Woori Financial Group Inc.
Annual Report 2017

Plain-text annual report

WOORI BANK ANNUAL REPORT 2017 TogeTher for Tomorrow A Leading Bank Shaping the Future WOORI BANK ANNUAL REPORT 2017 Woori Overview 006 010 012 014 015 016 020 Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations 024 026 028 030 032 034 036 037 040 042 044 045 046 Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility 050 052 054 056 058 Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review 061 072 180 182 Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network In 2018, change and innovation will give new life to Woori Bank. All of us will strive to become the number one comprehensive financial group. At Woori Bank, we build a better tomorrow, working together as one team. TogeTher for Tomorrow A LeAding BAnk ShAping the Future We communicate and grow under an innovative and open corporate culture. W e CHa n g e 1 Ch aN Ge We Harmonize We build trust and harmony together with our customers and our society. 2 haRmO Ny 3 S h aRe We share common values that encourage caring and empathy for all W e SHa r e with Woori Bank A l l T o g eTh e r Together we can take a powerful step to grow and become an all new bank. We will realize the dream of becoming the number one comprehensive financial group together with our customers through change, harmony and sharing. To gain the trust of our customers We build a strong foundation to generate steady profits and sustainable growth. W e Cr e at e a better tomorrow for our customers We become a holdings company and the number one comprehensive financial group. We fulfill our responsibility as a corporate citizen. We localize our business further and promote global business competencies. We grow to become a bank capable of leading the digital era. with Woori Bank F o r T o m o r r o w To build a wealthier future for our customers, we will implement inclusive banking and be a financial services company that creates a sustainable future. 006 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 006 message from the CeO First of all, I would like to extend my warmest gratitude to our valued shareholders and customers for their continued support of Woori Bank. First of all, I would like to extend my warmest In October 2017, Woori Bank beat all of its rivals gratitude to our valued shareholders and cus- in a competitive bid to select the primary bank tomers for their continued support of Woori for Korea’s National Pension Service (NPS). In Bank. January 2018, we were re-appointed as the managing custodian bank of the National Hous- In 2017, we saw uncertainty increase around ing & Urban Fund. These successes also helped the world. The United States hiked interest expand Woori Bank’s brand recognition. rates and extended trade protectionism, while political controversies over the issue of the Ter- I am deeply grateful to the shareholders for the minal High Altitude Area Defense (THAAD) sys- trust and support they have shown under such tem affected Korea in various ways. We then severe internal and external conditions, thus witnessed the emergence of the fourth indus- empowering Woori Bank to progress and attain trial revolution leading to the launch of Inter- stable growth. To repay the continued kind- net-only banks and the more immediate possi- ness demonstrated by our shareholders, we bility of the technology sector offering financial are committed to doing our best in every step services. These circumstances have made the we take. market conditions under which we operate extremely tough. As a part of such efforts, Woori Bank recently came up with its 2018 operating slogan, “Woori In the face of such challenges, employees at All Together, All New Woori.” The tagline sig- Woori Bank have pooled their combined efforts nifies our unified commitment to revamp the to increase the Bank’s corporate value. We have bank and build a whole new organization with been rewarded with impressive achievements the help of all employees acting as one based for our efforts in all areas including profitabil- on communication and harmony. ity, growth, and integrity, which in turn have brought us one step closer to our shareholders and customers. WOORI BANKANNUAL REPORT 2017007 Employees at Woori Bank have pooled their combined efforts to increase our corporate value. 007 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017008 008 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner Woori Bank has come up with the following five management strategies in order to ensure more substantial growth, and to bring greater satisfaction and happiness to our shareholders and customers. First, we will build a strong foundation to gener- Second, we will localize our business further to ate steady profits and sustainable growth. We promote global business competence. Focus- will achieve balanced growth in interest-bear- ing mostly on Southeast Asia, where we enjoy ing assets, while pursuing a constant increase high profitability, we will expand the propor- in non-interest income, especially in the area of tion of loans in the region. At the same time, asset management. we will strengthen our network management Management strategies in order to ensure more substantial growth, and to bring greater satisfaction and happiness to our shareholders and customers. capabilities so that we can achieve the two goals of profitability and stability. Third, we will grow to become a bank that is capa- ble of leading the digital era. Digital transforma- tion is the undisputed trend now, and Woori Bank will fully use the know-how and skills we have accumulated over the years to transform the bank into a leader in digital banking. WOORI BANKANNUAL REPORT 2017009 Fourth, we will fulfill our responsibility as a cor- porate citizen. By implementing what we call bigger banking, which is mainly focused on inclusive, productive and trustworthy bank- ing, we will fulfill the banking sector’s collective social responsibility and be a bank that grows The year 2018 marks the 119th anniversary of together with society. Woori Bank. We have maintained a history of over one hundred years, and we intend to grow Lastly, we will successfully change into a hold- for another century and beyond to become a ings company to establish ourselves as Korea’s financial brand that will be there for you always. number-one comprehensive financial group. To We appreciate the generous support and inter- make this happen, our employees will work as est from our shareholders and customers as we one team with the same purpose and drive as seek to realize this goal. they seek to enhance Woori Bank’s corporate value to the fullest and reward the unchanging On a final note, from the bottom of my heart, I support provided by shareholders. wish all our shareholders and customers con- tinued health and happiness. Thank you. Sohn Tae-Seung President and CEO, Woori Bank 009 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017010 Board of Directors President & Chief Executive Officer Standing Director Outside Director Sohn, Tae Seung Oh, Jung Sik Ro, Sung Tae Shin, Sang hoon · Executive Vice President & Head, Global Business Group, Woori Bank · Head, Global Business Unit, Woori Bank · LLM, Seoul National University · CEO, KB Capital · Vice President, Commercial Business Division, Citibank · Managing Director, Risk & Planning Group, Citibank · B.A. in International Economics, · LLB, Sungkyunkwan University Seoul National University · President, Hanwha Economic Research Institute · President & CEO, Shinhan Financial Group · President, Korea Economic Research Institute · Ph.D. in Economics, Harvard University · B.A. in Economics, Seoul National University · President, Shinhan Bank · MBA, Yonsei University · B.A. in Business Administration, Sungkyunkwan University 010 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017011 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 011 Outside Director Non-Standing Director Park, Sang yong Tian, Zhiping Chang, Dong Woo Bae, Chang Sik · (Current) Honorary Professor, Yonsei University · Civilian Chair, Public Fund Oversight Committee · Dean, School of Business, Yonsei University · Ph.D. in Business Administration, New York University · B.A. in Business Administration, Yonsei University · (Current) Vice Managing Director, Beijing FUPU DAOHE Investment Management Ltd. · Managing Director and Director of ICBC (London) plc. and ICBC’s Middle East Division · Managing Director, Sichuan Sub-branch, Industrial and Commercial Bank of China (ICBC) · MBA, Southwestern University of Finance and Economics · IMBA, University of Hong Kong · B.A. in Economics & Governmental Administration, Shanxi University of Finance & Economics · (Current) CEO, IMM Investment · Chief Partner, IMM Investment · LLB, Hanyang University · (Current) Head of Human Resources Development, KDIC · Head of Settlement and Recovery Planning 2, KDIC · Completed, Program in Asian Security Studies, Duke University · BA in Trade, Hankuk University of Foreign Studies WOORI BANKANNUAL REPORT 2017012 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 012 Corporate Governance As of the end of March 2018, Woori Bank’s Board As experts in the fields of economics, business of Directors (BOD) consists of eight executive administration, accounting and law, directors con- directors: two standing directors, one non-stand- tribute their expertise and information gathered ing director and five outside directors who were from years of experience in the field to enhance the appointed to increase the relevant expertise and management efficiency of the bank and increase independence of the BOD. The five outside direc- shareholder value. tors and one non-standing director were selected based on their experience in the fields of finance, management, law, accounting and public relations. Many of them are also well-known public figures. In their respective capacities, they support and moni- tor Woori Bank’s strategic decision-making process and overall business affairs on a regular basis. The BOD held 17 meetings in 2017 to discuss a total 2017 Performance of 44 agenda issues and 42 briefings, all of which required decisions to be made. Directors in a variety of fields collected information from internal and external research activities, and then offered real-world advice by utilizing their expertise to contribute significantly to improving management. During regular quarterly meetings in 2017, the BOD was informed of quarterly business results, reviewed current issues, and deliberated on the bank’s management plans. Major agenda items of discussion included comprehensive briefings regarding major loans; briefings on NPLs; progress reviews and reports on review results concerning the implementation of orders handed down by the BOD; and a rundown of activities at all the commit- tees that fall under the BOD. At the December meeting, the Board of Directors also held in-depth discussions about major issues facing Woori Bank amid continued market changes, as well as giving final approval to the bank’s 2018 draft management plan. Board of Directors ① Sohn, Tae Seung President & Chief Executive Officer ② Oh, Jung Sik Standing Director ③ Ro, Sung Tae Outside Director ④ Shin, Sang Hoon Outside Director ⑤ Park, Sang Yong Outside Director ⑥ Tian, Zhiping Outside Director ⑦ Chang, Dong Woo Outside Director ⑧ Bae, Chang Sik Non-Standing Director ④ ⑤ ⑥ ⑦ ⑧ ② ① ③ executive Vice Presidents Jang, An Ho Retail Banking Business Group Kim, Yeong Bae International Trade Business Group Hong, Hyun Poong Digital Banking Business Group Cho, Woon Haeng Business Support Unit / Human Heo, Jeong Jin Institutional Banking Business Group Cheong, Chai Pong Investment Banking Business Group Resources Group / Information Security Division Lee, Chang Jae Real Estate Finance Business Group Park, Seong Il Compliance Officer Lee, Dong Yeun Domestic Business Unit / Retail Banking Busi- Kim, Jeong Ki Corporate Banking Business Group Kim, Sun Kyu Credit Support Group ness Group, Small & Medium Corporate Banking Business Group managing Directors Ha, Tae Joong Corporate Restructuring Division Cho, Su Hyeong Consumer & Brand Group Jeong, Jong Suk Wealth Management Group Lee, Jong In Risk Management Group Park, Hwa Jae Operation & Support Group Park, Kyong Hoon Global Business Group Lee, Won Duk Management & Finance Planning Group Shin, Myung Hyuk Trust & Pension Business Group Kim, Jong Deuk Financial Market Business Group Choi, Hong Sik Next Generation ICT System Building Division Choi, Dong Su Future Strategy Division WOORI BANKANNUAL REPORT 2017013 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 013 Governance Award Best Company in Governance (Board of Directors) The Maeil Business Newspaper, Daishin Economic Research Institute Committees under the Board of In order to ensure the efficient operation of the Directors Board of Directors, Woori Bank has established a Compensation Committee The Compensation Committee monitors the design Board of Directors Management Committee, an and operation of the bank’s performance-based Audit Committee, a Risk Management Committee, compensation systems and is in charge of inde- a Compensation Committee, and an Officer Candi- pendently establishing compensation policies. date Recommendation Committee. Board of Directors Management Committee The Board of Directors Management Commit- Officer Candidate Recommendation Committee The Officer Candidate Recommendation Commit- tee actively supports the activities of the BOD by tee recommends candidates for the positions of studying and reviewing its overall function and President & CEO, outside directors, and members operation, while also establishing and reviewing of the Audit Committee. succession and training plans relating to the man- agement team, including those of directors. Audit Committee The Audit Committee establishes and executes internal audit plans, makes outcome evaluations, In 2018, Woori Bank will make significant improve- 2018 Plans ments to its management by discussing major carries out follow-up measures, and provides agenda items at BOD meetings. improvement plans to evaluate and enhance the appropriateness of the internal control systems and management performance evaluations. Risk Management Committee The Risk Management Committee makes deci- sions about risk-related policies and strategies in response to changes in the financial environment. It meets at least once every quarter, or on an ad hoc basis, to deliberate on risk management strategies and policies, risk tolerance levels and exposure, allowing it to predict, measure, and monitor over- all risks arising from the bank’s management and transactions in a timely manner. The quarterly BOD meetings will continue to focus on agenda items such as carrying out an analysis of management performance results and reviewing the draft of the 2018 management plan, with ad hoc meetings also being held whenever needed to deal with agenda items related to diverse matters such as management goals, organization and financing. In 2018, Woori Bank will maintain its position as a reliable banking partner that excels and grows through transparent and efficient management innovation. Type of Meeting No. of Agenda Issues No. of Briefings Major Issues Shareholders’ Meeting, BOD and Corporate Governance, etc. Accounting/ Financial Management Portfolio & Risk Management/ Investment/Audit & Inspection/ Gov. Regulation HR/Organizational Management Others Total 12 8 3 3 18 44 2 4 18 1 17 42 General shareholders’ meetings; corporate governance issues; management plans and strategies (establishment and implementation) Approval and revision of closing financial statements; reporting and planning of financial results; bond issuance planning (including bonds in foreign currency) and limit controls Integrated report on major loans; status report on bad loans; audit and internal control issues Appointment and dismissal of Compliance Officers; appointment and dismissal of persons responsible for major responsibilities; appointment and dismissal of executive vice presidents and managing directors WOORI BANKANNUAL REPORT 2017 014 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 014 Company Structure On August 22, 2016, the Public Fund Oversight Committee (PFOC) of Korea announced a plan to sell Woori Privatization of Woori Bank Bank to oligopolistic shareholders. At the time, the state-run Korea Deposit Insurance Corporation (KDIC) owned 51.06% of the bank’s stake, and the plan was to sell 30% of the KDIC stake (a bidding volume of 4~8% per bidder) through bidding in Competitive Auction Scheme. In principle, the shares were sold to the highest bidders, but, the PFOC also took into account factors other than bidding price considering the winning share- holders’ potential influence on Woori Bank’s management. The KDIC launched this auction process of selling its Woori Bank stake, starting with a public note of sale on August 24th, 2016. On September 23th, 2016, a total of 18 investors submitted letters of intent with bidding volumes far exceeding the range from 82% to 119% out of the KDIC’s target 30% stake. As the auction closed on November 11th, 2016, 8 potential investors submitted bid letters for a total bidding volume of 33.7%. The PFOC successfully resolved to sell 29.7% stake to 7 selected bidders. The PFOC’s long years of utmost effort to privatize became a reality, and it was necessary to guaran- tee autonomous management by the private parties. As a result, on December 16th, 2016, the PFOC decided to terminate the Memorandum of Understanding (MOU) between KDIC and Woori Bank, and actively encourage market-driven autonomous management led by oligopolistic shareholders. Meanwhile, out of 2.97% of the KDIC’s stake exempted from the sale and spared for call options for minority stakeholders selected in 2014, 2.94% was exercised by the deadline of December 8th, 2017. Accordingly, the remaining equity stake held by the KDIC decreased to 18.43% as of the end of 2017. Given the need to recover public funds invested, the Korean government intends to continue in selling the remaining stake as early as possible. Domestic Present Status of Woori Bank’s Subsidiaries Woori Card Co., Ltd. 100% Woori Investment Bank Co., Ltd. 59.83% Woori FIS 100% Woori Finance Research Institute Co., Ltd. 100% Woori Credit Information Co., Ltd. 100% Woori Fund Service Co., Ltd. 100% Woori Private Equity Asset Management Co., Ltd. 100% International Woori America Bank (U.S.A.) 100% Woori Global Markets Asia Limited (Hong Kong) 100% Woori Bank China Limited (China) 100% AO Woori Bank (Russia) 100% Banco Woori Bank do Brazil S.A. (Brazil) 100% Woori Finance Cambodia Plc (Cambodia) 100% PT Bank Woori Saudara Indonesia (Indonesia) 79.88% Woori Finance Myanmar Co., Ltd. (Myanmar) 100% Woori Wealth Development Bank (Philippines) 51% Woori Bank Vietnam Limited (Vietnam) 100% WOORI BANKANNUAL REPORT 2017015 Woori Bank awards 2017 The Bank of the Year 2017 Asia-Pacific Best Transaction Bank Award, The Future of Finance Summit Best Cash Management Bank, The Future of Finance Summit 2017 Presidential Commendation for Services in Social Enterprise Incubation Best Bank in Preventing Voice Phishing Damages, 2017 First Half 11th National Sustainable Management Award Consumer’s Choice Star Brand Grand Prize in Integrated Financial Membership Minister’s Prize in Service, the 4th Korea Big Data Awards Governance Award, Best Company in Governance (Board of Directors) Excellence in Banking Sector, the 4th Korea Retirement Pension Award Commendation by Minister of Trade, Industry and Energy (for Promotion of Expert) Grand Prize, Korea’s Best Banker The Banker Asian Banker Asian Banker Ministry of Employment and Labor Financial Supervisory Service Ministry of Strategy and Finance Maekyung Media Group Maeil Business Newspaper, Ministry of Science and ICT The Maeil Business Newspaper, Daishin Economic Research Institute Mercer Korea Ministry of Trade, Industry and Energy The Seoul Economic Daily Seoul Metropolitan Government 2017 Business Supporting the Employment of Multicultural Families Asia Today Best Bank in Cutting Edge Banking, 2017 Asia Today Financial Grand Prize Money Today thebell Grand Prize, 2017 Risk Manager Awards (FSS [Financial Supervisory Service] Chairman’s Award, awarded to one company out of all categories) Chairman’s Award of the Korea Commission for Corporate Partnership, the 4th CSV Awards Excellence Prize, HK Wow TV Global Financial Grand Prize 2017 Customer Satisfaction + Awards (Hall of Fame in Banking) Chief Information Security Officer(CISO) of the Year The Korean Academic Society of Business Administration HK Wow TV The Korean Economic Daily Korea Forum of Chief Information Officers, the Federation of Korean Information Industries 015 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 016 News highlights Woori Bank Selected as the Primary/Custodian Bank for the National Pension Service Woori Bank was selected as the primary and custodian bank for securities assets by the 1 npS, the world’s third-largest pension fund in rank gives a bank the power to choose the asset category it will manage, be it securities, bonds or alternative assets. The usual order of preference is securities- bonds- alternative assets, and Woori Bank was thus able to continue with its existing cus- todian business. The position of custodian bank is as attractive as that of primary bank. In this bid- size with a total of krW 600 trillion in funds ding, Woori Bank was highly rated for its decade- Woori Bank was selected as the primary and cus- todian bank of the National Pension Service (NPS) that manages KRW 600 trillion, the world’s third largest pension fund in size. On October 16, 2017, the NPS announced that it had selected Woori Bank as the preferred bidder to become the pri- mary bank for the NPS banking business, which includes pension premium collection, pension pay- ment, and operational funds settlement. Korea’s four major commercial banks competed in this cru- cial bidding, and Woori Bank focused all its compe- tencies on becoming the successful bidder with an exclusive team to handle the NPS business. Woori made thorough preparations not only in the pri- mary banking business but also in information long zero defect performance and experience in handling business for securities, bonds, and alter- native assets. The selection helped Woori Bank to maintain its custodian banking market share and become Korea’s number one bank. Woori Bank’s WiBee Women’s Pro- fessional Basketball Team Achieves V9- Its 9th Championship and 5th Consecutive Title the team broke new ground by winning the cham- pionship match for the fifth consecutive season in 2 projects and its mid- and long-term strategy. the Women’s korean Basketball League These efforts paid off, and Woori Bank became the The WiBee women’s professional basketball team, primary bank of the NPS, a position held by another dubbed the ‘absolute power’ of the Korean wom- bank for the past ten years. Becoming the primary en’s basketball, emerged victorious in the 2016- bank of the world’s third-largest pension fund pro- 2017 Women’s Korean Basketball League (WKBL). moted Woori’s profile and brand image in and out- On March 20, the team played its third and final side Korea. Woori Bank was also selected as the championship match against the Samsung Life most preferred bidder to become the NPS cus- Insurance team at the Yongin Gymnasium and todian bank to maintain and manage the invest- scored a thrilling come-from-behind victory, win- ment assets of the NPS funds. The preferred bidder ning in overtime with a score of 83-72 against its 016 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 017 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 017 opponent. The committed drive of all players to by expanding entry into Southeast Asian markets that win the team’s fifth consecutive title at the cham- offer high growth and profitability as well as by diver- pionship could be seen in their overwhelming skills sifying the bank’s business based on models custom- and solid team synergy. With a record of 33-2 with a ized for the local environment, such as through the success rate of 0.943 percent in the regular season, savings bank and credit finance models. Meanwhile, the team achieved the highest winning rate among existing local operations (in Indonesia, Myanmar, all professional sports teams in Korea. In January Cambodia and other countries) are scaling up their 2017, the team was already crowned the cham- respective businesses, enlarging sales coverage with pion of the season with a record of 24-1, yet its con- new networks. Woori Bank also opened a local oper- trol over games did not falter—it still managed to ation in Vietnam in January 2017 and acquired Wealth achieve a 9-1 record in the remaining ten games. Development Bank in the Philippines, increasing local The WiBee team has never stopped improving itself business growth at a rapid pace. season after season, although it has already been crowned the most powerful team in the league. Our cheers go out to the players who are still work- ing as hard as ever to make history with a V10 – the team’s 10th victory in the championship. Expanding Our Global Presence, Maintaining the Bank’s No. 1 Posi- tion in Global Networks enlarging the foundation for global and over- seas business through entry into new markets, localization, and network expansion 3 In 2017, Woori Bank cemented its position as a leading global bank. By the end of the year, we have 301 over- seas networks in 25 countries, including the newly opened regional headquarters in Mumbai, India. Woori Bank now has the largest overseas network among Korean commercial banks. This was achieved In terms of the bank’s inorganic growth strategy through mergers and acquisitions, Woori Bank has achieved