦ | 257 | 0.0 | % | ￦ | 224 | 0.0 | % | ￦ | 470 | 0.1 | % | ￦ | 252,793 | 100.0 | % | ￦ | 302,123 | 99.7 | % | ￦ | 781 | 0.3 | % | ￦ | 286 | 0.0 | % | ￦ | 285 | 0.0 | % | ￦ | 490 | 0.0 | % | ￦ | 303,965 | 100.0 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
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Including loans made to banks and the Korean government and government-owned agencies. |
| (2) | Including loans made to banks. |
| (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. |
| As of December 31, 2016 | As of December 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Normal | Past due by 1 month or less | Past due by 1-3 months | Past due by 3-6 months | Past due by more than 6 months | Total | Normal | Past due by 1 month or less | Past due by 1-3 months | Past due by 3-6 months | Past due by more than 6 months | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in billions of Won, except percentages) | (in billions of Won, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amount | % | Amount past due | % | Amount past due | % | Amount past due | % | Amount past due | % | Amount | % | Amount | % | Amount past due | % | Amount past due | % | Amount past due | % | Amount past due | % | Amount | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Corporate(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | ￦ | 88,313 | 37.4 | % | ￦ | 162 | 0.1 | % | ￦ | 98 | 0.0 | % | ￦ | 97 | 0.0 | % | ￦ | 298 | 0.2 | % | ￦ | 88,968 | 37.7 | % | ￦ | 100,415 | 37.1 | % | ￦ | 117 | 0.0 | % | ￦ | 111 | 0.0 | % | ￦ | 93 | 0.0 | % | ￦ | 93 | 0.0 | % | ￦ | 100,829 | 37.1 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
Lease financing | 7 | 0.0 | — | 0.0 | — | 0.0 | — | 0.0 | — | 0.0 | 7 | 0.0 | 77 | 0.0 | — | 0.0 | — | 0.0 | — | 0.0 | — | 0.0 | 77 | 0.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade financing | 10,671 | 4.5 | 4 | 0.0 | 4 | 0.0 | 10 | 0.0 | 10 | 0.0 | 10,699 | 4.5 | 6,758 | 2.5 | 1 | 0.0 | 2 | 0.0 | 3 | 0.0 | 2 | 0.0 | 6,766 | 2.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other commercial | 12,843 | 5.4 | 6 | 0.0 | 2 | 0.0 | 17 | 0.0 | 55 | 0.0 | 12,923 | 5.4 | 13,705 | 5.1 | 6 | 0.0 | 3 | 0.0 | 5 | 0.0 | 29 | 0.0 | 13,748 | 5.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total corporate | 111,834 | 47.3 | 172 | 0.1 | 104 | 0.0 | 124 | 0.0 | 363 | 0.2 | 112,597 | 47.6 | 120,955 | 44.7 | 124 | 0.0 | 116 | 0.0 | 101 | 0.0 | 124 | 0.0 | 121,420 | 44.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General purpose household | 30,412 | 12.9 | 141 | 0.1 | 30 | 0.0 | 21 | 0.0 | 80 | 0.0 | 30,684 | 13.0 | 37,368 | 13.8 | 120 | 0.0 | 45 | 0.0 | 33 | 0.0 | 39 | 0.0 | 37,605 | 13.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgages | 47,328 | 20.1 | 225 | 0.1 | 38 | 0.0 | 18 | 0.0 | 21 | 0.0 | 47,630 | 20.2 | 54,145 | 19.9 | 202 | 0.1 | 67 | 0.0 | 41 | 0.0 | 56 | 0.0 | 54,511 | 20.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity | 24,269 | 10.3 | 112 | 0.0 | 24 | 0.0 | 17 | 0.0 | 64 | 0.0 | 24,486 | 10.3 | 28,450 | 10.5 | 87 | 0.0 | 32 | 0.0 | 23 | 0.0 | 30 | 0.0 | 28,622 | 10.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total consumer | 102,009 | 43.3 | 478 | 0.2 | 92 | 0.0 | 56 | 0.0 | 165 | 0.0 | 102,800 | 43.5 | 119,963 | 44.2 | 409 | 0.1 | 144 | 0.0 | 97 | 0.0 | 125 | 0.0 | 120,738 | 44.