outstanding results. The bank accumulated know-how and useful experience in the process of acquiring Saudara Bank in Indonesia in 2014. Taking advantage of the knowledge gained, we pushing for- ward with our entry into the Southeast Asian region. The bank’s push into Europe also remains active, with a new representative office opened in Katowice, Poland in February 2017 and a local operation sched- uled to open soon in Germany. Woori Bank is thus building its European Financial Belt. The bank also plans to further expand in Southeast Asia, which has high growth potential, and to increase the number of its global networks to over 500. We will launch new businesses in these markets using best-selling prod- ucts from Korea and our credit card business. We have high hopes for the bank’s global business as it imple- ments growth in volume and quality to realize its goal of becoming one of Asia’s Top 10 and a Global Top 50 bank. the No. 1 Position in the Global Network WOORI BANKANNUAL REPORT 2017018 Woori Bank, Named the Bank of the Year 2017 in the Asia-Pacific Region by The Banker Woori Bank saw its position and credibility in the global arena go up as the Banker maga- zine named it the Bank of the Year 2017 in the 4 Over 5-Million Subscribers to the WiBee Platform WiBee talk, a financial platform leading the digital market, now has more than five million 5 subscribers WiBee Talk, the first mobile messenger in the Asia-pacific region On November 30th, 2017, Woori Bank was named the Bank of the Year in the Asia-Pacific region at The Banker Awards 2017 hosted by the world-renowned The Banker magazine. The Banker evaluated almost 1,000 banks from 120 countries from around the world and selected the best bank from each country and region. In 2016, Woori Bank, after having been named the Best Bank of the Year in Korea, has now been selected as the Bank of the Year in the Asia Pacific region. The Banker is an international financial affairs publication founded in 1926, owned by the Financial Times. It is a highly presti- gious magazine in the banking sector, which publishes the list of the Top 1,000 World Banks every year, a list most frequently quoted in the financial markets. Korean banking sector, has over five million sub- scribers now, only 600 days since its launch in 2016. This means that the platform acquired an aver- age of 5.3 new subscribers per minute and that its diverse services catered to the daily needs of cus- tomers. However, WiBee Talk is only one part of the entire WiBee platform. There is also mobile WiBee Bank, the first digital bank of its kind launched in Korea in 2015; WiBee Members, an integrated plat- form for membership management; and WiBee Market, an open market online shopping mall. Woori Bank successfully built the WiBee platform in only about a year, stirring the digital scene in the market. The bank has led digital innovation in the financial sector, successively launching various services and content such as WiBee Cam, WiBee Woori Bank was well recognized for its global expan- Honey Partner, real-time foreign language transla- sion strategy to overcome the limited growth poten- tion services, as well as SORi, and AI voice recog- tial in the Korean market. Other aspects highly rated nition banking functionality for WiBee Talk. Woori included: intensive qualitative growth in each busi- Bank has integrated the WiBee platform within its ness area; the mobile WiBee Bank that demonstrated 278 overseas network customer contact points as the bank’s competitive edge within a radically chang- well, enhancing its retail finance reputation in each ing financial environment; WiBee Talk, another mobile local market. The creation of value in business is platform pioneering the fin-tech market in Korea; and moving rapidly onto the digital platform; a digital continued enhancement of management performance platform now correlates to the competitiveness of based on improvements in financial services, profit- a business. Accordingly, Woori Bank will lead the ability, and integrity. This designation is the pinnacle of digital market by creating an ecosystem within the global recognition for Woori Bank’s strategy for proac- WiBee platform in which people can start and end tive overseas expansion and digital banking to secure their day using WiBee Talk. new growth engines. This award has provided another firm foundation for the bank to secure its credibility and status as a global bank. 018 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017019 Presidential Commendation for Services in Social Enterprise Incubation: Exclusive Recipient in the Financial Sector Woori Bank was the exclusive recipient in the korean financial sector of this commendation 7 awarded by the Ministry of employment and Labor Designated as the Best Bank in Preventing Voice Phishing Losses by the Financial Supervisory Service preventive actions against voice phishing pro- mote our corporate value as a bank taking the initiative in protecting customer assets 6 On September 9, 2017, Woori Bank received a letter of recognition from the Financial Supervisory Ser- In the 2017 Ceremony for the 10th Anniversary of Social vice (FSS) of Korea, having been designated as the Enterprises hosted by the Ministry of Employment and Best Bank in Preventing Voice Phishing Losses. The Labor, Woori Bank received the Presidential Commen- FSS considered the scale of prevented voice phish- dation for Services in Social Enterprise Incubation. This ing scams, the number of arrests made against government commendation is an award given biannu- offenders in charge of fund withdrawals, the extent ally since 2008 to promote awareness of social enter- of the contribution made by bank employees and prises as well as develop and spread best practices many other factors during the first half of 2017 and in this area. Those eligible for this award are the best eventually sent out letters of appreciation to 23 social enterprises that have contributed to improv- employees at 21 financial companies. To prevent ing social cohesion and the quality of people’s lives, financial fraud, Woori Bank has constantly refined its employers and officers who have contributed to incu- monitoring system and opened a new direct report- bating social enterprises, and organizations or individ- ing channel so that our employees can quickly com- uals who have contributed to promoting social enter- municate with the monitoring officer in the event of a prises by way of financial support or management large withdrawal. As a result, as of the end of Novem- consulting. Woori Bank received this commendation ber 2017, the bank has prevented 2,761 voice phish- in recognition of the financial support and manage- ing scams and prevented associated losses of KRW ment consulting offered to social enterprises. Woori 15 billion. Woori Bank prevented assets amounting Bank was the sole recipient of this commendation from to KRW 10 billion from being misappropriated in the the Korean financial sector. Since 2005, Woori Bank shortest period (as of August) in the whole financial has been offering consulting free-of-charge for social sector and contributed to arresting about 200 voice enterprises and supports customized loan products phishing offenders who tried to withdraw money, for developed specifically for them. In 2013, we concluded which a total of 67 branch employees received a let- a Business Agreement to Support the Ecosystem of ter of appreciation from the police. As many of these Social Enterprises with the Ministry of Employment cases were covered by the media, our image as a and Labor. The bank still strives to assist and promote bank striving to protect customer assets received social enterprises through business support and pur- both internal and external media exposure, signifi- chases. The role of social enterprises is increasingly cantly promoting our corporate value. Woori Bank is important today, and national interest in them has committed to exerting its best efforts to respond to been heightened. Woori Bank is committed to help- increasingly sophisticated voice phishing scams and ing social enterprises through diverse channels so that to protect the precious assets of our customers. they can improve social cohesion and the quality of people’s lives in Korea. 019 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017020 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 020 Financial highlights Net Income [ Wbn, U$mn in ( ) ] 2015 1,059 (988) 2016 1,261 (1,177) 2017 1,512 (1,411) [ Wbn, U$mn in ( ) ] Interest Income [ Wbn, U$mn in ( ) ] Non Interest Income 5,019 (4,685) 5,221 (4,873) 1,252 (1,169) 4,762 (4,445) 4,493 (4,194) + 4.0% + 5.4% + 6.0% 2014 2015 2016 2017 706(659) 867(809) + 44.4% 461(430) + 53.1% 2014 + 22.8% 2015 2016 2017 * Consolidated Basis, Based on exchange rate of KRW1,071.4/USD as of Dec. 29 2017 Net Income(Continuing Operations) attributable to owners Assets [ Wtn, U$bn in ( ) ] Loan in Local Currency total Assets 7 1 0 2 6 1 0 2 5 1 0 2 4 1 0 2 (187) 200 (178) 191 (272) 185 (156) 167 (332) 356 (320) 343 (297) 318 7 1 0 2 6 1 0 2 5 1 0 2 4 1 0 2 * Consolidated Basis, Total Assets include Trust Account Based on exchange rate of KRW1,071.4/USD as of Dec. 29 2017 (272) 297 Funding [ Wtn, U$bn in ( ) ] deposit total Funding (219) 235 (206) 221 (195) 209 (176) 189 (276) 296 (271) 290 (255) 273 (235) 252 WOORI BANKANNUAL REPORT 2017021 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 021 [ Unit : % ] Dividend [ Unit : % ] Profitability (ROA & ROE) ROA ROE 5.69 7.42 6.36 3.55 0.37 0.41 0.48 2014 2015 2015 2016 2016 2017 2017 0.21 2014 * Consolidated basis * 2014: excluding one-off factors related to the sale and the spin-off subsidiaries [ Unit : % ] Asset Quality (NPL Ratio) NPL Ratio (Bank) NPL Ratio (excl. 4 shipbuilders*) 2.10 1.62 1.47 1.24 2014 2015 0.98 0.91 2016 0.83 0.80 2017 * 4 Shipbuilders : Sungdong, SPP, Daesun, STX Credit Cost Ratio [ Unit : % ] 2016 2017 400 600 * 2017 : including the interim dividend 21.35 26.71 (KRW) Dividend per Share (%) Payout Ratio 100(KRW) [ Unit : % ] Capital Adequacy BIS Ratio Tier1 Ratio CET1 Ratio 13.66 10.43 8.47 2015 15.29 12.68 10.50 15.40 13.03 10.95 2016 2017 [ Unit : % ] Credit-to-Income-Ratio Cost-to-Income Ratio Cost-to-Income Ratio(excluding ERP Expense) 0.52 0.45 0.37 0.34 2014 2015 2016 2017 57.6 53.9 2015 59.1 56.1 2016 54.6 2017 49.9 * Consolidated basis Credit Cost Ratio = Credit cost/average Total Credit balance * Cost-to-income ratio = SG&A expense / (Interest Income + Non-Interest Income) WOORI BANKANNUAL REPORT 2017 01 BuSineSS OpeRATiOnS With the 4th industrial revolution underway, the market conditions are changing and evolving rapidly. Woori Bank will lead this new era, turning challenges into opportunities, diversifying our bases for revenue, and achieving stable growth. As we take our business to the next level based on the trust of our customers and shareholders, we will make sure to repay their trust with bigger profits and enhanced levels of satisfaction. Reliable Financial Services through Balanced Growth No. of foreign Customers [unit : thousand people] 1,032 Branches 876 No. of SOHO & SME Clients [unit : million] 1.48 Total Customers of Retail Banking [unit : million people] 22.56 Loans in Local Currency Deposits Note) Consolidated Basis +3.3% 185 191 % +4.7 200 2015 2016 2017 [unit : krW trillion] +5.7% 209 221 % +6.2 235 Leaping Forward to Become a Leading Global Asset Management Bank WM Distribution Channels PB&FA Bancassurance Sales/Income Managing WM distribution channels nationwide Delivering comprehensive asset management and consulting services. Enhancing Our position as the leading bancassurance provider 707 721 No.1 Growing Our Financial Services through a Global Network With its 301 customer contact points internationally—the largest global network among Korean banks—Woori Bank is making its globalization push the core compe- tency in its drive to become a leading global financial institution Head Office Woori Global Total Networks Overseas Branches 301 Representative Office 19 Overseas Subsidiaries (278 Contact Points) 4 10 in the Expansion of Fintech (in 7 Countries) No.1 Net Profit of Global Business [unit:USD million] 143 Leading the 4th Industrial Revolution Digital Financial Platform Big Data + AI + Block-chain Feb. Mar. May Sep. Oct. 2017 WiBee Talk Real-time translation service in 16+ languages SORi AI banking service with voice recognition function Woori Robo-alpha AI-based financial adviser, providing financial consultation to customers Wibee Bot Pepper Chatbot service First humanoid robot used in financial services 024 retail Banking 037 global Business 026 Wealth Management 040 international trade Business 028 trust & pension Business 042 Financial Market Business 030 Corporate Banking 044 investment Banking 032 SMe Banking 045 digital Banking 034 institutional Banking 046 risk Management 036 real estate Finance 024 Retail Banking The Retail Banking Business Group oversees marketing strategies for retail consumers, new market penetration, retail marketing organization management, and strategy-building for marketing channels for university and hospital clients. In our constant effort to develop new markets and manage customer relationships at the highest level, our prime concern remains providing customized financial products and services to our clients. 024024 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner In 2017, the number of Woori Bank retail customers is approximately 22.6 mil- 2017 Performance lion, a number that drives us to do our best in developing innovative and differ- entiated products. Woori Bank has implemented projects to ensure a broader retail customer base including the Baby Project, the School Project, and the Teens Future Dream Project, presenting diverse financial products and services by life stage: products designed for infants, students, employees, homemakers and senior citizens presented using targeted marketing by customer segment. In addition to the launch of life-stage branded products, we aim to secure more customers who use Woori Bank as their primary bank. This is why we have con- cluded new prime power loan (PPL) agreements for the employees of businesses with prime credit ratings and also handled loans related to employee stock own- ership plans (ESOP) for companies going public with initial public offerings (IPO). We have measures in place to enable customers to handle banking transac- tions without the constraints of time or place: the Tablet Branch as a tool for out-bounding banking services to reach out to customers, and the WiBee Smart Branch allows automated WiBee Smart Kiosks to handle transactions. All of these services are part of our commitment to put customer satisfaction first. new product Lineup by Life Stage Brand Strategy, Aiming to Attract new Customers and Make Woori the primary Banking partner for existing Customers In 2017, we launched new products and renovated our existing product line up under our life-stage brand strategy so that we can attract new customers and encourage existing customers to make Woori Bank their primary banking partner. Our products are designed for target groups such as teenagers, college stu- dents, employees, and senior citizens at retirement age. All our products are tai- lored to match the generational needs and benefits preferred by each group. The WiBee Friends Account and the School Card linked to it are offered to the bank’s younger customers. As School Card usage increases, customers will be eligible for account fee exemptions. If they refer a friend or buy a group prod- uct, they will also be eligible for special interest rates. College students who are interested in employment, credentials, and language learning may open a WiBee Honey Youth Account and receive additional services as they earn certi- fications, go to the movies, and travel. They can also enjoy free-of-charge trans- fers when they pay their credit card or mobile phone bills. The WiBee Super Primary Account is designed chiefly for full-time employees. When customers use it as a primary account to transfer their salary, pension, utility and credit card bills, transfer charges are waived (for all transfers to other Woori Bank accounts; up to five transfers per month to accounts at other banks). We also launched products for seniors who want to enjoy life after retirement. In partnership with a Korean travel agency, Mode Tour, we released an installment deposit product with high interest rates. The Woori Well-Rich 100 Plus Package is a product that offers healthcare, spa, and other services when customers receive pension benefits from any one of the four public Korean pension schemes. We worked in collaboration with businesses from other industries such as G Market, Auction, and Samsung Digital Plaza, as we take diverse customer needs into account and offer useful financial services for everyday life. Branch-in-Branch for Comprehensive Financial Services To satisfy changing customer needs, Woori Bank concluded a partnership agreement in March 2015 with Samsung Securities, Korea’s number one secu- WOORI BANKANNUAL REPORT 2017025025 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner Total Customers of [Unit : 1,000 people] Retail Banking 2016 21,973 2017 % +2.7 22,561 Total Loans of [Unit : KRW trillion] Retail Banking 2016 105.0 % 2017 +3.8 109.0 [Unit : KRW trillion] Total Deposits of Retail Banking 2016 2017 % 88.5 +0.6 88.0 % 96.8 +3.2 93.8 Deposits in KRW (existing) Deposits in KRW (including trust) 025 rities firm and started branch-in-branch (BIB) operations. As of 2017, the bank runs a total of seven BIB outlets. The BIB is not just a financial transaction window; it plays the role of a sales and services channel, which provides Woori Bank customers with additional con- sulting and sales capabilities. In 2018, we plan to develop products in partner- ship with Samsung Securities and establish more BIB operations to start mar- keting activities for high net worth customers and sustain the synergy between our banking and securities businesses. Optimized and efficient Distribution Channel networks Responding to the changing financial environment, Woori Bank quickly entered into areas with new growth potential and established branches in newly devel- oped or major commercial zones. The bank also merged or relocated branches suffering from low profitability, those with overlapping geographical cover- age, and strategically weak locations. While six new branches opened, 24 were merged, and 16 were relocated; as of the end of 2017, a total of 876 branches are in operation. Establishing an effective branch network improved our profitability. To boost competitiveness in our sales organization through a highly effective channel, the bank operates Exclusive Branches for Retail Banking. This special- ized retail distribution channel strengthened our sales competencies in indi- vidual retail business. With this move, we also built a distribution system under which financial centers can concentrate on corporate business, and exclusive branches can focus on retail. We also wanted to reinforce the efficiency of workforce management and improve the skills of all our employees. To that end, we reorganized our existing windows, from the system of four basic windows to a two-team system com- posed of a Deposit Team and a Total Consulting Team. The integration of teams added efficiency to our human resources, and after this reorganization, we have been able to use some of our people to take charge of outbound operations, ultimately bolstering customer management and acquisition. We now have a new kind of branch called the WiBee Smart Branch that makes use of the WiBee Smart Kiosk, our new non-face-to-face digital channel. This branch allows customers to handle banking transactions outside of business hours, subscribe to savings or deposit products, handle a variety of registration forms, pay utility bills, and use ATM functions. In 2018, the Retail Banking Business Group plans to carry out a project to expand 2018 Plans the scope of its target customers so that we can broaden our customer base amid a slow-growth market and cut-throat sales environment. We will liaise with govern- ment subsidy projects and partner with industries that are a part of everyday life. Furthermore, we plan to launch marketing strategies targeted to appeal to custom- ers in their 50s and 60s, in the face of very low birth rates and a quickly aging pop- ulation. To make the plan more effective, we will extend our loyalty programs for pension recipients and launch exclusive packages for customers in this age group. While we aim to optimize branches based on the scale of local financial assets, characteristics and customer base, we also plan to set up financial service chan- nels in places where our customers require greater accessibility. For instance, there are regions where financial services are few and far between as well as new housing development project zones. By assigning our channels efficiently to such locations, we will stand by our customers and fulfill our role as a respon- sible banking institution. WOORI BANKANNUAL REPORT 2017 026026 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 026 Wealth management The Wealth Management (WM) Group oversees private banking (PB) services, focusing on high-net-worth (HNW) customers and the bank-wide asset management business. The WM Group consists of 11 teams under three departments (the WM Strategy Department, WM Business Department, and WM Advisory Center). As of the end of 2017, the WM Group manages a total of 707 WM distribution channels nationwide. 721 private bankers, financial advisors (FAs), and sales professionals deliver comprehensive asset management and consulting services to around 179,000 HNW customers. Our specialists work together through an independent PB brand called Two Chairs as they offer best-in-class services. WM Group WM Strategy department WM Business department WM Advisory Center WM Affairs Team Fund Business Team Future Planning Team Bancassurance Business Team WM Platform Team Investment Strategy Team Investment Product Development Team ISA Trading Team Asset Management Consulting Center Tax Consulting Center Real Estate Investment Support Center 2017 Performance Outstanding performance in Affiliate products: Funds and Bancassurance In 2017, Woori Bank achieved growth in volume, ranking first in market share measured by net fund value increase and number one in bancassurance sales/ income. Total fund value went up by KRW 1.7 trillion, showing the strongest upturn among all competitors. As we held seminars for large companies and institutional customers and released tailored products by customer segment, private equity fund assets amounted to KRW 6.7 trillion in total. In the bancas- surance sector, Woori Bank accounted for 32.9 percent of the total market share, thus defending its undisputable number one status and enhancing its position as the leading bancassurance provider. Achieving the Highest Yield in Discretionary individual Savings Accounts (iSA) in the Banking Sector; Yield-Oriented Sales for Customers ISA is a leading wealth accumulation scheme in which Woori Bank has shown remarkable performance. We launched a discretionary ISA scheme in April 2016 and maintained the top position among all Korean commercial banks in terms of nine-month cumulative yield (as of the end of 2017). While the market condi- tions were rather unfavorable as other competitors collaborate with an affiliate securities firm under the same holdings company, Woori Bank showcased excel- lent asset management capabilities. We also hosted an in-house Fund Returns Challenge to create a sales environ- ment where our employees can take the initiative in developing good products and consider customer profits a priority. We also added a portfolio evaluation criterion to the fund returns index for customers and focused on generating sta- ble profits through asset allocation. Launch of Ai-Based Robot Advisor, Woori Robo-Alpha In May 2017, Woori Bank officially launched a robot advisor program called Woori Robo-Alpha. The Woori Robo-Alpha employs artificial intelligence (AI) to suggest the best asset allocation portfolio based on customer information and tendencies. Every three to four months, it reevaluates the portfolio and decides whether or not rebalancing is necessary. The decision is sent out to customers either by the bank’s in-house WiBee Talk messenger or via text messenger ser- vices. The minimum subscription amount is set at KRW 100,000 so that anyone take advantage of wealth management at an affordable price. The new program is playing a big part in boosting our non-face-to-face digital channel growth. Sales Cooperation Between SMe RM and pB/FA Woori Bank has established a system of cooperation between small and medium enterprise (SME) relationship managers (RMs) and PBs The system is mainly about how to provide asset consulting to SMEs with loans from the bank, and how to induce PB customers with loans at other banks to switch to Woori Bank. We motivated our employees by including cooperation as a criterion in performance appraisals as well as by offering joint awards/ rewards. Their efforts have turned many SME CEOs into Woori Bank customers, who in turn played a huge role in increasing the number of PB customers. Thanks to such enthusiastic sales efforts and management of designated human resources, the number of PB customers (those who have more than KRW 100,000,000 in deposits) has gone up by approximately 13,000 in 2017. WOORI BANKANNUAL REPORT 2017027027 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner Total Number of [Unit : 1,000 trillion] WM Customers 2016 166.1 2017 +13.1 179.2 Total Deposits of Wealth [Unit : KRW trillion] Management Banking 2016 47.6 2017 +5.7 