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards | 6,502 | 2.7 | 92 | 0.0 | 51 | 0.0 | 29 | 0.0 | — | 0.0 | 6,674 | 2.7 | 8,189 | 3.1 | 100 | 0.0 | 55 | 0.0 | 55 | 0.0 | — | 0.0 | 8,399 | 3.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total domestic | 220,345 | 93.3 | 742 | 0.3 | 247 | 0.0 | 209 | 0.0 | 528 | 0.2 | 222,071 | 93.8 | 249,107 | 92.0 | 633 | 0.1 | 315 | 0.0 | 253 | 0.0 | 249 | 0.0 | 250,557 | 92.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Corporate(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 10,449 | 4.5 | 1 | 0.0 | 2 | 0.0 | 36 | 0.0 | 52 | 0.0 | 10,540 | 4.5 | 15,474 | 5.7 | 19 | 0.0 | 7 | 0.0 | 15 | 0.0 | 29 | 0.0 | 15,544 | 5.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade financing | 2,155 | 0.9 | — | 0.0 | — | 0.0 | — | 0.0 | 1 | 0.0 | 2,156 | 0.9 | 1,781 | 0.7 | — | 0.0 | — | 0.0 | — | 0.0 | 1 | 0.0 | 1,782 | 0.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other commercial | 350 | 0.1 | — | 0.0 | — | 0.0 | — | 0.0 | — | 0.0 | 350 | 0.1 | 828 | 0.3 | — | 0.0 | 17 | 0.0 | — | 0.0 | — | 0.0 | 845 | 0.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total corporate | 12,954 | 5.5 | 1 | 0.0 | 2 | 0.0 | 36 | 0.0 | 53 | 0.0 | 13,046 | 5.5 | 18,083 | 6.7 | 19 | 0.0 | 24 | 0.0 | 15 | 0.0 | 30 | 0.0 | 18,171 | 6.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer | 1,664 | 0.7 | 2 | 0.0 | 6 | 0.0 | 2 | 0.0 | 10 | 0.0 | 1,684 | 0.7 | 3,217 | 1.2 | 14 | 0.0 | 8 | 0.0 | 7 | 0.0 | 19 | 0.0 | 3,265 | 1.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total foreign | 14,618 | 6.2 | 3 | 0.0 | 8 | 0.0 | 38 | 0.0 | 63 | 0.0 | 14,730 | 6.2 | 21,300 | 7.9 | 33 | 0.0 | 32 | 0.0 | 22 | 0.0 | 49 | 0.0 | 21,436 | 7.9 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total loans(3) | ￦ | 234,963 | 99.5 | % | ￦ | 745 | 0.3 | % | ￦ | 255 | 0.0 | % | ￦ | 247 | 0.0 | % | ￦ | 591 | 0.2 | % | ￦ | 236,801 | 100.0 | % | ￦ | 270,407 | 99.9 | % | ￦ | 666 | 0.1 | % | ￦ | 347 | 0.0 | % | ￦ | 275 | 0.0 | % | ￦ | 298 | 0.0 | % | ￦ | 271,993 | 100.0 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
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| (1) | Including loans made to banks and the Korean government and government-owned agencies. |
| (2) | Including loans made to banks. |
| (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. |
| As of December 31, 2015 | As of December 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Normal | Past due by 1 month or less | Past due by 1-3 months | Past due by 3-6 months | Past due by more than 6 months | Total | Normal | Past due by 1 month or less | Past due by 1-3 months | Past due by 3-6 months | Past due by more than 6 months | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (in billions of Won, except percentages) | (in billions of Won, except percentages) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amount | % | Amount past due | % | Amount past due | % | Amount past due | % | Amount past due | % | Amount | % | Amount | % | Amount past due | % | Amount past due | % | Amount past due | % | Amount past due | % | Amount | % | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Domestic | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Corporate(1) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | ￦ | 91,443 | 40.3 | % | ￦ | 158 | 0.1 | % | ￦ | 154 | 0.1 | % | ￦ | 534 | 0.2 | % | ￦ | 513 | 0.3 | % | ￦ | 92,802 | 41.0 | % | ￦ | 95,811 | 36.6 | % | ￦ | 169 | 0.1 | % | ￦ | 117 | 0.0 | % | ￦ | 84 | 0.0 | % | ￦ | 102 | 0.0 | % | ￦ | 96,283 | 36.7 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
Lease financing | 55 | 0.0 | — | 0.0 | — | 0.0 | — | 0.0 | — | 0.0 | 55 | 0.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade financing | 11,405 | 5.0 | 8 | 0.0 | 10 | 0.0 | 9 | 0.0 | 14 | 0.0 | 11,446 | 5.0 | 9,633 | 3.7 | 3 | 0.0 | 3 | 0.0 | 6 | 0.0 | 4 | 0.0 | 9,649 | 3.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other commercial | 12,135 | 5.3 | 7 | 0.0 | 7 | 0.0 | 18 | 0.0 | 62 | 0.0 | 12,229 | 5.3 | 16,133 | 6.2 | 6 | 0.0 | 3 | 0.0 | 3 | 0.0 | 32 | 0.0 | 16,177 | 6.2 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total corporate | 114,983 | 50.6 | 173 | 0.1 | 171 | 0.1 | 561 | 0.2 | 589 | 0.3 | 116,477 | 51.3 | 121,632 | 46.5 | 178 | 0.1 | 123 | 0.0 | 93 | 0.0 | 138 | 0.0 | 122,164 | 46.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General purpose household | 26,679 | 11.8 | 143 | 0.1 | 38 | 0.0 | 25 | 0.0 | 86 | 0.0 | 26,971 | 11.9 | 36,652 | 14.0 | 170 | 0.1 | 55 | 0.0 | 37 | 0.0 | 48 | 0.0 | 36,962 | 14.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mortgages | 40,337 | 17.8 | 188 | 0.1 | 33 | 0.0 | 16 | 0.0 | 24 | 0.0 | 40,598 | 17.9 | 50,862 | 19.5 | 281 | 0.1 | 59 | 0.0 | 39 | 0.0 | 39 | 0.0 | 51,280 | 19.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Home equity | 24,391 | 10.7 | 130 | 0.1 | 35 | 0.0 | 23 | 0.0 | 78 | 0.0 | 24,657 | 10.8 | 26,112 | 10.0 | 117 | 0.0 | 36 | 0.0 | 24 | 0.0 | 35 | 0.0 | 26,324 | 10.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total consumer | 91,407 | 40.3 | 461 | 0.3 | 106 | 0.0 | 64 | 0.0 | 188 | 0.0 | 92,226 | 40.6 | 113,626 | 43.5 | 568 | 0.2 | 150 | 0.0 | 100 | 0.0 | 122 | 0.0 | 114,566 | 43.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit cards | 5,899 | 2.6 | 103 | 0.0 | 50 | 0.0 | 47 | 0.0 | — | 0.0 | 6,099 | 2.6 | 7,818 | 3.1 | 123 | 0.0 | 58 | 0.0 | 52 | 0.0 | — | 0.0 | 8,051 | 3.1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total domestic | 212,289 | 93.5 | 737 | 0.4 | 327 | 0.1 | 672 | 0.2 | 777 | 0.3 | 214,802 | 94.5 | 243,076 | 93.1 | 869 | 0.3 | 331 | 0.0 | 245 | 0.0 | 260 | 0.0 | 244,781 | 93.4 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Foreign | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Corporate(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 9,484 | 4.3 | 7 | 0.0 | 3 | 0.0 | 5 | 0.0 | 19 | 0.0 | 9,518 | 4.3 | 11,778 | 4.5 | 8 | 0.0 | 13 | 0.0 | 3 | 0.0 | 35 | 0.0 | 11,837 | 4.5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade financing | 1,419 | 0.6 | — | 0.0 | — | 0.0 | 1 | 0.0 | 1 | 0.0 | 1,421 | 0.6 | 2,185 | 0.8 | — | 0.0 | — | 0.0 | — | 0.0 | 1 | 0.0 | 2,186 | 0.8 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other commercial | 192 | 0.1 | — | 0.0 | — | 0.0 | — | 0.0 | 14 | 0.0 | 206 | 0.1 | 700 | 0.3 | — | 0.0 | — | 0.0 | — | 0.0 | — | 0.0 | 700 | 0.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total corporate | 11,095 | 5.0 | 7 | 0.0 | 3 | 0.0 | 6 | 0.0 | 34 | 0.0 | 11,145 | 5.0 | 14,663 | 5.6 | 8 | 0.0 | 13 | 0.0 | 3 | 0.0 | 36 | 0.0 | 14,723 | 5.