53.3 [Unit : KRW trillion] Fund Sales Balance FY16 FY17 % +8.2 15,439 16,701 % +14.5 79 69 Fund Sales Balance Fund Sales Fee Revenue 027 WAMu: Woori Asset Management university: The First in-house Training institute in the Korean Banking Sector to Foster experts Woori Bank has taken the initiative in recruiting and fostering asset manage- ment specialists. The Woori Asset Management University (WAMU), the first in-house asset management training institute in the Korean banking sector, offers a diverse asset management curriculum that covers everything from basic theories to intensive coursework. In 2017, we recruited 300 next-generation PBs and FAs. Having been trained through WAMU programs to become field specialists as early as possible, they were soon assigned to branches. WAMU also conducted customized training for 645 existing PBs and FAs according to individual skill level. This is an example of how Woori Bank is using its differentiated training system and fostering asset management experts. Our 2018 vision is “Growth Based on Four Foundations; Leaping Forward to 2018 Plans Become a Leading Asset Management Bank.” Our four foundations are sustain- able growth, customers, profit, and digital/caring finance, based on which we will carry out customer-centric sales. First, we will build up our competencies focusing on channels and people so that we can offer quality asset management services to customers. New exclu- sive asset management branches will open to provide differentiated services. At the same time, we will implement various asset management training pro- grams to foster professional PBs, increase our PB pool, and establish a career development program (CDP). We also offer an entirely new Master PB program. Master PBs are the bank’s most competent employees who have demonstrated the best possible performance in each field. They will be encouraged to transfer their individual sales skills and know-how to boost the asset management com- petencies of all our employees. Second, our goal is to pass the 200,000 mark in the number of registered PB cus- tomers and acquire 50,000 pension recipients from any of Korea’s four public pen- sion schemes as customers. We will also launch special services and exclusive products targeting SME CEOs, the families of our existing PB customers, and cus- tomers in their 50s and 60s. Since Woori Bank is the primary banking partner of the National Pension Service of Korea, we will pursue a partnership in order to add more pension recipients to our clientele pool. We will strive to increase the number of PB customers through retirement planning seminars and consulting services. Third, we aim at quality growth in the partnership business, bolstering growth in both volume and profitability. We have raised our profit goal by more than KRW10 billion since 2017, and we will work with SMEs, global groups, and IB groups to achieve this goal. Not only in bancassurance but also in the fund busi- ness, our sales have a very strong profitability focus, and we will rank first in market share in both sectors. We also plan to start a real estate consulting busi- ness to find new sources of profit. Finally, we will expand our non-face-to-face channel and contribute to wealth accumulation and asset management for middle and lower-income customers. The AI-based Woori Robo-Alpha will help all of our customers access and use our asset management system with ease. By integrating the newest digital tech- niques such as scrapping and big data, we will enable customized asset man- agement for everyone on a 1:1 basis. Finally, we will introduce funds that provide for community donations or funds for a cause and lead the ‘inclusive finance’ ini- tiative included as part of the Korean government’s 100 Agenda Project. WOORI BANKANNUAL REPORT 2017 028028 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 028 Trust & Pension Business The Trust and Pension Business Group is leading the market with successful business models that continually meets customer asset management needs, keeping up with a radically changing market environment. As the sales of trust products such as equity-linked trust (ELT) 2017 Performance Trust Department The Trust Department’s goal is to be “No. 1 in Generating Yield for Customers, No. 1 Growth Rate and Creating a Cash Cow,” and has grown with a strategy based on customization. To gain a competitive edge in the fast growing trust business, we have built the “Trust Operation Platform” (a trust asset manage- ment system), which allows our employees to upgrade their professional com- petencies in asset management and investment portfolio planning. As a result, we have promoted ELT, and ETF as core trust products. To expand our business in the future, we have developed customer-focused investment strategies by launching new products with timely market insight, and building up our product line-up. With ELT, our sales result in 2017 reached KRW 8,569 bil- lion, or 286% of our annual target. We then developed new products and diver- sified underlying assets across diverse portfolios so that we can manage assets according to market conditions and individual customer needs. and the exchange-traded fund (ETF) grow, Retirement pension Business Department the Trust and Pension Business Group plays a Since retirement pension schemes were introduced to the market, Woori Bank leading role in pushing the bank’s overall non- implemented a customer-centric strategy with a long-term perspective to help interest income upward. customers enjoy a stable retirement and to cope with labor market changes There are experienced investment experts utilizing advanced methods at Woori Bank, based on which we can offer comprehensive consulting services to customers; this is what allows us to offer customized comprehensive financial services in a growing retirement pension market, including retirement planning according to personal investment profiles and efficient corporate retirement pension management. We have a broad range of experience in the custody agent business gained from transactions such as Korea’s rapidly aging society. We publish a monthly ‘Happy Life Retirement Pension Newsletter’ which covers major retirement pension issues, recent trends, asset management information, and everyday life tips. For retirement pension customers who are still employed, we provide information on retirement savings and asset management perfor- mance through the Internet or mobile banking via the Happy Life Retirement Pension Lifetime Account. These services enable our customers to manage the retirement savings in their accounts with ease. We have launched more aggressive marketing campaigns since July 2017 when the eligibility for the Individual Retirement Pension (IRP) was expanded. As a result, our IRP asset value has grown to KRW 1,594 billion as of the end of 2017. Including this increase, our total retirement pension asset value has reached KRW 15,003.5 billion, a KRW 2,012.5 billion increase from the previous year. The with our diverse clientele consisting of 120 number of companies for which we manage retirement pensions is 27,151 as of entities or so, including major institutional the end of 2017. In the unbundled contract with the Korean Workers’ Compensa- clients in Korea’s securities custody services tion and Welfare Services (KWCWS), the KWCWS is in charge of operations, and market as well as asset management companies. Taking advantage of our experience, we will provide custodian asset management services that allow us to take preemptive action in the face of market changes. Woori Bank is in charge of asset management. In 2017, we saw an increase of 6,284 in the number of subscribed companies, with a total of 34,653 subscribers. Custody Agent Department - Successful pension Fund Bidding, Relationship with Lager Asset Managers We have participated in two bids to select a custodian bank for the National Pen- sion Service and the Ministry of Land, Infrastructure and Transport. In both bids, we analyzed the institution’s needs proactively and presented differentiated and customized proposals. In the end, Woori Bank was re-appointed as the cus- todian bank for the two institutions, achieving a sweeping victory in both cases. Our marketing targeted at insurance companies also turned two large insurers into new customers. These achievements ensure we will see a steady increase in our assets in custody. WOORI BANKANNUAL REPORT 2017029029 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 029 [Unit: KRW Trillion] Money in Trust % 14,119 +10.9 15,651 Retirement Pension [Unit: KRW Trillion] Assets 12.99 15.00 % +15.5 2018 Plans Trust Department The 2018 business goal for the Trust & Pension Business Group is to ‘Dominate the Trust & Pension Market.’ This goal means that we intend to become the num- ber one bank in terms of increased trust market share. Accordingly, we plan to differentiate marketing support and continue to improve and further develop our core products. With ELT, our core product, we will generate profits through balanced growth between high-yield products and low-yield products, based on stable structure.. We also plan to promote ETFs as a key asset management product for customers. To achieve our goals, we plan to have asset management functions in place to cope with a variety of fluctuations in the financial market while making our prod- ucts globally relevant. Hence, we will upgrade our trust asset management sys- tem and risk management system. Retirement pension Department As Korea becomes a super-aged society, the importance of the retirement mar- ket is increasingly highlighted in the banking industry. That is why Woori Bank has selected retirement pensions as a core growth business and has decided to carry out active marketing campaigns to secure a stable customer and profit base over the long-term. [Unit: KRW Trillion] Assets under Custody In 2018, the Retirement Pension Department will establish a foundation for growth through distinctive marketing campaigns tailored for each target cus- % tomer group and become a leading retirement pension provider. We will rein- force our product management competence to enhance yield for our custom- 129.54 +11.12 143.94 ers and promote efficiency in distribution channels. We will continue to lead the retirement pension market using our expert human resource pool, training sup- port system, diverse products, professional asset management competencies, and a unique retirement planning service platform. Custody Agent Department - increase in Asset Value by Diversifying Customer Segments Woori Bank has been in charge of the custody agency business for large pub- lic funds. Based on such experience, we will launch marketing campaigns to appeal to institutional customers that need to manage large-volume assets, such as insurance companies and mutual aid associations. We will upgrade our securities custody system and grow our expert human resource pool in order to become a leader in the securities custody market. [Unit: Number of Subscribers] Retirement Pension Trust Sales by Bank [Unit: KRW Billion] ELT Sales Volume (Balance) % % ) +324.2 (+215.7 2017 Trust Fee Revenue Category 2016 2017 Charge(%) Companies 55,640 61,804 11.1% Employees 14.3% * Including the number of subscribers liaised through the KWCWS 1,391,492 1,590,643 2016 2020 (1,390) 8,569 (4,388) 2016 85.9 % +75.2 2017 150.5 Financial Review 2016 2017 WOORI BANKANNUAL REPORT 2017 030030 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 030 Corporate Banking The Corporate Banking Business Group oversees services for corporate customers including some of the biggest Korean corporate groups such as Samsung, LG, and POSCO. As of the end of 2017, Woori Bank has primary banking partnerships with the largest number of corporate clients among all Korean banks. The two major forces driving the Corporate Banking Business Group are our general managers of corporate banking branch and banking center. The general managers of corporate banking branch have driven Woori Bank to become the best in class in Korea, the general managers of corporate banking center have supported the affiliate and partner companies of our corporate customers while taking care of retail banking targeting officers In 2017, the Corporate Banking Business Group maintained its number one market 2017 Performance share in loans as the main creditor, producing results worthy of the title of Korea’s strongest corporate banking service provider. Woori Bank also hosts the Woori Dia- mond Club, a social gathering where the CEOs of our large corporate customers meet. It serves as an effective channel for us to figure out different market needs in advance and strengthen customer relations. As great emphasis is being placed on corporate social responsibility today, we strive to develop products that will help companies survive and prosper together and to build a financial culture through which we can help each other. As of the end of 2017, the Corporate Banking Business Group (including Corporate Finance Centers) is managing a total of KRW 24.5 trillion in assets, with an operating income of KRW 739.9 billion, and an export/import volume of USD 282.4 billion. Strengthening Relationship on a Continual Basis As our corporate customers turn into major global players, their financial needs are changing in a rapid and diverse manner. In 2003, Woori Bank started the Woori Diamond Club as a social gathering for the CEOs of our corporate cus- and employees at associated firms. Thanks tomers. Celebrating its 15th anniversary this year, the club acts as a channel for to these competent managers, the Corporate us to strengthen customer relationships and understand the financial needs of Banking Business Group can satisfy the varying our customers at the right time so that we can respond in advance to the rapidly needs of our corporate clientele. changing environment for financial services. Our corporate customers have grown into Supporting ‘Sangsaeng’ for Large Companies and SMes major global players over the past 119 years, The Korean word ‘sangsaeng’ refers to mutual life-giving symbiosis, as well as and we are very proud to have been their chosen helping and sharing prosperity with each other. As the emphasis on corporate financial service provider. Today, we are doing our best to offer the expertise we have gained over the years to a wider customer base. social responsibility grows, Woori Bank is committed to fulfilling its role as a cor- porate citizen, offering sangsaeng product packages in which we enter into busi- ness agreements with large corporate customers and provide loans with low interest rates to SMEs. In 2008, we launched the Sangsaeng Loan for Partners of Large Companies; as of the end of 2017, we have extended a total of KRW 570.8 billion in loans to 1,402 firms through this product. In 2013, we developed the Woori Sangsaeng Partner Loan, a loan package for settlements, and upgraded the relevant system later in 2015; as of the end of 2017, we offered a total of KRW 815.6 billion in loans to 5,010 companies. Woori Bank has the largest number of big corporate customers in Korea, and this wide client network enables us to manage a system of sangsaeng financing to encourage mutual aid, for exam- ple by reducing financial costs for SMEs. We thus contribute to the co-prosperity and growth of big companies and SMEs using our comprehensive network. WOORI BANKANNUAL REPORT 2017031 Business partnership with Different industries To move beyond the traditional banking sector and develop a new business model, we pursue diverse business partnerships with players from different sec- tors. In 2017, Woori Bank used the WiBee mobile platform to promote joint mar- keting campaigns with companies in diverse fields such as communications, dining, distribution logistics, and leisure. These efforts led to mutually benefi- cial relationships, resulting in increased sales for our partners and prospective opportunities for Woori Bank. Such partnerships are now a new and exceptional source of future profits. The Corporate Banking Business Group’s business goal of ‘2018, the Four Ups for Big- 2018 Plans ger Corporate Banking’ will build stronger growth in corporate banking by establish- ing a new sales culture. The first goal is to ramp up margins. To enhance margins, we will diversify our sources of profit by developing new products and new markets. Our sales will be income-cen- tric, with appropriate interest rates and fees. The second is to ramp up volumes. We will pursue a balanced loan business, increas- ing loans to major, profitable companies and applying suitable risk management strategies. The third is to ramp up partnerships. We will use our network of major corporate clients and promote transactions with their partners, officers and employees, ulti- mately to further expand our all-in margin business strategy. The last is to ramp up innovation. We will continue to seek out partnerships and joint marketing efforts with players from different sectors to generate new and innovative profit sources. Woori Bank is the main creditor bank of 13 of Korea’s largest enterprises (2017) Total number of large enterprises under main creditor bank management: 36 031031 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner Total Assets of Corporate Banking KRW Trillion 24.5 Total Credit Exposure to Main Debtor Groups KRW Billion 25,839 WOORI BANKANNUAL REPORT 2017032032 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 032 Sme Banking The Small and Medium Corporate Banking (SME Banking) Business Group oversees financial services for SME clients. As of the end of 2017, it manages KRW 80.4 trillion in loans and KRW 49.5 trillion in deposits for 1.48 million customers consisting of individual entrepreneurs, SMEs, and high-potential enterprises. To maintain satisfaction levels among SME banking customers, we provide competitive products and various financial and non-financial services. Moreover, we foster and manage SME relationship managers (RMs), SOHO RMs and next-generation SME RMs. These experts in SME financing and We saw an increase of approximately 100,000 individual entrepreneurs, SMEs 2017 Performance and high-potential enterprises amongst our clientele in 2017. Potentially non-performing assets decreased by KRW 2.5 trillion, raising the performing asset rate to 80.2% and drastically improving asset soundness. Our marketing strategy concentrated on the acquisition of strong SMEs and retention. In 2017, we followed up on our 2016 strategic targets such as tech- nology financing, policy financing, and guaranteed loans. Simultaneously, we stressed cross-selling in order to lock in customers and maximize profits. We also implemented various loyalty programs in order to offer better services and increase SME customer satisfaction. Another area of focus for us included train- ing and fostering in-house SME experts. Marketing Activities Targeting High-Yield SMe Clients In 2017, we maintained our focus from the previous year to provide marketing information to help branches appeal to high-yield SME clients such as by pro- viding them with information on targets by product and customer and informa- tion on the corporate partners of large companies. In April 2017, we launched Woori CUBE Loan, which offers special benefits for growing businesses, includ- ing preferential interest rates, fees, and credit lines. Product sales reached KRW 8.1 trillion as of the end of 2017. As the SME Banking Business Group pursued a marketing strategy to promote high-yield assets, the size of loans to high-yield corporate clients rated BBB and above grew by KRW 8.8 trillion by the end of 2017. Concentration on Technology Financing & Reinforcing Growth potential asset management deliver top-notch financial To acquire high-yield assets with a focus on technology financing, we pursued services and content to our clients. marketing that targets companies that utilize advanced technology with a strat- egy of preemptive sales by allowing pre-approved credit lines. The Woori R&D Plus Loan is a new product developed for companies that integrated advanced technology, and this product allowed us to help companies with excellent R&D performance endorsed by the Ministry of Industry, Commerce and Energy. To offer technology financing to more businesses, we improved our tech credit bureau (TCB) system and offered competitive interest rates. These efforts resulted in an increase in both value and the number of borrowers compared to the previous year (as of the end of 2017) by around KRW 3.5 trillion and 3,500 borrowers, respectively. In 2017, we also saw an increase of 100,000 customers and KRW 2.3 trillion in low-cost deposits, which reinforced our profitability and loan growth potential. productive Financing and inclusive Financing in Action To put productive financing in action, we broadened support for companies with advanced technology (such as leaders of the fourth industrial revolution), companies that create jobs, and start-up or venture companies. Our partnership with credit guarantee organizations, local governments, and public institutions continued throughout the year. Also, we strengthened interest rate competi- tiveness through policy financing and provided diverse job training programs to salespeople. Meanwhile, we increased our special contribution to the Korea Credit Guarantee Fund and the Korea Technology Finance Corporation and extended KRW 2.9 trillion in loans for letters of guarantee to new and promising SMEs, companies that create jobs, and other SMEs. Our policy financing went to not only our corporate accounts but also individual entrepreneurs: we offered WOORI BANKANNUAL REPORT 2017033033 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner SME Key Figures People Number of SOHO and SME Clients Increasing in 2017 100,000 KRW Trillion Reduction in Non-performing Assets 2.5 Percent Percentage of Performing Assets 80.2 033 customized policy financing for the latter with special contributions to and con- tracts with the Seoul Credit Guarantee Foundation and other regional credit guarantee foundations. We also worked with Yellow Umbrella Mutual Aid to pro- vide a stable social safety network and enter into contracts to provide inclusive financing for small business owners and social enterprises. Diversified Special products Our new Woori CUBE Loan is a product with special benefits for growing SOHO and SME businesses. The main purpose of this product is to expand loans to individual entrepreneurs, SMEs, and enterprises with high potential. We then remodeled our Woori Franchise Power Account Loan to create a more tailored special product. The Woori R&D Plus Loan is a product released in line with the government policy to support companies with good R&D performance based on highly advanced technological competencies. Another product, the Woori CUBE Account, was released together with bundled products, and we expect it to bolster our sales competitiveness in the form of partnership marketing with a range of associations and organizations. Our diverse product line-up provided us with a good foundation for balanced asset growth between corporate and individual businesses. Retaining Customers & Offering Top notch Consulting Services Amid the fierce competition among all banks, Woori Bank maintains customer loyalty programs and supportive consulting services to meet the varying needs of customers with a competitive leadership stance in the corporate consulting area. Our loyalty programs offer benefits for member companies and long-term customers, including support for family events (weddings, funerals, etc.) and staff training. With these programs, Woori Bank is doing its best to fulfill its duty as a true financial partner. The corporate consulting services offered by Woori Bank are the ultimate cul- mination of experience and expertise gained in the Korean banking sector. We have assorted programs for companies that do business with us, covering man- agement consulting, CFO consulting, family business succession consulting, operations consulting, tax consulting, and many more. In 2017 alone, we com- pleted a total of 110 consulting projects, demonstrating our competitive edge in this area. In 2018, the SME Banking Business Group plans to conduct marketing campaigns 2018 Plans to increase its proportion of high-yield assets. The basis of this plan is produc- tive financing, with a focus on manufacturers utilizing advanced technology and companies in new growth industries. Most importantly, we will broaden the special benefits provided to clients according to financial assets and industry so that we can acquire new corporate accounts and clients in the start-up/ven- ture sector. We will launch new special products make inclusive financing a pri- ority, allowing customers and the bank to live and prosper together in the spirit of sangsaeng. We plan to acquire additional high-yield customers and improve the skills of our sales professionals, thus intensively expanding our foundation for profit generation by providing comprehensive financial services. Finally, we will take preemptive measures to manage potentially non-performing assets and become the number one trusted bank in the SME banking sector. WOORI BANKANNUAL REPORT 2017034 Institutional Banking The Institutional Banking Business Group consists of three departments. The Institutional Banking Product & Marketing Department caters to the needs of the central government, local governments, and public institutions. The Public Fund Sales Department manages the municipal and provincial treasuries of local governments and the courts. Finally, the newly established National Pension Department will take over and carry out business related to Korea’s largest public pension, since Woori Bank was selected as the primary bank for the National Pension Service (NPS) that manages the world’s third-largest pension scheme. The Institutional Banking Business Group is the first in the Korean banking sector to establish an institutional banking specialist pool (institutional customer RMs), providing first-class financial services to institutional customers. As of 2017, our institutional customers include the Seoul Metropolitan The Institutional Banking Business Group has a strong foundation built on Woori 2017 Performance Bank’s expertise gained from 102 years of managing the Seoul Metropolitan Government’s treasury. Based on such management know-how, we are broad- ening our transactions with government institutions, local governments, and major public agencies. Wherever our client institutions may be, we have reached out to the local community through various corporate social responsibility pro- grams and established Woori Bank as a financial institution that stands by local communities. In 2017, Woori Bank was selected as the primary banking partner by the National Pension Service, the world’s third largest pension fund in size, and will be man- aging a total of KRW 600 trillion of funds for three years starting in March 2018. In 2017, Woori Bank acted as the primary bank for 105 public institutions out of 330 Korean public institutions designated by the Ministry of Strategy and Finance. As of the end of 2017, the Institutional Banking Business Group is managing a total of KRW 27.5 trillion in deposits and KRW 0.8 trillion in loans as part of its institutional business. In addition, we have built banking relationships with 4,500 institutions. Supporting new Government and public Agency projects In order to effectively support government policy and public projects, we established the System Sales Team within the Institutional Banking Products & Marketing Department to facilitate direct transactions and payment clearing Government, the Ministry of Land, Infrastructure between the buyers and sellers of renewable energy. As a result, Woori Bank is in and Transport, the Korea Land & Housing Corporation, the NPS, the Korea Railroad Corporation, and many more. Our clientele list positions us as the primary bank for the largest number of public institutions in Korea. charge of upgrading the Korea Power Exchange (KPX)’s REC Trading System and is serving as the KPX’s dedicated settlement bank. We are also the designated bank for managing the Ministry of Trade, Industry and Energy’s R&D funds. In this function, we not only manage and disperse the R&D funds including the opera- tion of a Real-time Cash Management System (RCMS) but also provide compre- hensive financial services for successful R&D firms. In addition, Woori Bank is solely in charge of international contracts and foreign exchange transactions for the Defense Acquisition Program Administration (DAPA), and we offer various financial services when settling the international purchase of goods for DAPA. 034034 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017035035 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 035 Maximizing Synergy with new Business The Institutional Banking Business Group does not only provide direct finan- cial services to institutional customers but also discovers and offers business opportunities to liaise with SMEs and individuals associated with the projects undertaken by diverse institutions. In 2017, Woori Bank was selected as the pri- mary banking partner for the Korea Environmental Preservation Association (KEPA) and had the opportunity to provide financial services to local associa- tions and KEPA member companies. We also worked with the Seoul Metropol- itan Government, the Ministry of Environment, and other parties in our Clean Woori Campaign to promote the use of electric vehicles. In this campaign, we presented financial products specially designed for electric vehicles including loans and a credit card, and had another opportunity to acquire new customers through our efforts. We intend to provide a system for effective cash management for government 2018 Plans and public agencies and develop partnership services related to various bud- get activities so that we can provide upgraded financial services on a different level as a preferred banking partner for institutional customers. Furthermore, as the primary bank for the largest number of institutions in Korea, we will seek to broaden the range of our financial services so that more employees of public agencies can do business with Woori Bank. [Unit : KRW trillion] Total Deposits 2016 24.7 2017 +2.8 27.5 Number of Institutional Customers Institutions 4,500 Major Public Agencies National Pension Service Korea Land & Housing Corporation (LH) Korea Housing Finance Corporation (HF) Ministry of Land, Infrastructure and Transport Defense Acquisition Program Administration Korea Railroad Corporation Korea Electric Power Corporation(KEPCO) Korea Post National Health Insurance Service Korea Creative Content Agency Korea Evaluation Institute of Industrial Technology(KEIT) Korea Institute of Energy Technology Evaluation & Planning Korea Institute of Startup & Entrepreneurship Development Korea Institute for Advancement of Technology Agency for Defense Development WOORI BANKANNUAL REPORT 2017 036036 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 036 Real estate Finance In 2013, for the systematic and professional In 2017, the Real Estate Finance Business Group once again became the undis- 2017 Performance puted leader in NHUF market share. Woori Bank has been the managing cus- todian bank of the NHUF for the past ten years, and a wide range of housing finance product offers showcased the Bank’s distinguished business perfor- mance. Consequently, Woori Bank was selected again as the managing custo- dian bank for the NHUF in January 2018, as the bank in charge of business del- egated by the NHUF for the next five years. We took preemptive steps to cope with market fluctuations caused by government policy changes. We also took the initiative to create demand for domestic housing finance products by devel- oping new markets. increased Customer Base as the Managing Custodian Bank for the nHuF The NHUF business is critical to broadening financing options for the demand- management of real estate financing, Woori side of housing finance, including for low-income individuals and families. As the Bank enlarged the Housing Finance Division into the Real Estate Finance Business Unit, which was later renamed the Real Estate Finance Business Group. The Group also manages the Ministry of Land, Infrastructure and Transport’s National Housing and Urban Fund (NHUF) as the managing custodian (formerly general treasury) bank. Our goal is to satisfy the diverse needs of our customers— hence we provide not only products that build on Woori Bank accounts but also NHUF products available for low-income individuals and families. [Unit : %] Demand-side Housing Subscription Loans 44.7 43.1 40.9 2015 2016 2017 No. 1 Market Share [Unit : %] Housing Subscription Savings Plans 28.0 2015 27.0 2016 26.0 2017 No. 1 Market Share [End of 2017] Real Estate Finance Group Category Results Market share Rank [Unit: KRW billion] Mortgage Loans 83,398.2 26.2% [Unit: No. of subscription] Loans to the Demand-side 302,195 40.9% [Unit: No. of subscription] Housing Subscription Savings Plan 5,447,597 26.0% 2 1 1 managing custodian bank, Woori Bank is in charge of financing and dispersing funds. As of the end of 2017, the bank accounted for a market share of 40.9 per- cent in loans to the demand-side and a market share of 27 percent in housing subscription savings plans. Throughout the year, one million new customers subscribed to the housing subscription savings plan designed to enable them to own a new house in the future. We will work hard to build a solid foundation for this business so that a greater number of customers will be able to utilize NHUF products through Woori Bank. Leading Korea’s Housing Finance Market with a Total Real estate information platform In 2017, the Real Estate Finance Business Group developed products for both face-to-face and non-face-to-face channels and a comprehensive real estate information platform to proactively respond to changes in the financial environ- ment. We also took the initiative in reforming regulations. Woori Bank focuses on developing non-face-to-face real estate finance products for customer con- venience. In January 2018, we launched WiBee Homes, our real estate informa- tion platform that offers property information and loan consulting services. This platform will enable us to continue leading the mobile real estate market. We intend to maintain our number one position in terms of NHUF market share 2018 Plans in 2018, and we will do our best as the managing custodian bank for the NHUF so that customers can enjoy the funds’ benefits with greater ease. We will focus on loan plans for the demand-side, which has shown a recent increase, including the Jeonse (Key Money) Deposits, Monthly Rental Loan Plans and the Beotimmok (Support) Jeonse Deposit Loan Plan. At the same time, we will focus on attract- ing more customers to our housing subscription savings plans. Building on our experiences, expertise, and IT system in financing and managing funds, we will actively support housing welfare projects for low-income individuals and fami- lies and take action to revitalize Korea’s national housing market and help make it more transparent. We will also participate in government measures to support housing funds for consumers with real demand and establish asset portfolios that will ensure balanced asset growth, optimal profitability, and minimum risk. To that end, we will expand mortgage loans by KRW 1.5 trillion in 2018 to serve as a solid rock protecting the assets of Woori Bank customers. 2017 was the year of building a stepping stone to dominate the real estate platform market. 2018 will be the year in which we utilize our diverse and customized services to lead the real estate finance market. WOORI BANKANNUAL REPORT 2017 037037 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner Global Business In 2017, Woori Bank expanded its network focusing on the Southeast Asian region, which has high growth potential and profitability, implemented a sales strategy tailored to local markets, and built a unique financial platform. As a result, Woori became the number one player in the Korean banking sector in terms of global network, net profit growth, and the expansion of fintech services (in seven countries). Based on these results, Woori Bank now proudly represents innovation and growth in the global business sector. The bank’s network increased particularly in such footholds as Indonesia and Vietnam, completing its retail business infrastructure optimized for Southeast Asia. With a new representative office in Poland and regional headquarters in India, we have established the largest global network among all Korean banks, with a total of 301 networks in 25 countries, preparing a foundation for global growth. In addition, based on a localized business strategy in all overseas business units, we have pursued growth both in volume and quality, resulting in a net profit of USD 143 million, a 58.5 percent increase against the previous year. We established a global smart banking platform on a non-face-to-face basis to attract retail customers. We also transcended the borders between sectors and partnered with firms that offer digital wallets, telecommunications, and other services to offer simple settlements, simple overseas remittances, payment gateways and other services. By doing so, we overcame the constraints of the face-to-face channel and created a business model based on digital convergence. 037 2017 Performance expanding Our Overseas network (Channels) Woori Bank started to go global by opening its first overseas branch in Novem- ber 1968 in Tokyo, becoming the first Korean commercial bank to do so. Since this first step, our interest in international markets has never faltered. In 2014, we became the first Korean bank to acquire a foreign bank in Indonesia, sub- sequently launching the Woori-Saudara Bank. In 2016, we became the first for- eign bank in the Philippines to acquire a local bank when we acquired a stake in a local Philippine savings bank, and we are expanding it with our partner, the Vicsal Group, adding synergy to the business. In 2017, Woori Bank pursued a strategy of organic growth in Southeast Asia where growth potential and prof- itability are high and expanded its business coverage in Indonesia, Cambodia, Myanmar, and the Philippines. Woori Bank also opened a representative office in Poland, branches in Gurgaon and Mumbai, and the new Indian regional headquarters. The Bank’s outstand- ing performance reached new heights with 301 overseas networks in 25 coun- tries, forming the largest international network of a Korean bank. In 2018, Woori Bank will establish a new subsidiary in Germany to expand its global network further and bolster business performance in the EU area. We also plan to enter Mexico, a country where many Korean companies are doing business. Strengthening Competitiveness of Overseas products and Cross-sector partnerships (Business implementation) Woori Bank is planning and launching strategic products tailored to each local market, based on financial market trends by country. We also intend to promote product competitiveness for overseas units by using cross-sector strategic part- nerships (MOUs). In 2017, we launched and sold various products exclusively designed for over- seas markets, including bills bought without recourse, global confirmation, and payment guarantees for global mutual aid societies. We pursued strategic part- nerships with China’s An Bang Insurance, Vietnam Post Insurance Corporation, local Indonesian insurers, as well as Korean insurers such as Hanhwa Life and Seoul Guarantee Insurance. These alliances contributed to the growth of our bancassurance business, product development, and the distribution of credit guarantee loans, resulting in positive synergy for all parties. In 2018, we plan to reinforce strategic cooperation not only with Korean institutions but also with local financial and government institutions in the countries where we do busi- ness. Our goal is to become a Korean bank that offers the best global financial services. WOORI BANKANNUAL REPORT 2017038 [Unit : USD million] Net Profit 2016 90 [Unit : %] NPL Ratio 2016 0.92 [Unit : %] Liquidity Ratio 2016 117.3 038038 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 2017 % +58.5 143 %p Improvement -0.16 2017 0.76 2017 %p +3.8 121.1 expanding Business with Overseas Banks (F.i.) Woori Bank is stepping up business partnerships and cooperation with lead- ing global banks and provides support for Korean companies so that they can become established as quickly as possible when they enter overseas markets. By strengthening relationships with global banks, we secure stable credit lines, support financing at international offices, and ultimately ensure financing for promising Korean and local companies in overseas markets. We intend to move a step ahead in terms of compliance control, which is becoming increasingly rigorous all over the world, which is why we are implementing reinforced anti- money laundering checks and customer verification processes with other banks in foreign exchange transactions. Strengthening Global Digital Competitiveness (Digital) Woori Bank is promoting retail banking using the digital banking services com- posed of our Internet banking, mobile banking, and consulting services. In 2017, we extended our digital banking coverage by launching mobile banking ser- vices for overseas branches as well as our subsidiaries in Vietnam and Indone- sia. We also utilized the consulting services in our mobile banking platform to bolster non-face-to-face marketing and sales functions. Our business strategy is based on localization, overcoming the limitations of the face-to-face chan- nel and expanding the foundation for retail finance. Simultaneously, we have entered partnerships with fintech companies in order to provide services cus- tomized for Southeast Asian markets. In Vietnam and Indonesia, we expanded customer contact points through diverse offerings within digital banking, start- ing with pre-paid recharge functions for mobile phones and payment gateway services, as well as account deposits/withdrawals using partner platforms and affiliated businesses. In 2018, the Global Business Group will pursue balanced growth both in volume 2018 Plans and quality based on risk management. First of all, we will rebalance our asset portfolio, focusing on high-yield assets. We will make active use of our IB Desk, introduce G-CMS, broaden the line-up for global products, and reinforce localized business to accelerate qualitative growth. By doing so, we will secure new global growth engines. We will expand cross-sector partnerships with such parties as Seoul Guarantee Insurance and seek more linked business opportunities between Korean and overseas branches, ultimately enhancing profitability and growing our customer base. WOORI BANKANNUAL REPORT 2017 039039 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 039 Global Networks Total Networks Overseas Branches 301 Representative Office 19 Overseas Subsidiaries 4 278 Contact Points 10 Woori Bank’s strategic gateway to going global is in Southeast Asia, namely Indonesia, Vietnam and the Philippines. We will pursue a strategy of organic growth in these markets and secure 500 networks in our global network. We will also build a financial belt in Europe and America by developing new markets in Germany and Mexico. We are preparing to enter these markets in various forms, such as through microcredit and savings banks, based on the extent of develop- ment and needs in the local financial sector. Since many Southeast Asian countries are undergoing a radical digital transfor- mation, we plan to build tablet branches, expand our agent banking business, and introduce a biometrics-based mobile one-time password (OTP) to build up our digital competitiveness. We will foster global loan screening specialists and operate a regional screening center in Asia to manage risk preemptively, and reinforce compliance by refining our anti-money laundering system. In 2018, the Global Business Group will achieve quality growth, secure 500 net- works in our global network, offer digital services to lead the fourth industrial revolution, and manage risks while staying one step ahead. By doing so, we will become a leading bank in all the markets in which we do business, bolster our sales channels both online and offline, and localize our major subsidiaries. Our short-term goal is to become the undisputed number one Korean bank in the countries where we have a presence; our longer-term goal is to grow into a lead- ing Asian and global bank that can compete against other prominent players in the world’s banking sector. New Global Market Development Representative Office in Poland opened as a bridgehead to enter the Eastern European market. (February 2017) In an aggressive move to enter the Indian market, the Gurgaon Branch was opened (January 2017) Woori Bank Russia poland London germany Woori Bank China turkey iran Bahrain Qatar Mumbai dhaka Woori Global Markets Asia tokyo Gurgaon Woori Bank Vietnam dubai india Regional Headquarters Chennai Woori Finance Myanmar Yangon Woori Finance Cambodia hong kong Wealth Development Bank philippines kuala Lumpur Singapore Bank Woori Saudara indonesia new York Woori America Bank Los Angeles Mexico South Africa Sydney Woori Bank Brazil Followed by the Mumbai Branch and the Regional Headquarters. (July 2017). Woori Bank subsidiary opened in Vietnam. (January 2017) A second branch in Brazil opened in Bom Retiro to enhance coverage of the Brazilian retail market. (May 2017) WOORI BANKANNUAL REPORT 2017040040 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 040 International Trade Business In 2017, Woori Bank reported outstanding performance in export/import financ- 2017 Performance ing, FX, and international remittances, clearly overshadowing its competitors by taking advantage of competitive FX products, services, and the superior FX competencies of our employees. We handled USD 339.3 billion in export/import financing, USD 4.1 billion in FX (cash basis), and USD 145.5 billion in international remittances. These results ensured Woori Bank enjoyed the highest FX market share in all areas among major commercial Korean banks. In terms of income, we achieved the highest FX non-interest profits ever, amounting to KRW 323.9 billion or an increase of KRW 2.8 billion compared to 2016. In the new market of banking for foreign nationals, we have acquired over one million customers already, having the largest number of foreign national cus- tomers among all Korean commercial banks, which led to the first year of build- The International Trade Business Group is in ing a sustainable FX business model. charge of establishing the marketing strategy Woori Bank provides rapid money brokerage services by operating the Woori for foreign exchange (FX) services, supporting Clearing System (WCS), which is our FX settlement system with leading domes- branch offices, and developing products across Woori Bank. To offer speedy and efficient support for FX operations, we manage the International Trade Service Center, which is a business process reengineering (BPR) center, and the Global Investment Center, which is responsible for foreign direct investment (FDI), escrow, capital transactions and other services. Recently, we established the Foreign Customer Banking Business Department to serve the 2 tic and international financial institutions as its members. Using our superior settlement infrastructure, we have served as the exclusive FX treasury bank for the NPS, the world’s third-largest pension fund, since 2014. We have also acted as the primary bank in charge of FX transactions for more than 120 public insti- tutions, including Korean central and local governments, the Defense Acquisi- tion Program Administration, and the Public Procurement Service. In April 2016, Woori Bank was selected as the first South Korean bank to offer won currency clearance services in China, handling the clearance and settlement in Korean won, performing the job of a market maker, and eventually establishing our- selves as the global transaction banking leader for the Korean won. The International Trade Business Group’s outstanding business performance in million foreign nationals in Korea, in order to 2017 is the result of implementing a successful business model geared toward reinforce our targeted marketing efforts. FX 4.0, which is about strengthening profitability and synergy according to our The International Trade Business Group has outstanding human resources who specialize in FX as well as expertise gained from doing business with the largest number of major Korean companies and their subsidiaries. Based on our expertise and people, we excel in a wide range of businesses including domestic and international export/import financing, consulting for overseas investment, and retail. By doing what we do, we generate non-interest income for Woori Bank and enhance our bank’s image as a global player. four business goals of enhancing profitability, promoting employee competen- cies, securing product competitiveness, and expanding strategic partnerships. The Group will continue to concentrate on developing new growth engines and improving business infrastructure. Business Aimed at Foreign Customers In 2017, the International Trade Business Group implemented a strategic gate- way channel and foreign customer-friendly marketing to boost business related to foreign nationals. As a result, we attracted 127,000 new foreign customers, a big increase against the 107,000 we gained in 2016. 1. Channel expansion The Foreign Customer Banking Business Department opened Foreign Customer Banking Centers in Ansan and Gimhae to focus on marketing for foreign custom- ers, and the most recent addition was made in Uijeongbu in June 2017. These three centers are specialized branches for foreigners. The Foreign Banking Centers hired foreign staff to make our customers feel more comfortable, and also offer religious and cultural facilities including prayer rooms. We also boosted convenience and banking accessibility for foreign customers, for instance by expanding the operation of Sunday Banking Branches (special branches that open on weekends) in some major residential zones with a large foreign population. 