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consumer | 1,218 | 0.5 | 1 | 0.0 | 1 | 0.0 | — | 0.0 | 2 | 0.0 | 1,222 | 0.5 | 2,502 | 1.0 | 3 | 0.0 | 4 | 0.0 | 4 | 0.0 | 17 | 0.0 | 2,530 | 1.0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total foreign | 12,313 | 5.5 | 8 | 0.0 | 4 | 0.0 | 6 | 0.0 | 36 | 0.0 | 12,367 | 5.5 | 17,165 | 6.6 | 11 | 0.0 | 17 | 0.0 | 7 | 0.0 | 53 | 0.0 | 17,253 | 6.6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total loans(3) | ￦ | 224,602 | 99.0 | % | ￦ | 745 | 0.4 | % | ￦ | 331 | 0.1 | % | ￦ | 678 | 0.2 | % | ￦ | 813 | 0.3 | % | ￦ | 227,169 | 100.0 | % | ￦ | 260,241 | 99.7 | % | ￦ | 880 | 0.3 | % | ￦ | 348 | 0.0 | % | ￦ | 252 | 0.0 | % | ￦ | 313 | 0.0 | % | ￦ | 262,034 | 100.0 | % | ||||||||||||||||||||||||||||||||||||||||||||||||
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| (1) | Including loans made to banks and the Korean government and government-owned agencies. |
| (2) | Including loans made to banks. |
| (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. |
Credit Exposures to Companies in Workout, Restructuring or Rehabilitation
Workout is a voluntary procedure through which we, together with the borrower and other creditors, seek to restore the borrower’s financial stability and viability. Previously, workouts were regulated under a series of Corporate Restructuring Promotion Acts, which last expired on December 31, 2015.June 30, 2018. In March 2016,September 2018, the National Assembly of Korea adopted a new Corporate Restructuring Promotion Act, which became effective on October 16, 2018 and is scheduled to expire on June 30, 2018.October 15, 2023. Under the new Corporate Restructuring Promotion Act, creditors of a financially troubled borrower may participate in a creditors’ committee, which is authorized to prohibit such creditors from exercising their rights against the borrower, commence workout procedures and approve or make revisions to a reorganization plan prepared by the lead creditor bank, the borrower and external experts. The composition of the creditors’ committee is determined at the initial meeting of the committee by the approval of creditors holding not less than 75% of the borrower’s total outstanding debt held by creditors who were notified of the initial meeting of the committee. Although creditors that are not financial institutions or hold less than 1% of the total outstanding debt of the borrower need not be notified of the initial meeting of the creditors’ committee, if such creditors wish to participate, they may not be excluded. Any decision of the creditors’ committee requires the approval of creditors holding not less than 75% of the total outstanding debt of the borrower. However, if a single creditor holds 75% or more of the borrower’s total outstanding debt held by the creditors comprising the creditors’ committee, any decision of the creditors’ committee requires the approval of not less than 40% of the total number of creditors (including such single creditor) comprising the committee. An additional approval of creditors holding not less than 75% of the secured debt is required with respect to the borrower’s debt restructuring. Once approved, any decision made by the creditors’ committee is binding on all creditors of the borrower, with the exception of those creditors that were