2. Marketing for international Students Studying in Korea through Strategic partnership Woori Bank made agreements with several associations of international stu- dents studying in Korea and related organizations to strengthen our business WOORI BANKANNUAL REPORT 2017041041 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner [Unit: USD billion, 10,000 people, %] Results Of Business Performance [Among the four major Korean banks] 041 competitiveness in terms of foreign customers. Since Chinese and Vietnamese students represent the majority of international students studying in Korea, we entered into a group agreement with their respective student associations. We also partnered with the Korean Immigration Service Foundation that takes care of civil affairs on behalf of the Ministry of Justice and acquired some students as customers through this partnership. By doing so, we reinforced partnerships with organizations that serve foreign nationals in Korea and laid the foundation Category Results Market share for becoming a more foreign-friendly bank. Export financing Import financing Export/Import financing FX (cash) International remittances No. of foreign customers 190.2 149.1 339.3 4.1 145.5 103.2 37.2 35.8 36.6 28.7 24.6 25.0 [Unit : KRW mrillion] (FX) Non-Interest Income expanded Capital Transactions Despite the adverse external conditions in 2017, the International Trade Busi- ness Group relied on the Global Investment Center in charge of capital trans- actions marketing. The Center successfully managed to reinforce the Group’s deal-sourcing channels and strategize channel expansion, resulting in invest- ments of USD 2,987 million, the amount increasing more than 9 percent com- pared to 2016. We also operate 30 FDI Desks and special offices to handle capital transactions. We liaise with major organizations such as law firms, PEFs and free economic zone administrations to strengthen our deal-sourcing channels. In addition to the Jeju and Yeoksam Offices under the Global Investment Center, we plan to 2017 open a strategic gateway office in the Gyeongin (Seoul-Incheon) area in order to 2016 295,835 +28,059 323,894 expand our start-up network of promising foreign investments in the future. The International Trade Business Group will enhance the competencies of the Global Investment Center in charge of capital transactions and consulting ser- vices while expanding its deal-sourcing channels and gateway branches. Our final goal is to secure maximum competitive edge in the capital transactions market. [Unit : USD million] Major Successful FDI Cases Acquisition of cosmetics company C 1,250 Acquisition of IT company S 680 PEF A acquisition of a Korean company 360 PEF Q acquisition of company K 180 Capital for listing of a biotech company T 180 Capital increase for Korean company Q 80 In 2018, the International Trade Business Group will actively use AI, blockchains, 2018 Plans IoT and other new technologies of the fourth industrial revolution to develop products and improve our internal processes. We will also move one step fur- ther to achieve a digital transformation. By doing so, we will attain a dominant position over our competitors in all areas including product and channel com- petitiveness, cost, and risk management, while also enhancing customer sat- isfaction and work efficiency. We will do our best to become a leading FX bank that can keep up with the radically changing environment. Our products, services, and systems will be improved to offer convenient and appropriate products to our customers, and the number of dedicated branches for foreign customers will also be expanded. We will provide the right products in FDI and for our foreign customers, and we will pursue new growth engines. We intend to become a bank that specializes in handling foreign customers. In line with our efforts since 2017, we will strengthen partnerships with organi- zations that serve foreign nationals. We plan to maintain our active support for the financial voucher project for multicultural families. Our goal is to become a trusted and friendly financial partner for foreign customers residing in Korea. We plan to attract more capital transactions by expanding the designated workforce for inbound capital transactions such as FDI as well as reinforc- ing employee training and branch support. We will partner with branches and establish professional consulting services to provide the best solutions for our customers. In 2018, the International Trade Business Group will quickly adapt to the chang- ing environment, provide optimal FX services based on new technologies of the fourth industrial revolution, and continue to do our best to boost customer sat- isfaction. WOORI BANKANNUAL REPORT 2017 042 Financial market Business The Financial Market Business Group consists of the Treasury Department, which manages Woori Bank’s liquidity, the Trading Department, which handles FX trading, marketable securities, and financial derivatives, and the Settlement Support Department, which performs back office duties. Woori Bank is the most competitive of all Korean commercial banks in trading derivatives. We lead the market, handling forwards, swaps and options In charge of major funding and capital management for Woori Bank, the Finan- 2017 Performance cial Market Business Group focused on improving profitability and maintaining stable liquidity through efficient funding and capital management. We contrib- uted to enhancing the Bank’s profitability by maintaining an optimal loan-to deposit ratio (LDR), diversifying Korean won- and foreign currency-denominated financing, and managing our bond portfolio. We also promoted our capital ade- quacy and stability in financing by issuing perpetual foreign currency-denomi- nated contingent convertible bonds (CoCos) in the first half and won-denomi- nated CoCos (TierⅡ) in the second half. Consequently, we complied with the Korean regulatory guidelines on liquidity in 2017 at a level well above the liquidity coverage ratio(LCR) (minimum 90%), the foreign currency LCR (minimum 60%), and the mid- and long-term foreign cur- rency financing ratio (minimum 100%). These results contributed to a 0.49 per- cent increase in the bank-wide BIS ratio. We strengthened our competitiveness in FX and derivatives trading by diversifying trading currencies and managing positions. We also provide equity derivative services that are available through all global trading hours so that our customers can be prepared for risks arising from time zone differences. based on a wide range of underlying assets implementing Optimal Funds Management including interest rates, foreign exchange, equities, and commodities. issuance of Senior Debt and CoCos in Won and Foreign Currencies In 2017, the Financial Market Business Group established proactive financing plans to issue KRW 8.34 trillion in won-denominated senior debt, KRW 0.25 trillion in won-denominated CoCos, and USD 700 million in foreign currency senior debt, and USD 500 million in foreign currency-denominated CoCos, all with competitive interest rates. Most notably, we took preemptive action and expanded the issuing of mid- and long-term won-denominated senior bonds to prepare for interest rate hikes. We successfully issued won- and foreign curren- cy-denominated CoCos, boosting the bank-wide BIS ratio by around 0.49 per- cent and building a stable foundation for business. Successful Response to Tougher LCR Standards in July The Treasury Department decided to take preemptive action to prevent the potential decrease in the LCR due to tougher standards (minimum LCR of 90%) implemented in July 2017. The Department increased retail deposits received from individuals and SMEs that tend to show low run-off rate and issued bank bonds, increasing high-quality liquid assets. As a result, we maintain the LCR at 102.07 and continued to manage liquidity in a stable fashion, at a higher ratio than the regulatory guidelines, even after the standard was strengthened. enhancing Stability with Diversified Financing of Foreign Currency In December 2017, we set up a global certificate of deposit (CD) program that can issue Yankee and Euro CDs at the same time. The new program diversified our platforms for foreign currency financing and included overseas gateway offices as well as our head office as the issuer, assisting in our global business growth. 042042 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017Liquidity [Unit : %] Coverage Ratio Liquidity Coverage Ratio (All currencies including KRW) Liquidity Coverage Ratio (Foreign Currencies) Mar. 2017 Jun. 2017 Sep. 2017 Dec. 2017 043 Complying with Korean Regulatory Guidelines As of December 2017, we have complied with Korean regulatory guidelines by maintaining 101.23% in the LCR, 103.77% in the foreign currency LCR, and 214.35% in the mid- and long-term foreign currency financing ratio. Strengthening Competitiveness in FX and Derivatives Business In 2017, the Financial Market Business Group strengthened its competencies to proactively respond to the volatility of the financial market and strove to build competitiveness through various measures, including creating profits from new sources. FX Dealing 112.57 79.3 In foreign currency dealing, we bolstered our currency forecast capability for both domestic and international markets and realized outstanding trading prof- its by taking anticipatory and proactive action in response to the fluctuations in international financial markets. In 2017, we accounted for a higher portion of market share (8.23% in USD/KRW, 17.01% in CNY/KRW), playing the role of a lead- 121.33 ing market maker in Korea. Derivatives 94.15 102.29 In the derivatives market, we forecast the trend of market variables such as Korean and international financial policies and changes in demand and supply, which helped us manage our positions one step ahead and establish a secure foundation for derivatives trading. We also offer FX/interest rate risk manage- ment consulting and customized 1:1 solutions for SMEs that suffer from a lack of experience and expertise in risk management. 108.79 Securities 101.23 103.77 In securities, we analyzed domestic and international monetary policies and bond markets and efficiently managed bonds and bond-type beneficiary certif- icates, increasing both interest and non-interest income. We also diversified our sources of non-interest income by varying and increasing bond lending transac- tions that receive risk-free charges. In 2018, the Financial Market Business Group plans to steadily manage bank- 2018 Plans wide liquidity based on thorough monitoring of money markets. In trading, we will broaden both our FX and derivatives income by diversifying strategies, such as arbitrage in FX/derivatives and foreign currency/interest rate hedging in trading. The demand for risk hedging is expected to increase with growing global volatility, and we intend to broaden FX/derivatives trading further by offering the right product at the right time for all of our customers. We also have a dedicated sales team of specialists for securities firms, insurers, government agencies and other financial and public institutions. With the work of our dedi- cated team, we will continue to acquire exceptional customers and increase our non-interest income. 043043 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 044044 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 044 Investment Banking 2017 saw us building a stepping stone to expand into quality overseas IB mar- 2017 Performance kets, taking advantage of Woori Bank’s international network and the new IB Desks. At the same time, we steadily increased our income and realized sales-re- lated profits of over KRW 200 billion for the third consecutive year. We used our strong ties with high-performing PEs and companies to consistently secure rights to arrange acquisition finance deals. We also increased high-qual- ity assets by handling large-scale structured finance deals for blue-chip busi- nesses and expanding aircraft financing. In securities investment, we recorded impressive results as we recovered existing investments to realize large profits on dividends and sales. Woori Bank’s Investment Banking (IB) Business Group is in charge of diverse areas of investment, including acquisition finance (M&A), securities investments (securities, mezzanine securities, collective investment securities, foreign currency bonds), corporate finance, In 2018, the IB Business Group will focus on core business areas such as acqui- 2018 Plans sition finance, securities investment, infrastructure finance, and structured finance to achieve growth in quality and volume. To prepare a foundation to generate future profits, we will continue to invest in growing domestic and inter- national PEFs and participate in overseas projects through our global network, overcoming the limitations of the Korean market. Above all, we will do our best aircraft finance, project finance (infrastructure to reinforce asset soundness and effectively . projects, power generation energy projects), and structured finance (asset-backed securities, real estate structured finance). The IB Business Group has the Investment Banking Department and the Project Finance Department under its umbrella to actively implement its business strategies. In M&A, we provide customized acquisition finance through a strong network we have built with sound private equitys (PEs) and leading companies both in and outside Korea. In securities investment, we offer a combination of investments and loans related to various projects in real estate and infrastructure. In October 2006, we opened Woori Global Markets Asia Ltd. in Hong Kong and became Korea’s first financial institution to establish a unit to specialize in overseas IB investment. Since June 2017, we have opened IB Desks in Singapore and Sydney using Woori Bank’s overseas branch network. We are tapping into new opportunities overseas as well as in domestic IB markets. Total Assets of Investment Banking Operations in 2017 [Unit: KRW trillion] Balance Sheet Assets Loans (34%) 3.3 Securities (28%) 2.8 (38 % ) % ) (62 6.1 3.8 Total Assets (100%) Off-balance Sheet Assets Loan Agreements 9.9 Payment Guarantees (4%) (34%) 0.4 3.4 Investment Banking Organization iB Business Group investment Banking department project Finance department Woori global Markets Asia Ltd. (hong kong) IB Control & Management Team Structured Finance Team Business Unit M&A & Global Finance Team Infrastructure Finance Team Business Support Unit Principal Investment Team Power & Energy Team Corporate Finance /Shipping & Aviation Team WOORI BANKANNUAL REPORT 2017Digital Banking The Digital Banking Business Group is in charge of establishing Woori Bank’s digital banking strategy and developing new markets. In order to respond to the exponentially growing smart banking markets ahead of time and dominate them in alliance with ICT companies, we operate a Digital Banking Strategy Department, a Digital Banking Business Department, a Platform Business Department, and an ICT Support Center. As of the end of 2017, 16.55 million Woori Bank customers are using our Internet banking and smart banking services. We provide approximately 6,000 ATMs, utilize cutting- edge technology (including smartphones and the Internet) and networks to quickly identify 045 In 2017, the Digital Banking Business Group developed financial services with 2017 Performance new technologies and reinforced the WiBee Platform to respond to develop- ments associated with the fourth industrial revolution, providing convenient smart banking services for our customers. Financial Services with new Digital Technologies Under the umbrella of the Digital Banking Business Group, we have newly estab- lished the Digital Banking Strategy Department in April 2017 in the face of the fourth industrial revolution. It is continuing to develop new business opportu- nities using new technologies through cross-sector technological partnerships with ICT companies. As a result, we launched the Woori Home IoT Banking services in alliance with Samsung Electronics’ Family Hub and KT’s GiGAGenie. Then there came the pilot launch of Pepper, a humanoid robot with AI capabilities that was rolled out at several branches for the first time in the financial sector. WiBee Talk now has real-time translation services for 16 languages, and we also launched voice translation services that allow both text-to-speech and speech- to-text translations. We also started an AI-based consulting system called WiBee Bot to provide real-time banking consulting services for our customers. The Digital Banking Business Group strives to develop business models using new technologies, build a big data platform, and develop financial services based on blockchain technology. Developing Financial Services for Customer Convenience using Biometrics We introduced SORi, a banking service using voice-recognition technology for the first time in the financial sector, and embedded the function into our smart banking services. We then expanded the application to WiBee Talk, WiBee Bank, and Woori-Samsung Pay Services. We also applied biometric verification ser- customer needs, provide products and services vices using fingerprints and offered a simple face verification login function 045045 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review accordingly, and stand by our customers. using facial recognition technology. By using these biometric technologies, we Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner took the initiative in providing convenient services for customers ahead of our competitors. Offering Omni-Channel Financial Services We expanded omni-channel financial services, including a non-face-to-face smart loan roll-over process, pre-registration of passcodes, a smart business card, and other services to allow the continuation of financial services in both online and offline environments. We also broadened the scope of services avail- able via the online channel including our non-face-to-face identification verifi- cation service, non-face-to-face reservation service, and the issuing of import- ant financial documents via Internet banking. In 2018, the Digital Banking Business Group will present innovative financial 2018 Plans services based on new technologies and be ready for the fourth industrial rev- olution as we implement Open Innovation through partnerships with ICT and platform companies. We will strengthen our life-sharing platform through the real estate platform WiBee Homes and the WiBee Talk Ver. 3.0. We plan to offer convenient financial services by expanding the scope of our online banking ser- vices. These customer-centric banking services and the expansion of platform networks will establish Woori Bank as a leader in smart banking and a leader of the digital banking market in the future. WOORI BANKANNUAL REPORT 2017046 Risk management Risk management is now essential for any financial institution to survive and increase its competitiveness. Woori Bank has gained a great deal of know-how by overcoming a range of crises in the past, based on which it introduced the Risk Adjusted Performance Measurement (RAPM) system in 2002, a first among Korean banks. The bank also successfully implemented the Basel II and the Basel III protocols to establish an advanced risk management system. Keenly recognizing that “risk management is the source of profits,” Woori Bank will continue to reinforce its position as a leading bank through effective risk management in the future. 046046 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 2017 Performance Summary Woori Bank intends to prepare a foundation and become a stronger bank by improving risk management. Aiming to achieve advanced risk management and make Woori Bank more robust, we have succeeded in taking risk management to the next level by improving the relevant systems with cutting-edge technology. We have rebuilt the asset liability management (ALM) system and completed the development of a system for investment bank (IB) asset monitoring. Currently, some of the work in progress includes developing a corporate diagnosis system, improving the loss given default (LGD) estimation system, and improving the credit scoring system for retail loans. In addition, we have continually enhanced the quality of the bank’s assets through optimal portfolio management as well as reinforced global risk management and prevention of potential insolvency. Advanced Risk Management System using State-of-the-Art Technology In 2017, we focused on developing and improving the bank’s risk management system with cutting-edge technology to promote advanced risk management practices. First, we have rebuilt our ALM system in response to reforms related to interest rates and liquidity-related regulations. In system development, we have made sure to integrate the ability to react immediately to potential changes in risk fac- tors by establishing a daily calculation system of major indicators and adding a range of simulation functions. The newly built IB asset monitoring system has linked the front, middle and back offices, enabling highly detailed monitoring of IB assets. We are currently building a corporate diagnosis system (Big-Eye), integrating the latest digital techniques of big data analysis into the bank’s risk management system. This application of such advanced technology is unprecedented in the Korean banking sector. The corporate diagnosis system will provide compre- hensive information on corporate and default pattern analysis, which will, in turn, make it easier to evaluate corporate credit risk and respond to solvency issues at an earlier stage. This corporate diagnosis system is expected to be completed within the first half of 2018 after a pilot test run and the addition of any necessary improvements. In our credit scoring system, we have improved the credit scoring system for retail loans. In the initial phase for this improvement, we reviewed existing cate- gories, checked whether new categories reflect new trends, and analyzed non- face-to-face customer characteristics. This year, we will use the analysis results of this initial preparatory stage and develop an additional credit scoring system for loans with mid-range interest rates and pursue overall improvements to the credit scoring system for retail loans. Lastly, we have improved the LGD estimation system as a stepping stone for improving risk management. improvement to the Asset Management process in 2017 In 2017, gradual economic growth continued domestically. However, since there were expectations about interest rate increases in Korea following the inter- est rate hike in the United States, managing “marginal” firms and household debts became even more important. Accordingly, Woori Bank concentrated on risk management through portfolio rebalancing and prevention of potential loan insolvency. We applied the return on risk weighted assets (RORWA) the- ory in examining loans and allowed preferential treatment for businesses with WOORI BANKANNUAL REPORT 2017047047 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner Prime assets of BBB0* [Unit : KRW trillion] and above %p 71.9 (81.3%) +5.9 62.9 (75.7%) 59.8 (69.5%) 2015 2016 2017 * Standard targets for calculation of BRR 047 a good outlook to ensure the bank’s quality growth in consideration of capital adequacy. We also have done our best in terms of prevention by implementing themed reviews for businesses sensitive to economic conditions and exports, corporate groups that share credit risks, companies with large loans, and other debtors that require intensive risk management. As a result, our loan grade structure improved each year, and high-quality assets accounted for over 80 percent of total loans by the end of 2017. Simultaneously, in global risk management, the bank has actively offered sup- port to strengthen internal risk management competence in overseas branches so that they can back up the bank’s overall strategy to proactively expand its global sales platform. For this purpose, the bank has conducted on-site reviews of the local operations in Vietnam, China and Russia. We have also invited risk management officers from the bank’s Indonesia operation to learn about the bank’s advanced risk management techniques. We have produced and distrib- uted training material for risk management officers in international branches as part of continued efforts to boost understanding of risk management. This year’s goal for the Risk Management Group is to establish a stepping stone 2018 Plans for a new leap forward in risk management, and gradually build an efficient risk management system to achieve this goal. First, we will pursue balanced growth through portfolio improvement. We will maintain capital adequacy and continue focusing on quality asset growth by providing support for decision-making on loans and risk management strate- gies that integrate RORWA. Despite the economic recovery in Korea, we expect different levels of performance in each business area. Hence, we will strive to achieve balanced growth: we will differentiate risk management by using a dif- ferential asset growth strategy in each business area and reinforce the manage- ment of large loans with concentration risks. As the bank’s global business grows in volume, we will also seek quality growth by re-establishing the global risk management system and strengthening risk management capabilities according to the type of local operation. To cope with the expansion of non-banking corporations, especially in Southeast Asia, we will set up a customized risk management system for non-banking operations. As diversification of our overseas operations continues, we plan to enhance our risk management expertise accordingly: we will expand the risk management system for derivative businesses at international branches and reinforce fol- low-up management of assets traded by international branches in liaison with the IB group. To ensure the soundness of assets is improved, we will prevent loans from becoming insolvent to the maximum degree possible: we will conduct a pre-in- spection of marginal companies and those showing symptoms of insolvency, diversify the targets subject to review, and intensively manage businesses sensi- tive to economic conditions and exports. Lastly, we plan to improve the bank’s risk management system in a range of ways. We will upgrade our corporate diagnosis (Big-Eye) system and other man- agement systems based on big-data, develop an credit scoring system for small- loan financing to offer more financial support, proactively respond to regula- tions by improving the LGD estimation system and using the new ALM system, reinforce our expertise in stress testing, draw up a pilot recovery plan to insti- tute a crisis response system, and further strengthen the bank’s crisis response capabilities. WOORI BANKANNUAL REPORT 2017 02 CORpORATe SOCiAL ReSpOnSiBiLiTY Woori Bank strives to fulfill its responsibility as a corporate citizen to create a world in which everyone is happy and a tomorrow in which everyone’s hopes and dreams come true. We will manage our business based on sharing, service, and sangsaeng (thriving together) and become a bank that achieves sustainable growth together with our society. Social Contribution in Action Vision Sharing Love and Building Hopes and Dreams through Finance Mission (3H) Happiness Humanity Hopefulness Implementation Strategy 1 Fulfilling our corporate social responsibility by supporting SMEs and microfinance 2 3 4 Implementing marketing activities for the public interest by reinforcing cooperation with non- profit organizations Strengthening local social contributions through volunteer work with our employees Expanding the Woori Care Fund and further supporting social welfare facilities Woori Smile Microcredit’s Cumula- [unit:krW billion] tive Performance [unit: no. of volunteers] Woori Volunteers 130.8 112.7 95 48,846 48,419 +427 18,833 2015 2016 2017 2008 2016 2017 *annual cumulative basis people +30,013 An increase over the last 10 years % +159 Woori Bank will achieve sustainable growth as a global company through fair and clean management. Woori Bank Code of Ethics 1 We will provide our customers with joy and happiness. 2 3 4 We will offer the best value for our shareholders. We will protect the dreams and the future of our employees. We will fulfill our social responsibility and role as a corporate citizen. 5 We will act based on honesty, integrity, and fairness, and build a sound corporate culture. Business Principles and Philosophy Woori Bank 2017 CSR Awards 2017 Presidential Commendation for Services in Social Enterprise Incubation [Ministry of Employment and Labor] Best Bank in Preventing Voice Phishing Damages, 2017 First Half 11th National Sustainable Management Award [Financial Supervisory Service] [Ministry of Strategy and Finance] 2017 Business Supporting the Employ- ment of Multicultural Families [Seoul Metropolitan Government] 2017 Customer Satisfaction +Awards (Hall of Fame in Banking) [The Korean Economic Daily] Chief Information Security Officer [Korea Forum of Chief Information Officers, the Federation of Korean Information Industries] 050 ethical Management 052 Consumer protection 054 employee Satisfaction 056 Social Contribution Activities 058 Woori Smile Microcredit 050 ethical management To survive in an era of global competition and achieve sustainable development, Woori Bank has the Woori Code of Ethics and the Woori Code of Conduct in place so that employees can refer to these standards and understand the importance of corporate social responsibility and ethical management as they perform their day-to-day responsibilities. We continuously operate various ‘action programs’ to help our officers and employees recognize the importance of ethical management. For Woori Bank, our employees and society as a whole, as well as our customers and shareholders, are important stakeholders. Based on the high level of ethical finance implemented through the Woori Code of Ethics, we will fulfill our social responsibilities for all stakeholders and contribute to the advancement of society. 2017 Performance In 2017, Woori Bank launched various ethics and compliance training programs so that all our employees are able to understand and put the ideals of ethical management into practice. Reinforcing ethics and Compliance Training First, we implement a bimonthly Ethics/Compliance Self-Check Test so that the employees can develop a detailed understanding of the Code of Ethics. Second, on We-Check Day, all officers and employees must participate and participate in a voluntary ‘cyber pledge’ to examine the behav- ioral standards applicable to each job rank. Third, we utilize the ‘Ethics and Compliance at Work’ section on the bank intranet to publish training materials on ethics and internal control online, which our employees can use for their monthly compliance training and in the field. Finally, we post a quarterly Ethics and Compliance Case Study on the intranet as a commentary on the Code of Ethics and other regulations related to internal control. 050050 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017051051 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 2018 Plans 051 Action programs for ethical Management Woori Bank offers many programs to promote ethical management. The first is the Woori Hotline, a channel through excellent practices can be commended and violations of the Code of Ethics by employees can be reported. The Woori Hotline is a channel for receiving complaints from employ- ees, partners, and other stakeholders. This is a program that encourages employees to comply with laws, regulations, and the Code of Ethics. Second, the Ethical Management Support Council serves as a meeting group to spread the idea of ethical management and the practice of compliance. The Council holds meetings twice a year chaired by the Compliance Officer. It discusses various agenda items, including how to uphold the Code of Ethics and how to improve ethical management, and makes necessary decisions in this regard. The Council coordinates the implementation of specific policies related to ethical man- agement such as ‘action programs’ and training. Third, Woori Bank has a Whistleblowing Program in place to report foul play by any of our employ- ees as well as the Clean Contract System to encourage transparent and honorable agreements for all providers and businesses participating in contracts and purchases. The Bank has various mea- sures in place to make our goal of Clean Woori Bank a reality. In 2018, Woori Bank aims to implement preemptive internal control measures and improve our compliance monitoring system in order to eliminate fraud and other incidents. For a culture built on transparent and ethical management, we will prepare a wide variety of training and programs. First, we will make it mandatory for all employees to take an action pledge regarding the Code of Ethics twice a year. This pledge will cover the crucial parts of our Code of Ethics including the pro- hibition on improper solicitation and influence peddling, and it will serve to encourage the spirit of integrity and fairness as part of ethical management. Second, we will offer diverse ethics training for all executives and employees. While continuing existing ethics and compliance training programs, we will also produce online educational pro- grams on ethics and have our employees complete easy-to-understand programs based on dif- ferent case studies. Woori Bank is committed to pursuing sustainable development based on trusted and ethical management in 2018, based on which we will further enhance our position as the leading bank in Korea. Woori Bank Code of ethics 1 2 3 4 5 We will provide our customers with joy and happiness. We will offer the best value for our shareholders. We will protect the dreams and the future of our employees. We will fulfill our social responsibility and role as a corporate citizen. We will act based on honesty, integrity, and fairness, and build a sound corporate culture. Employee Behavior Principle 2017 Performance WOORI BANKANNUAL REPORT 2017052052 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 052 Consumer Protection Woori Bank has made Put Customers First in On-Site Management its bank-wide management principle. Our core values are: customer happiness; future innovation; honesty and trust; and people first. The most important of these is customer happiness. Based on this management philosophy, Woori Bank became the first Korean bank to establish a consumer protection division. We take consumer protection seriously and always put our customers first, thereby strengthening our position as a leader in this field. 2017 Performance The Consumer Protection Center incorporated relevant policy trends and customer voices to enhance complaint prevention and implement related action plans. We do our best to resolve any problems and promote the rights and interests of consumers by identifying unsound prac- tices and constantly improving bank-wide systems. We process any cases of inconvenience or damage suffered by our customers in a speedy and fair manner. We conduct independent research about our complaint handling process in order to make necessary changes. We also implement proactive anti-fraud measures to protect the valuable assets of customers. Continued Decrease in Complaints The Consumer Protection Center implemented various projects to prevent and reduce com- plaints. To come up with customized complaint reduction plans, we organized a team with staff in charge of consumer protection from each regional headquarters and provided them with sup- port to implement autonomous complaint prevention plans. Before the development and launch of a product, we have a proactive verification process in place in all relevant departments. As the process allows us to conduct a thorough inspection in advance, we can remove any elements that may result in complaints and ensure that the interests of our cus- tomers are not compromised. As a result, we saw a decrease in customer complaints for the fifth consecutive year, and were rated ‘good’ in eight criteria in the Evaluation of Financial Consumer Protection Practices conducted by the Financial Supervisory Service (FSS) of Korea. WOORI BANKANNUAL REPORT 2017053053 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 053 implementing Customer-Oriented Consumer protection projects To reinforce consumer protection, we continually listen to the opin- ions of our customers on-site and organize contests to gather new ideas related to consumer protection ideas from our branch employ- ees. We use various channels to listen to the voices of customers and 2018 Plans The Consumer Protection Center has two goals for 2018: to concen- trate on our bank-wide competencies and establish a clean con- sumer protection system, and to build a stepping stone towards Woori Bank becoming a new comprehensive financial group. use the results to improve or add to our business processes so that To achieve these goals, we will take preemptive action to reduce complaints of the same kind will not recur in the future. The no. 1 Bank in preventing Financial Crimes We used our various publicity channels to educate customers on the prevention of voice phishing that involves the impersonation of public officials or loan scams. We also offered continuous train- ing and education programs for employees to strengthen bank- wide competencies in responding to fraud. We then launched a new Voice Phishing Direct Report Channel to provide immediate support from the head office to networks. Thanks to these efforts, we were selected by the FSS as the Best Bank in Preventing Voice Phishing Damages in the first half of 2017. The award significantly enhanced Woori Bank’s image as a financial company that is serious about pro- tecting its customers’ assets. Information Security at Woori Bank complaints, based on policies established by the financial author- ities and enhance employee training to further promote the rights and interests of our consumers. As branch offices serve as contact points for our customers, we will reinforce support for complaint prevention on-site. In the event of a product launch, we will thoroughly verify whether there are any product elements that may be disadvantageous to our customers. Finally, we will take the initiative in protecting the valuable assets of customers by upgrading our anti-fraud system in a sophisticated and powerful manner. Woori Bank continually strengthens its information security orga- When we are required to consign customer information for busi- nization and enhances administrative and technical security mea- ness purposes, we disclose the scope of responsibilities and the sures to prevent any leakage of customer information. consignee information on our website. We conduct a regular inspec- Reinforcing the information Security Organization The Head of the Information Security Division bears the responsibili- tion of the handling of information and information protection train- ing. Our management and supervision of consignees are always thorough to ensure that customer information is not lost, stolen, ties of the Chief Information Security Officer (CISO) and Chief Privacy leaked, forged, falsified or damaged. Officer (CPO), managing all the teams in charge of privacy (credit information) protection. We regularly hold Information Security Technical Security Measures Committee meetings, which are chaired by our CISO and attended by 15 department heads of Woori Bank who are in charge of infor- mation security, IT operation and development, customer informa- tion handling and other relevant responsibilities. The Committee discusses agenda items that cover IT security issues, internal control and process improvement for privacy protection, and other matters. We also have an ICT security diagnosis team with information secu- rity experts who serve as white hat hackers. This team analyzes and evaluates vulnerabilities, conducts mock hacking, and conducts an internal security review for newly launched services to ensure their safety and security. Taking Administrative protection Measures To prevent the potential abuse and misuse of private information, we allow only minimal access for employees so that they can only retrieve information required to perform their jobs. We also reinforced internal control for both the head office and branches through regular monitor- ing. In addition, all our employees must attend bank-wide information security training at least twice a year. We also make on-site visits to pro- mote privacy information awareness and prevent security breaches. In July 2017, Woori Bank obtained ISMS (Information Security Man- agement System) designation from the Financial Security Institute under the Ministry of Science, ICT and Future Planning, and we renew our certification every year by passing strict standards. In 2017, Woori Bank applied cutting-edge security technology using a dynamic app tampering prevention and obfuscation system, which was a first among Korean banks. The new technological innovation bolstered the security of our mobile app services against increas- ingly intelligent and sophisticated external cyber violations. 2018 plans The Information Security Division plans to build an integrated informa- tion security management system that can ensure real-time integration, analysis, and action against both internal and external cyber violation threats. The Division will also introduce AI-based detection functionality to strengthen and enhance the Fraud Detection System (FDS). We will also conduct mock hacking drills to enable Woori Bank to be thoroughly ready for any potential cyber-attacks and protect customer information. We will always do our best in managing our systems and reinforcing security so that our customers will find a trustworthy partner in Woori Bank. WOORI BANKANNUAL REPORT 2017054054 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 054 employee Satisfaction Woori Bank believes that a workplace where employees are happy is a necessary foundation to be able to provide the best services to our customers. This led to the setup of the Employee Satisfaction Center in 2007, and since then, the Center has been developing and implementing diverse programs to improve employee satisfaction. We are expanding our programs to improve employee satisfaction because we believe that satisfied employees feel a strong sense of ownership and voluntarily strive to make customers happy. 2017 Performance implementing programs for Greater employee Satisfaction Woori Bank offers original and interesting programs to boost employee satisfaction. In 2017, we offered various programs to help employees meet their cultural needs and build networks. Health for Mind & Body 365 is a program to help our employees take care of their physical and mental health, and another offered program is the Special Lectures on Culture, which encour- ages them to discover and enjoy new hobbies. Among our existing programs, we continue to offer those that have been the most popular among our employees, including the family get- away initiative Oh! Happy Woori and the psychological counseling program to help employees deal with feelings of insecurity or with family issues. Through these efforts, we strive to not only encourage communication and fun but also support our employees in resolving any personal problems. We are doing our best to implement Woori Bank’s core belief, that the happiness of our employees and their families is the core foundation of the bank’s competitiveness. Oh! Happy Woori Oh! Happy Woori is a family getaway program that began in July 2011 based on the idea that happy families are the very source of employee satisfaction. Employees and their families can participate in our seasonal experience programs to spend time with their families and refresh themselves physically and mentally. Last year, the program offered such experiences as Under- standing Constellations, visiting Pocheon Herb Island, Korea Job World, My Mother’s Family, and Korea Job World & a Taekwondo Program at the Kukkiwon. For seasonal trrips, we offered the programs Together for Spring Flowers and Together in Autumn, designed to offer happy expe- WOORI BANKANNUAL REPORT 2017055055 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network 055 riences for our employees and their spouses, reinforcing employee loyalty. Oh! Happy Woori events are held every month with a high participation rate from our employees, and this has become the most preferred and sought after program among all our offers. The program allows our employees an opportunity to have a great time with family and be reminded of how important family is—something that can be easily neglected when people are too focused on work. using the Head Office Auditorium as a Free Wedding Venue Woori Bank rents out the auditorium at its head office building as a wedding venue for employees, free of charge. The location has been praised by our employees for its spaciousness, the ample amount of time allowed for the ceremony, and its refined decorations. The venue features a gorgeous bridal room, a separate room to perform the traditional Korean wedding ceremony known as pyebaek, and a A Day When Woori Meets Culture This is a support program to encourage participation of cultural activities by our employees and their families. Be it musicals, opera, or classical music, the program responds to the cultural interests of our staff and enriches their leisure time. First launched in 2012, the program made a group purchase for performances like the Little Prince (an opera), Wicked, Dream Girls, and 42nd Street (musicals). In 2017, in order to further boost employee satisfaction, we contin- ued to group ticket purchases for musical performances such as The Bodyguard and Rebecca. We thus provided efficient and satis- fying forms of support to allow our employees to return to work with greater energy and in better spirits. improving ‘pC-Off’ policies for Work-Life Balance The Banking industry has characteristically imposed a work environ- newly renovated cafeteria for the wedding banquet. The CEO’s offi- ment that entailed overtime work at night. To improve such condi- cial vehicle is also made available as the wedding getaway car. A total tions, we introduced a work-life balance policy in 2013, which then of 533 newlywed couples walked down the aisle in this auditorium became established as a part of corporate culture at Woori Bank between 2012 and 2015. Its popularity continued in 2016 and 2017, as most offices and branches came to comply with the policy. The with an additional 160 pairs and 180 couples getting married there so-called ‘PC-Off’ deadline is at 19:00 to ensure employees have time in each year respectively. The benefit of this free wedding venue offer for leisure activities and family life. It also increased efficiency and is twofold: it not only helps our employees save on wedding costs focus at work, reducing unnecessary overtime where possible. In the but also boosts the sense of pride our employees feel in Woori Bank. first half of 2017, we introduced flexible work hours, and in the sec- Benefits Offered in 2017 There are cases of employees who struggle psychologically due to family issues. Woori Bank supports struggling employees and their families by making reservations and paying for psychological and legal counseling services so that our staff are able to focus on their work with renewed energy. In addition to external counseling ser- ond half, we improved the existing PC-Off policy for work-life balance by introducing a PC-Shut-Down function. We will take the initiative in realizing work and life balance for all our employees. We will con- tinue our efforts to increase employee satisfaction with constant on-site monitoring, feedback, and consequent improvement. Building a Healthy and Vibrant Work Culture Woori Bank offers annual medical check-ups and blood tests in order chological tests, counseling visits, and lectures at branches. We also to continually and systematically manage the health of our employ- have experience programs to help employees manage stress and ees. If any symptoms should be identified after a check-up, we sup- recover mentally, such as one-day meditation courses, temple stays, port affected employees with our group accident insurance and the Financial Review vices, we have an in-house counselor who offers, upon request, psy- and healing herbal programs. Branch Workshop Support We offer team-building workshops for employees outside the head office through outdoor activities, including zip-line rides, glamp- ing, yacht rides, all-terrain vehicle (ATV) racing, and outdoor sur- Coporate Fact Book vival games. The high employee participation rate proves the pop- Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner ularity of these programs. By taking part in the workshops together, employees create synergy as they get the opportunity to communi- cate with each other freely and hence cooperate better at work after the experience. In 2016, we hosted the Woori Pop Star event, a talent show in which employees could show off their talents and passion. In 2017, we orga- nized the Woori Family Talk! Healing Concert in five cities (Daejon, Changwon, Daegu, Gwangju, Busan) and created an atmosphere of harmony for our employees. The Employee Satisfaction Center thus launched various programs to make our employees happy and boost sales competencies through communication. bank’s medical fee subsidy scheme to create a healthy and active work culture. Meanwhile, our employees and their families are enti- tled to book and use the shared condominiums Woori Bank owns all over the country. We also improved our rest and recreation center operations, extending the business hours and opening on weekends so that employees can use the center anytime. These benefits help our employees build a vibrant work culture. Woori Daycare Center As part of the government’s policy to address the country’s low birth rate and actively support working parents, Woori Bank runs a cor- porate daycare centers in Seoul at Mapo-gu (Happiness Center), Seongdong-gu (Love Center), and Jung-gu (Dodam Center, opened at the Woori Bank head office building in August 2016). In addition to the three existing centers, we opened the fourth center at Bun- dang, Gyeonggi Province (Saesol Center) in March 2018. We will con- tinue to open new daycare centers to promote a corporate culture that encourages raising families and do our best to help working par- ents cope with childcare challenges. Woori Bank would like to ensure that all of our employees are happy and that our happy employees, in turn, will make our customers happy. WOORI BANKANNUAL REPORT 2017056056 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 056 Social Contribution activities Woori Bank has its root in the Daehan Cheonil Bank, a bank founded in 1899 by Emperor Kojong who used the imperial family’s funds to protect the Korean economy. Proud of its roots as a bank built on national capital, Woori Bank has fulfilled its responsibilities to contribute to national development for the past 119 years. Today, as great emphasis is placed on the social roles and responsibilities of finance, we strive to realize our three core values of Humanity, Happiness, and Hopefulness by serving and sharing with local communities. We also implement various corporate social responsibility (CSR) programs including support for small business owners and financing for low-income individuals and families. 2017 Performance Humanity: Humanity in Action with Local Communities Woori[we] Love Sharing program: Woori Bank’s Signature CSR program Since launching the Woori Bank Volunteer Corps in July 2007, we have been engaged in a number of social contribution activities through our nationwide branch network. The Woori [We] Love Sharing Program is our signature CSR program involving welfare facilities that have sisterhood ties with 33 regional business headquarters. Our partners are mainly welfare institutions sup- porting elderly citizens, infants, and the disabled, as well as local children’s centers. Woori Bank employees regularly visit these facilities and do volunteer work. At the end of each year, our support extends not only to the institutions under the Woori Love Sharing program but also to other welfare facilities, supporting people who need help through our year-end CSR Campaign. We share the best CSR practices put in place by offices and branches to make our CSR activities dynamic and spread a heart-warming corporate culture. Do-Touch: A CSR program using a non-Face-to-Face Channel Woori Bank is the first Korean bank to perform CSR activities using a non-face-to-face channel. In this new project that was held between May and August 2017, our customers had the chance to WOORI BANKANNUAL REPORT 2017057057 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 057 visit the Sweet Donations section on the WiBee Talk messenger app, read the descriptions of our partner NGOs, and choose to donate KRW 1,000. Any customer using WiBee Talk could take part in this, and if our customers added their own Honey-Money to the donation, Woori Bank offered a matching grant. The donations were used to support families going through financial crises and the children of low-income families. Woori Bank is dedicated to launching various CSR programs to enable hassle-free donations for all participants. Sharing Daily necessities for the underprivileged Hopefulness: inspiring Hope Through Communication and Mutual prosperity Global CSR Activities Using more than 300 contact points around the globe, Woori Bank conducts a variety of CSR activities and fulfills its social responsi- bilities as a global financial company. In December 2017, our new- est recruits participated in the Campaign to Share Hope with help children who became climate refugees. There are children from underdeveloped countries who have lost their homes due to climate Woori Bank sends practical warm-hearted wishes to marginalized change and natural disasters. We sent these children t-shirts with neighborhoods so that they can enjoy holidays and the winter sea- hand-drawn messages of hope as well as fortified food designed son comfortably. For the Chuseok (Korean Thanksgiving) holidays, to prevent malnutrition. We also funded mangrove planting in Ban- we provided daily necessities for 3,730 elderly citizens in Seoul gladesh, where forests are rapidly being destroyed due to climate through the Seoul Association of Senior Welfare Centers in Mapo-gu. change. Local students and residents worked with us to plant trees, In November 2017, we worked with the Korean Association of Social and it was an opportunity to once again understand the importance Welfare Centers to make kimchi for the winter and distribute it to of forests as a crucial source of oxygen. about 2,300 low-income households. Woori Bank will keep working to build a society where we live together with our neighbors on the periphery. Woori Multicultural Scholarship Foundation: A Reliable partner for Multicultural Families Happiness: pursuing Happiness Through Sharing Woori Care Fund and Woori Children’s Care Fund The Woori Multicultural Scholarship Foundation is a non-profit cor- poration funded by Woori Bank and other affiliates of the Woori Financial Group that was established in 2012. Its diverse projects help multicultural families in Korea to overcome cultural and linguis- Woori Bank strives to create a culture that encourages employees to donate tic differences and comfortably integrate themselves into society. voluntarily to good causes. The Woori Care Fund and the Woori Children’s Care Fund are the result of these efforts, and they allow employees to directly donate a regular amount from their monthly payroll. Since its foundation, a total of 2,910 children from multicultural families and immigrant spouses received around KRW 1.97 billion in scholarships. In 2017, the Foundation aimed to expand Woori’s The Woori Care Fund is used for our Woori Together in Love and Support responsibilities and contribution as a corporate citizen and radically scheme, which develops and funds 120 worthy CSR programs every year. increased the number of beneficiaries and the amount of scholar- The Woori Children’s Care Fund is spent to help CSR activities for chil- ship money compared to the previous year by 36 percent and 250 dren suffering from hunger and other hardships. Woori Bank thus actively percent respectively. In addition to tuition support, the Foundation builds a culture of sharing among our employees. We are committed to implementing sharing programs not as a one-off promotion but as a contribution that has continual as well as immediate effects. We intend to firmly establish a corporate culture based on sharing offered educational programs on various subjects including financial information, culture, and taekwondo. These programs are designed to aid in the healthy upbringing of multicultural children and com- fortable settlement of their families in Korean society. and service, thus fulfilling our responsibilities as a good corporate citizen. The Foundation also hosted Woori Wedding Day, a joint ceremony for ten multicultural couples who could not afford a wedding cere- mony. It also provided subsidies related to furniture purchases for multicultural children so that they can study more efficiently, and subsidized medical costs and cultural activities. The Foundation intends to remain active in enhancing the quality of life and sense of happiness enjoyed by multicultural families. Sponsoring Children The Woori Bank Woori Arts Contest boasts a long history and tradi- tion, having been hosted 22 times so far. Preschool to high school students can participate in this contest while their families can take part in various other programs prepared for the day. The whole event is designed to allow participants to have fun and make great memories together. In addition, the Woori Together Scholarships for Youth are given to local children’s centers twice a year. 164 children received scholar- ships in 2017 through this program. The Special Event for Children from Islands and Remote Areas is a program that invites children to Seoul from rural or fishing villages where social and cultural resources may be relatively scarce. The event offers diverse experience pro- grams including visits to the Gyeongbok Palace and museums. WOORI BANKANNUAL REPORT 2017058058 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 058 Woori Smile microcredit Woori Bank is engaged in microcredit to spearhead efforts in practicing socially responsible banking by supporting financially struggling, socially vulnerable, and underbanked customers. In 2009, Woori Bank led the launch of the Woori Smile Microcredit Bank as a foundation, agreeing with the Woori Financial Group and its affiliates to raise a total of KRW 50 billion in funds over a five-year period, contributing KRW 10 billion a year. The Smile Microcredit Bank appointed well-known people from religious, academic, and social welfare circles as outside directors, ensuring fairness in all processes. Ten branches are working with 22 employees across the nation to support low-income families and individuals. Major performance Milestones by Smile Microcredit Bank Active Implementation of Social Responsibility Finance Woori Bank has been leading socially responsible banking by offering microcredit loans worth KRW 483.5 billion in 2017 for the financially struggling, socially vulnerable, and underbanked people of our society. We support low-to-middle class people with our products. Woori Seed of New Hope 2 is a product designed for low-income individuals with low credit rating scores. Switch Loan is a product that allows low-income individuals struggling with debt on high interest rates to switch to bank loans on lower interest rates. Through the Smile Microcredit Bank business, Woori Bank made a total of 11,151 microcredit loans worth KRW 130.8 billion by the end of 2017. The 2017 business objective was to have “Woori Smile Microcredit Foundation support the financial independence of the people.” We strove to radically increase microcredit performance by actively visiting the field and identifying potential beneficiaries of our projects. As a result, in 2017 we provided a total of 1,813 microcredit loans worth KRW 18.2 billion (cumu- latively 11,151 loans or KRW 130.8 billion since its launch). Our projects are not just about giv- ing out money—they are about helping our beneficiaries realize the dream of financial indepen- dence. That is why we offer on-site consulting and microcredit services, microcredit events at traditional markets, and volunteer work by Smile Volunteer Corps. WOORI BANKANNUAL REPORT 2017059 Key products of Smile Microcredit Bank Loans for Startup Leasing: A small- or micro-business owner who has a business registration can get a loan when renting a premise to start up their business. Loans for Operating Capital: A sole proprietor who has been running a place of business for more than six months is eligible to get this loan to purchase products, raw materials and other items. Loans for Facility improvement: A sole proprietor who has been running a place of business for more than six months is eligible to get this loan to improve business facilities. emergency Loan for Youth and College Students: Youth and college students aged 29 or under (31 in case of men who have completed their mandatory military service) can apply for this emergency loan. Smile Microcredit Making Your Dream of Financial independence Come True We plan to conclude agreements with merchant societies at traditional markets, various associ- ations, and other business-owner related organizations to identify vulnerable small businesses and expand the scope of our support. To broaden the scope of financing for low-income indi- viduals and families, we will further help local governments through their centers for compre- hensive financial support and the centers for employment and welfare. We will also identify and spread good microcredit practices so that beneficiaries can feel confident and realize their dream of independence. By doing so, we will take the initiative in sharing and promoting the true role of microcredit and how it can help people. Woori Bank will enthusiastically continue these microcredit projects to help individuals and families suffering from low credit ratings and low incomes. The ultimate goal is to help them become financially independent and contribute to improving their security and welfare. Woori Smile Microcredit’s Cumulative Performance [Unit:KRW billion] [Unit:cases] 2017 2016 2015 130.8 112.7 2017 2016 2015 95 11,151 9,338 7,560 059059 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017060 03 FinAnCiAL ReVieW 061 Management’s discussion and Analysis 072 independent Auditors’ report 060060 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017061061 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 061 maNaGemeNT’S DISCUSSION aND aNaLySIS 1. Overview In 2017, uncertainty around the world increased. The United States hiked interest rates and took up a hardened protectionist stance in trade, while political controversies over the issue of the Terminal High Altitude Area Defense (THAAD) affected us in multiple ways. Then there was the emergence of the fourth industrial revolution leading to the launch of Internet-only banks as well as the more immediate possibility of the technology sector offering financial services. In other words, the market conditions have been extremely challenging this year. Amid such con- ditions, Woori Bank has enhanced its financial performance over the past three years. As financial soundness indicators including our non-per- forming loans (NPL) ratio and delinquency ratio radically improved each year, asset quality and capital adequacy indicators also demonstrated a strong trend for the better, with the Common Equity Tier 1 ratio reaching 10.95%. This overall improvement enhanced our risk management ability, which allowed us to exhibit outstanding business performance under the low-growth and low-interest-rate environment of the past few years. Continuing our streak of great results from 2016, Woori Bank managed to surpass the previous year’s net income figures in 2017 after only nine months. Key Management Indicators Category Profitability Capital Adequacy Asset Quality 1) Return on Assets (ROA) 1) Return on Equity (ROE) 2) Net Interest Margin (NIM) 1) Total Equity Ratio (BIS Ratio) 1) Common Equity Tier 1Ratio 2) NPL Ratio (Bank) 2) Delinquency Ratio 1) Based on consolidated financial statements 2) Based on separate financial statements th 2017 term) (184 0.48 7.42 1.47 15.40 10.95 0.83 0.34 rd 2016 term) (183 0.41 6.36 1.41 15.29 10.50 0.98 0.46 (Unit: %) nd (182 2015 term) 0.37 5.69 1.41 13.66 8.47 1.47 0.82 In response to more rigorous regulations on household loans, we have pursued a balanced growth of assets involving household, SMEs, and large companies, while we have continuously enhanced non-interest profits by reinforcing asset management competencies to meet customer needs. In October 2017, Woori Bank beat rival banks and was selected as the primary bank for the National Pension Service (NPS). In January 2018, Woori Bank was also re-appointed as the managing custodian bank for the National Housing and Urban Funds (NHUF). Both results show how Woori Bank’s business competencies are recognized and trusted. As growth in the Korean financial market has remained stagnant, many domestic banks are accelerating entry into global markets. As of the end of 2017, Woori Bank has over 300 contact points in its global network, the largest in scale among Korean commercial banks. In an effort to add quality to growth in quantity, the bank is providing more loans in Southeast Asia and establishing new business models in consideration of the characteristics of each region. We are currently reinforcing our global management competencies and building a global risk management system through bank-wide cooperation so that we can efficiently manage our extensive network. Through the development of digital financial technology such as big data, blockchain, and artificial intelligence (AI), it has become an immedi- ate possibility for the technology sector to offer financial services. The emergence of Internet-only banks including K Bank and Kakao Bank is posing a threat to traditional banking business methods. Under these circumstances, Woori Bank is enhancing its financial service environment to be more user-centric, expanding banking product development based on new digital technologies, and making systematic efforts to adapt to the fourth industrial revolution. In line with such efforts, the Digital Banking Business Group and the Digital Strategy Department were estab- lished to develop and implement new digital technology-related businesses. Starting in 2017, Woori Bank plans to extend its digital ecosystem to the global arena and strengthen bank-wide digital competencies by fostering expertise and ensuring systematic management. Since Woori Bank declared an era of ‘bigger banking’ in 2017 to fulfill its social responsibility as a corporate citizen, its efforts to support financ- ing for low-income customers and investment in innovative companies have continued to make its banking efforts inclusive, productive and trustworthy. The bank is also pursuing various measures to expand business portfolios in the non-banking sector and establish a comprehen- sive financial services group. WOORI BANKANNUAL REPORT 2017 062062 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 062 2. Financial position & Business performance Results A. Financial position & Business performance Results (1) Growth Account Total Assets Loans in KRW Corporate loans Household loans Public and other loans * Based on consolidated financial statements th 2017 term) (184 rd 2016 term) (183 Change (amount) Change (percentage) (Unit: KRW billion) 316,295 200,213 89,666 106,814 3,733 310,683 191,309 84,502 102,570 4,237 5,612 8,904 5,164 4,244 (504) 1.8% 4.7% 6.1% 4.1% (11.9%) As of the end of 2017, Woori Bank’s total assets (consolidated basis) stands at KRW 316.3 trillion, a KRW 5.3 trillion (1.8%) increase from the pre- vious year. The increase was mainly due to the year-on-year increase of loans in Korean won by KRW 8.9 trillion (4.7%), the bank’s key assets. Corporate loans increased by KRW 5.2 trillion, and household loans increased by KRW 4.2 trillion, illustrating the portfolio’s balanced growth. In 2018, Woori Bank will keep pursuing a strategy of balanced asset growth in consideration of risk management and profitability. (2) Profitability Account I.Operating profit Net interest income Non-interest income Net fees & commissions income Dividend income Net gain (loss) on available-for-sale (AFS) financial assets Other operating income General and administrative expenses Impairment losses due to credit loss II.Non-operating gain (loss) III. Net income before income tax expense IV.Income tax expense V.Net income (1) Net income attributable to owners (2) Net income attributable to non-controlling interests * Based on consolidated financial statements th 2017 term) (184 (Unit: KRW billion) Change rd 2016 term) (183 2,157 5,221 1,252 1,070 125 193 (136) (3,531) (785) (207) 1,950 419 1,530 1,512 18 1,574 5,020 867 937 185 (1) (254) (3,478) (834) (21) 1,553 276 1,278 1,261 16 583 201 385 133 (60) 194 118 (53) 49 (186) 397 143 252 251 2 In 2017, Woori Bank’s net income reached KRW 1,512.1 billion (consolidated basis, controlling interests), achieving an increase of 19.9 percent or KRW 250.8 billion in annual growth compared to its 2016 net income of KRW 1,261.3 billion. This means an increase of net income of nearly 20 percent for two consecutive years (19.1% in 2016, 19.9% in 2017). The increase resulted largely from 1) a stable increase in both interest and non-interest income; 2) a continued decrease in bad debt expenses by businesses focused on sound assets; 3) appropriate sales and adminis- trative expenses. Net interest income reached KRW 5,221 billion for a four-percent increase over the previous year. Contributing factors included the first base rate increase in six and a half years by the Bank of Korea (in November 2017), market rate increases based on expectations of the former, the positive impact of our low-expense deposit increase (annual 9.9% growth) on NIM, and strong growth in loan focused on SMEs. Thanks to impressive results in asset management products and foreign currency derivatives, our non-interest income showed notable growth, with an increase of KRW 385 billion or a 44 percent increase from the previous year. Income from net fees and commissions, a main form of non-interest income, increased by KRW 133 billion (14.2%) year-on-year. This is largely due to impressive performance from asset management products, including the 82.9 percent year-on-year increase in trusts based on increased ELT sales. Although dividend income decreased by KRW 60 billion, WOORI BANKANNUAL REPORT 2017 063 gains on AFS financial assets increased by KRW 194 billion year-on-year. The increase in foreign currency derivatives and other factors caused other operating income to increase by KRW 118 billion over the previous year. General and administrative expenses including personnel and non-personnel expenses were KRW 3,531 billion or an increase of KRW 53 bil- lion year-on-year. Although Woori Bank implemented a large-scale voluntary early retirement program (ERP, covering a total of 1,012 persons at a cost of KRW 299.6 billion) to improve its mid- and long-term expenses, its impact on general and administrative expenses was a 1.5 per- cent increase over the previous year. If the impact of ERP were excluded, the equivalent figures would show a slight decrease. The general and administrative expenses were adequately managed by reducing the number of branches and enhancing channel efficiency, as well as through efficient human resources management. Impairment losses due to credit loss reached KRW 785 billion in 2017 (KRW 834 billion in 2016 and KRW 967 billion in 2015), a decrease of KRW 49 billion from the previous year. Despite the reserve of a large-scale allowance regarding Kumho Tire Co., Inc. in the fourth quarter of 2017, our bad debt expenses decreased by 5.9 percent over the previous year, thanks to the continued improve- ment of asset quality. Woori Bank has managed bad debt expenses by increasing quality credit assets and through continued monitoring and preemptive control of industries under our watch category, such as shipbuilding, construction and marine transport, as well as through rigor- ous risk management. In 2017, our annual bad debt expenses stood at around 34bp. Non-operating income in 2017 showed a loss of KRW 207 billion. This loss was a result of impairment losses due to the credit loss regarding Kumho Tire and the contribution of issuance costs for an out- standing cashier’s check to the Korea Inclusive Finance Agency under the revised Microfinance Support Act. 2018 is expected to be another year in which the bank operates under a challenging financial environment, with a potential base interest rate increase and intensifying trade wars around the world. Woori Bank plans to maintain a strategy of growth, keeping pace with national eco- nomic growth, and focus on enhancing soundness and capital adequacy by reducing potentially delinquent assets in addition to pursuing growth based on quality assets. Since current economic conditions make it difficult to increase net interest income, we will focus our compe- tencies on non-interest income and endeavor to reduce costs by making human resources and channels more efficient, managing general and administrative expenses on a stable level. (Unit: KRW 100 million, %, %p) (3) Asset Quality Category Non-performing loans (NPL) NPL ratio * NPL coverage ratio Delinquency ratio th 2017 term) (184 rd 2016 term) (183 nd 2015 term) (182 Indicators Change Indicators Change Indicators 18,542 0.83 87.7 0.34 (2,579) (0.15) 3.2 (0.12) 21,121 (9,888) 31,009 0.98 84.5 0.46 (0.49) 14.3 (0.36) 1.47 70.2 0.82 * The amendment of the Detailed Enforcement Rules for the Regulations on Supervision of Banking Business (Schedule 7, as of December 14, 2016) and the Standards for Integrated Management Disclosure for Financial Business (as of January 26, 2017) recognized bad debts reserve as capital, therefore excluding bad debt reserve from the total of allowances. The calculation has been done based on the amended regulations. Before the amendment, the amount including the bad debt reserve would have been 165.0% (2016) and 183.8% (2017). Woori Bank has shown outstanding increases in asset quality each year through preemptive risk management and continued back-door-lock- ing. The NPL ratio has been reduced continually, from 1.47% in 2015 to 0.98% in 2016 and 0.83% in 2017. The NPL coverage ratio is increasing annually, from 70.2% in 2015 to 84.5% in 2016 and 87.7% in 2017. With these results, the bank is thoroughly preparing for any additional losses that it may incur. Corporate loans in 2017 reached KRW 112 trillion with an NPL ratio of 1.40 percent, against the 2016 results of KRW 110 tril- lion and 1.62 percent. Despite the increase in the total loan amount, the NPL ratio decreased due to the inflow of sound businesses and strict portfolio management. Household loans reached KRW 107 trillion in total with an NPL ratio of 0.24 percent, against the 2016 results of KRW 103 trillion and 0.28 percent. The same trend resurfaces: an increase in total loans and a decrease in the NPL ratio (NPL as defined by FSS). The man- agement of asset quality led to a radical reduction in the bank-wide delinquency ratio, from 0.82% in 2015 to 0.46% in 2017 and 0.34% in 2017. Since sufficient allowances have been reserved for debtors of debt restructuring in work-outs and corporate rehabilitation, the likelihood of additional losses in NPL is very low. For these debts, normalization efforts continue while we will consider sales in case normalization is impos- sible. Regarding industries with high risk, such as shipbuilding, construction, marine transportation, steel, and petrochemicals, our exposure continues to decrease each year, and we monitor individual debtors in these industries. The situation is being managed so that we can take pre- emptive action amid the uncertain financial conditions in and outside Korea. 063063 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 064 (4) Capital Adequacy Category Common equity Tier 1 capital Other Tier 1 capital Tier 2 capital Total risk-adjusted capital Risk-weighted assets Common equity Tier 1 ratio Tier 1 capital ratio Total capital ratio th 2017 term) (184 16,075 3,042 3,487 22,603 146,762 10.95% 13.03% 15.40% rd 2016 term) (183 15,715 3,276 3,911 22,901 149,728 10.50% 12.68% 15.29% (Unit: KRW billion) Change +361 (234) (424) (297) (2,966) +0.45%p +0.35%p +0.11%p In 2017, the Common Equity Tier 1 capital of Woori Bank (on a consolidated basis) reached KRW 16,075 billion, an increase of KRW 361 billion or 2.3 percent from the previous year. The Tier 2 capital was KRW 3,042 billion, an increase of KRW 234 billion year-on-year, which resulted from the repayment of hybrid securities issued before the implementation of Basel III. Considering the issuance cost, Woori Bank plans to reduce the scale of its hybrid securities on a continual basis. The Tier 2 capital amounted to KRW 3,487 billion or a decrease of KRW 424 billion year-on-year, affected by such factors as the decrease in recognized subordinated debt issued before the implementation of Basel III and the falling exchange rate over the previous year. As of the end of 2017, the total risk-adjusted capital of Woori Bank reached KRW 22,603 billion, a decrease of KRW 297 billion from the previous year. As of the end of 2017, risk-weighted assets (consolidated basis) amounted to 146,762 billion, a decrease of KRW 2,966 billion from the previous year. This reduction is an outcome of the bank’s proactive efforts to enhance capital adequacy by expanding sound assets and reducing poten- tially delinquent assets. In 2017, Woori Bank achieved a common equity Tier 1 ratio of 10.95 percent, a Tier 1 capital ratio of 13.03 percent, and a total capital ratio of 15.40 percent, which translates into an increase of 0.45%p, 0.35%p, and 0.11%p respectively. Capital adequacy continues to improve, and Woori Bank is committed to maintaining this trend by realizing profits and securing an adequate level of capital. B. new Businesses & Suspended Businesses Woori Bank implemented a new business venture in joining the bid for the banking and currency exchange business license at the new Termi- nal 2 of Incheon International Airport. The number of passengers going through the new terminal annually is expected to top 18 million, which will ensure a boost in publicity and profits from remittances and transfers. In May 2017, the bank’s board of directors decided that Woori Bank would participate in the bidding for the banking/currency exchange business license in the new terminal. In June, the Incheon International Airport Corporation made its selection, and we secured business rights at Terminal 2 until 2023 (with a 185㎡ branch, four currency exchange booths, and four ATMs). The new Woori Bank branch opened for business with the official launch of Terminal 2 on January 18, 2018. C. Business Rationalization (1) Alteration and Reorganization of Business Groups Woori Bank established a cooperative system among its business groups to create synergy, reorganized its organizational structure to rein- force competitiveness in digital banking, and established new exclusive units to acquire future customers and implement bank-wide initiatives to pursue innovation. First, we introduced a ‘business unit’ for cross-business collaboration. To take active action within a changing financial environment, we have regrouped closely related groups and units into domestic, global, and sales support business units for maximum organizational synergy. Second, the Digital Banking Business Group and the Digital Strategy Department have been established to ensure a systematic response to the fourth industrial revolution. They develop and implement businesses related to new digital technologies such as big data and blockchain. The National Pension Department was added as an exclusive unit to ensure the provision of high-quality services as Woori Bank serves as the primary bank for the NPS. Finally, the Management Innovation Department was established to bring innovation to the bank’s organizational culture and change management. 064064 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 065 (2) The Voluntary Early Retirement Program and Other Matters Since 2005, Woori Bank has implemented a Job Change Support Program that serves as our amended and upgraded ERP program. The Job Change Support Program aims to resolve the bottleneck in promotions and improve the bank’s human resource structure while allowing employees to find new opportunities in the second chapter of their lives. In particular, the bank operates a center and various programs for employees who plan to change jobs to provide systematic support for a new life after retirement. As of July 2017, job change support was given to a total of 1,012 employ- ees, offering reemployment opportunities through job sharing and other programs and improving the bank-wide human resource structure. D. Asset impairment Losses Woori Bank recognized impairment losses whenever the book value of AFS securities and securities in equity method decreased by over 30 percent against their acquired values. (Unit: KRW million) Category Item Loss amount Cause of loss AFS securities AFS securities AFS securities AFS securities AFS securities Hyundai Merchant Marine Hyundai Cement STX Heavy Industries Dongbu Steel Oriental Precision & Engineering Securities in equity method Kumho Tire Securities in equity method Chinhung International Securities in equity method Securities in equity method STX Saman Securities in equity method Poonglim Industrial Securities in equity method STX (unlisted) * Based on separate standards of the bank 3. Liquidity, Sources & Applications of Fund A. Liquidity Category 1) Integrated LCR 2) Foreign currency LCR High liquidity assets Net cash outflows Liquidity coverage ratio High liquidity assets Net cash outflows Liquidity coverage ratio The book value of these assets decreased by over 30% against their acquired values. 8,987 6,787 4,289 1,306 1,176 76,720 37,551 7,525 7,267 4,250 635 (Unit: KRW billion, USD million) th 2017 term) (184 40,067 39,581 101.23% 3,193 3,077 103.77% rd 2016 term) (183 39,835 36,344 109.61% - - - nd 2015 term) (182 35,591 33,365 106.67% - - - 1) Consolidated basis. The figures are calculated based on the average balance of December for the 184th term; based on the balance as of the end of December for the 183rd and 182nd terms. 2) Consolidated basis implemented from 2017 (as of 2017, the supervisory standard is 60%; it is expected to increase by 10%p annually, and hence will be 80% or more by 2019). The fig- ures are calculated based on the average balance of December for the 184th term. Woori Bank has managed liquidity in compliance with regulatory standards (80% in 2015, 85% in 2016, 90% in 2017, 95% in 2018, 100% or more in 2019) under the new liquidity index or integrated LCR introduced in 2015. The December 2017 average balance stood at 101.23 percent, over the regulatory standard (90%), with the ratio remaining stable. For foreign currency LCR applied since 2017, Woori Bank secured high liq- uid assets including U.S. Treasury bonds, comfortably meeting the regulatory standards at 103.77 percent in December 2017 (the standards are 60% for 2017, 70% for 2018, and 80% from 2019 onwards). To secure a stable structure of sourcing funds and properly manage a potential asset-liability maturity mismatch, we have analyzed liquidity crisis scenarios and used the results to establish and implement bank-wide liquid- ity risk management plans to control emergency funding, liquidity asset scale, balancing in sources of fund, and other relevant matters. 065065 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 066066 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 066 B. Sources of Fund Item Fund Funds in Deposits, installments KRW Certificates of deposit Borrowings in KRW Call money in KRW Others Subtotal (Unit: KRW million, %) 2017(184 term) th 2016(183 rd term) 2015(182 term) nd Average balance Interest rate % Average balance Interest rate % Average balance Interest rate % 187,332,008 1.26 66.02 183,440,285 1.38 65.35 169,919,620 1.70 64.76 4,500,100 1.66 1.59 3,466,223 1.70 1.23 1,879,832 1.92 0.72 6,213,903 1.32 2.19 6,709,080 1.45 2.39 6,689,135 1.77 2.55 1,254,623 1.23 0.44 1,159,188 1.32 0.41 1,370,253 1.62 0.52 20,168,307 2.29 7.11 18,532,241 2.60 6.60 18,944,493 2.95 7.22 219,468,941 1.37 77.34 213,307,017 1.50 75.98 198,803,334 1.82 75.77 Funds in Deposits in foreign currencies 14,338,927 0.51 5.05 14,838,684 0.47 5.29 11,568,322 0.44 4.41 foreign Borrowings in foreign currencies 7,267,096 1.38 2.56 8,595,575 0.86 3.06 9,245,073 0.53 3.52 currencies Call money in foreign currencies 980,001 1.14 0.35 1,401,294 0.70 0.50 1,199,484 0.53 0.46 Debentures in foreign currencies 3,649,805 3.11 1.29 3,950,614 2.54 1.41 4,851,289 2.72 1.85 Others Subtotal Others Total capital Provisions Others Subtotal 574,786 0.14 0.20 531,877 0.29 0.19 650,409 0.66 0.25 26,810,615 1.12 9.45 29,318,044 0.87 10.44 27,514,577 0.88 10.49 20,134,843 351,750 16,993,430 37,480,023 - - - - 7.10 19,617,484 0.12 412,553 5.99 18,070,427 13.21 38,100,463 - - - - 6.99 18,501,137 0.15 640,666 6.44 16,907,843 13.57 36,049,647 - - - - 7.05 0.24 6.44 13.74 Total 283,759,580 1.16 100.00 280,725,524 1.23 100.00 262,367,557 1.47 100.00 1) Deposits in KRW = Deposits in KRW – Deposit checks & bills in the process of collection – reverse deposits with BOK – inter-bank adjustment funds (call loans) * Deposit checks & bills in the process of collection = total checks and bills in the process of collection – checks & bills on clearing for overdrafts – inter-bank adjustment funds (call money) * Interest for calculating interest rates is the sum of interest on deposits and installment deposits and deposit insurance premiums. 2) Deposits in foreign currencies = Deposits in foreign currencies + off-shore deposits in foreign currencies 3) Borrowings in foreign currencies = Borrowings in foreign currencies + dues to BOK in foreign currencies + off-shore borrowings in foreign currencies 4) Debentures in foreign currencies = Debentures issued in foreign currencies + offshore debentures in foreign currencies 5) Based on K-IFRS financial statements 6) Excluding merchant banking accounts The average fund balance sourced by Woori Bank in 2017 stood at KRW 284 trillion, an increase of KRW 3 trillion over the previous year. The average funds in Korean won were KRW 219 trillion, mainly sourced by deposits from customers for the stable management of the loan-to-de- posit ratio. As a result, deposits increased by KRW 4 trillion over the previous year, mainly in core liquidity deposits. To respond to increasingly rigorous LCR standards, we expanded the issuance of senior debts, and other capital including debentures increased by KRW 2 trillion over the previous year. In order to minimize the impact from the changed formula to calculate the loan-to-deposit ratio, the Bank plans to adjust fund- ing and management portfolios according to market conditions and control profitability and the loan-to-deposit ratio at the same time. The average balance of funds in foreign currencies (converted into KRW) decreased by KRW 2.5 trillion against the previous term due to the fall in the exchange rate. In funding, we have reduced financing from the market (borrowings and debentures) and gradually increased deposits in foreign currencies for stability. Maturity of Major Financial Debts Category 3 months or less 4 to 6 months 7 to 9 months 10 to 12 months 1 to 5 years Over 5 years Total (Unit: KRW million) Financial liabilities at fair value through profit and loss Deposits from customers Borrowings Debentures Other financial liabilities Total 160,057 154,475 - - - - 314,532 143,085,964 28,776,407 17,749,883 29,951,466 6,723,926 644,187 226,931,833 5,339,315 1,570,513 6,531,004 1,700,358 2,069,703 1,488,848 678,054 1,132,055 1,512,183 3,799,707 14,614,016 479,140 13,939,423 2,843,612 23,288,081 - - - - 2,704,197 9,235,201 156,686,853 32,700,943 19,916,785 32,595,704 25,137,649 6,671,136 273,709,070 * Derivative financial liabilities and off-balance accounts (payment guarantees and commitments) are excluded. WOORI BANKANNUAL REPORT 2017 067067 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner C. Applications of Fund Item Applications 2017(184 term) th 2016(183 rd term) 067 (Unit: KRW million, % ) 2015(182 term) nd Average balance Interest rate % Average balance Interest rate % Average balance Interest rate % Funds in Deposits in KRW 3,424,567 1.28 1.21 3,171,599 1.34 1.13 2,580,842 1.72 0.98 KRW Marketable securities in in KRW 35,186,537 1.95 12.40 33,880,119 2.58 12.07 32,994,958 2.79 12.58 Loans in KRW 194,161,817 3.05 68.42 189,079,324 3.10 67.35 176,631,188 3.42 67.32 Advance payments on acceptance and guarantees Call loans in KRW Privately placed bonds Credit card receivables Others 26,639 3.14 0.01 51,254 0.89 0.02 64,533 1.89 0.02 2,275,748 185,092 28 4,235,478 1.33 5.94 - 1.99 0.80 0.07 0.00 1.49 3,581,382 247,292 24 4,580,215 1.41 5.19 - 2.04 1.28 0.09 0.00 1.63 2,083,053 280,702 - 1.64 5.98 - 0.79 0.11 - 4,313,781 2.61 1.64 Allowance for doubtful accounts in KRW (-) (1,284,188) - (0.45) (1,925,177) - (0.69) (2,482,955) - (0.95) Subtotal 238,211,718 2.85 83.95 232,666,033 2.98 82.88 216,466,103 3.31 82.50 Funds in Deposits in foreign currencies 3,791,184 foreign Marketable securities in foreign currencies 2,735,707 currencies Loans in foreign currencies Call loans in foreign currencies Bills bought in foreign currencies Others Allowance for doubtful accounts in foreign currencies (-) Subtotal Others Cash Property, plant and equipment for business Others Subtotal 0.67 1.07 2.51 1.33 1.88 2.50 1.34 0.96 3.80 0.88 2.61 0.02 3,761,286 1,752,884 13,371,873 2,940,858 7,110,164 13,829 0.43 1.13 1.95 0.85 1.53 9.72 1.34 0.62 4.76 1.05 2.53 0.00 2,872,735 1,375,146 14,206,736 2,040,819 6,899,811 17,047 0.28 1.51 1.65 0.59 1.38 6.96 1.09 0.52 5.41 0.78 2.63 0.01 10,790,442 2,506,588 7,417,500 48,472 (332,301) - (0.12) (312,211) - (0.11) (191,224) - (0.07) 28,638,685 1.51 10.20 27,221,069 1.37 10.38 26,957,590 1.85 1,201,343 2,352,466 15,036,463 18,590,272 - - - - 9.50 0.42 1,169,566 0.83 2,325,893 5.30 6.55 15,925,347 19,420,807 - - - - 0.42 0.83 1,116,715 2,328,130 5.67 6.92 15,235,540 18,680,385 - - - - 0.43 0.89 5.81 7.12 Total 283,759,580 2.57 100.00 280,725,524 2.62 100.00 262,367,557 2.87 100.00 1) Deposits in KRW = Deposits in KRW – Reverse deposits with BOK 2) Marketable securities in KRW = Marketable securities in KRW + Loaned securities in KRW * Interest for calculating interest rates = Securities interest (including dividend received) + Evaluation profit (net) + Gain on redemption of securities (net) + Portion excluding the gain from stock transactions (net) out of gains on sales of securities 3) Loans in KRW = Loans in KRW + Checks & bills on clearing for overdrafts * Interest for calculating interest rates = Interest on loans in KRW – Contribution to the Korea Credit Guarantee Fund 4) Deposits in foreign currencies = Deposits in foreign currencies + Offshore deposits in foreign currencies 5) Interest on securities in foreign currencies = Interest on securities in foreign currency + Loaned securities in foreign currencies * Interest for calculating interest rates = Securities interests (including dividend received) + Evaluation profit (net) + Gain on redemption of securities (net) + Portion excluding the gain from stock transactions (net) out of gains on sales of securities 6) Loans in foreign currencies = Loans in foreign currencies + Offshore loans in foreign currencies + Inter-bank loans in foreign currencies + Loans from foreign borrowings + Domestic import issuance bills 7) Cash = Cash – Total checks & bills in the process of collection 8) Property, plant and equipment for business = Property, plant, and equipment for business – Accumulated depreciation 9) Based on K-IFRS financial statements 10) Excluding merchant banking accounts The average fund balance managed by Woori Bank in 2017 stood at KRW 238.2 trillion, an increase of KRW 5.5 trillion over the previous year. This result was due to an increase of loans in Korean won (KRW 5.1 trillion) and marketable securities in Korean won (KRW 1.3 trillion). Out of all loans in Korean won, household loans increased by KRW 6.3 trillion, while corporate loans decreased by KRW 1.2 trillion. Since the Bank of Korea decreased the base rate by 25bp, the interest rates for loans in KRW had decreased, but with the high expectations for the base rate increase in the second half of 2017, the interest rate bounced back, decreasing profits from loans in Korean won by 5bp. Mar- ketable securities in Korean won increased by KRW 1.3 trillion as high liquidity assets such as public and government bonds increased due to toughened regulations by the supervisory authority. The LCD guidelines introduced in 2015 are 85 percent for 2016, 90 percent for 2017, and 95 percent for 2018. Assets in foreign currencies stood at KRW 27.0 trillion, a decrease of KRW 1.6 trillion since the previous year. This was due to the decrease of loans in foreign currencies (KRW 2.6 trillion) and the increase of marketable securities in foreign currencies (KRW 1.0 trillion). Woori Bank will control the applications of funds effectively so that the liquidity guidelines (for loan-to-deposit ratio, LCR, etc.) can be followed properly. WOORI BANKANNUAL REPORT 2017 068 4. Transactions out of Books Category th 2017 term) (184 Payment guarantees Confirmed guarantees Unconfirmed guarantees CP purchase commitments and others Commitments Loan agreements Other agreements 6,875,021 4,526,593 1,458,101 80,760,325 4,546,090 (Unit: KRW million) rd 2016 term) (183 8,270,187 5,101,701 1,389,896 83,795,496 4,840,593 5. Other issues Required for informed investment Decisions A. environmental impact and employees (1) Environmental Impact As a financial service provider, Woori Bank’s banking and trusts businesses do not have an environmentally destructive impact. Therefore, the bank is neither currently paying nor is likely to have to pay any environmental restoration (“remediation”) or damage compensation expenses in the future. It has not been and is not likely to be subject to administrative measures by the government or environmental authorities. Woori Bank, however, has been designated as a company subject to premise control under Paragraph 5, Article 42 of the Framework Act on Low-Car- bon, Green Growth. Accordingly, the Bank has reported to the government its greenhouse gas emissions and energy consumption as below. Category Greenhouse gas emissions (ton CO2) Energy consumption (TJ) 2013 95,574 1,463 2014 93,676 1,421 2015 91,322 1,360 (Unit: KRW million) 2016 88,470 1,315 2017 88,121 1,349 (2) Employees and Other Matters Woori Bank draws up a human resources plan based on changes in the management environment and bank-wide strategic directions. We pre- emptively respond to expected mid- and long-term personnel shifts. While our continued recruitment and CDP control secure experts in cor- porate business, our in-house training of human resources will help us become leaders in the global and fintech businesses. This is how Woori Bank has built up the best human resource pool in the financial sector. Meanwhile, as of the end of 2017, our regular employees consist of busi- ness unit and group heads (25%), managers (29%), and clerks or lower-level employees (46%), maintaining a pyramid HR structure. To build a culture that pursues work-life-balance, we introduced flexible work hours in May 2017, which has helped us boost productivity and efficiency as employees are able to work more flexible hours. B. Derivatives and Risk Management policy (1) Derivatives Woori Bank trades derivatives mainly for corporate clients. Our corporate clients are exposed to risks including rises in interest rates and fluctu- ations in the stock market and exchange rates. Accordingly, there is a need to hedge against any of these risks. While we offer diverse derivative products to satisfy the hedging needs of corporate clients, we also offer products to hedge against the interest rate and foreign currency risks incurring from our assets and liabilities. The trading balance of our derivatives transactions was KRW 200,645 billion in 2015, KRW 232,663 bil- lion in 2016, and KRW 267,430 billion in 2017. The following are Woori Bank’s major derivative instruments: - Interest rate swaps, options, and futures related to interest rate risks - Index futures and options related to stock market fluctuations - Currency forwards, swaps, options, and futures related to currency risks - Derivatives offered to clients who would like to avoid the price risks associated with raw materials 068068 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 069069 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 069 (2) Risk Management Policy 1) Overview (A) Objective The objective of risk management is to identify the sources of risks and measure the scale and adequacy of the bank’s response to make and implement decisions to avert or mitigate the risks, thereby enhancing the soundness of the bank’s investments and holdings. (B) Risk Management Organization Board of Directors President & CEO Risk Management Committee Business Support Unit Risk Management Council Risk Management Group Risk Management Department Loan Review Department ① Risk Management Committee ② Risk Management Council 〮 Top decision-making body for risk management 〮 Organization: Three outside directors and one non-standing director 〮 Organization: Head of the Business Support Unit (chair), six heads of business groups 〮 Major items for resolution - Establishment of the basic risk management strategy - Credit line approval and capital allocation 〮 Meeting cycle: Quarterly 〮 Major items for resolution - Deliberation of risks regarding new products - Decisions regarding the bank’s interest rate standards - Sourcing plan for funds (liquidity management) 〮 Meeting cycle: Monthly and when necessary (C) Risk Management Strategy & Procedures ① Strategy While eliminating excess risks and managing an adequate level of risk, we maximize our profit to risk ratio, pursuing asset soundness and prof- itability at the same time. ② Procedures 〮 Risk recognition: We analyze various sources of risks possibly associated with the bank’s business activities 〮 Risk measurement/assessment: We determine risk measurement methods by risk type and measure the scale of risks using our measuring system, assessing the adequacy of the scale afterward. 〮 Risk control: We control risks in our daily, monthly and quarterly reports to avert/mitigate risks or maintain risks at adequate levels. 〮 Risk monitoring & reports: We continuously monitor risk levels and define the channels, content, and cycles of reporting to respond to risk sit- uations properly. 2) Credit Risks (A) Definition Credit risk represents ‘the potential financial losses that can incur to the Bank when the counterparty becomes insolvent or rejects transac- tions within the period provided in the contract.’ The goal of credit risk management is to maintain the bank’s credit risk exposure to a permis- sible degree and to optimize its rate of return considering such credit risk. (B) Management Methods We manage credit lines, aggregation, total exposure, and portfolios so that we can calculate and control adequate credit lines by aggregation, company, and industry as we handle loans. ① Aggregation management: We aggregate the exposures of borrowers who share credit risks and put them under a single credit risk aggrega- tion management system to control the bank’s potential exposure to credit risks. ② Total exposure management: To prevent a concentration of loans, we calculate corporate value based on future cash flow and set the ceil- ings per borrower within the borrower’s repayment capacity from operating revenues. WOORI BANKANNUAL REPORT 2017070070 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 070 (3) Operational Risks (A) Definition We define operational risks as the potential risks of loss that can result from inadequate internal processes, personnel and systematic factors, as well as external factors. (B) Operational Risk Management Method To reinforce competitiveness, reduce the amount of risk capital, enhance operational risk management competencies, and prevent any unex- pected incidents, Woori Bank has established an operational risk management system developed under Basel II since December 2005. The objectiveness of our operational risk management system has been tested internally and by an independent third party. The advanced mea- surement approach was submitted to the Financial Supervisory Service (FSS) and obtained FSS approval in June 2009, coming into effect on June 30. ① Operational Risk Management Tools - Risk Self-Assessment (RSA): RSA refers to a series of risk management activities that allow self-identification and self-assessment of material operational risks and related control activities, to enable the bank to respond with measures to eliminate or improve such risks. - Key Risk Indicators (KRI): KRIs are used for identifying and monitoring risks and tracking operational risk trends. - Loss data: Woori Bank has built a systemic framework for collecting and managing internal loss data on a bank-wide level under the opera- tional risk management system. It also receives external loss data from SAS Global Data and the Korea Operational Risk Data Exchange Com- mittee for scenario analysis and risk identification. - Scenario analysis: Operating risks characteristically lack accumulated loss data, making it difficult to take a statistical approach. To measure such operational risks, we forecast potential loss amounts and the annual frequency of operational risk events based on diverse information sources such as internal data, external data, and the opinions of our experts working at each department and branch. - Business Continuity Plan (BCP): Woori Bank has a set of business continuity plans in place for its organizational structure, risk assessment, business impact analysis, an alternate location for continued business operations, and drills so that it can restore and continue core business operations in the event of cessation of operations due to unexpected factors like disasters and calamities. ② Operational Risk Measurement While Woori Bank applies an advanced method of measuring operational risk capital levels, its consolidated subsidiaries take a basic indicator approach for measurement. - The basic indicator approach sets 15 percent of the Bank’s total income as operational risk capital. - The advanced measurement approach takes a 99.9 percentile value of annual total loss distribution induced from the integrated loss distri- bution approach that combines loss data and scenarios to calculate operational risk capital. Based on the eight business domains and seven event types under Basel II, we added a back-office ‘support’ sector that is a common bank-wide function, setting a 9X7 matrix as the measur- ing unit for operational risk capital. We calculate the operational risk capital in consideration of all four basic factors (internal data, external data, scenarios, business environment, and internal control factors). - Woori Bank does not rely on insurance to mitigate its operational risk capital. 4) Market Risk (A) Definition Market risks refer to potential losses that can incur from trading positions of a financial institution according to changes in market factors, such as interest rates, stock prices, and exchange rates. Market risks arise from changes in interest rates and exchange rates on unsettled financial instruments. Thus, all contracts are exposed to a certain level of volatility according to interest rates, credit spread, exchange rates, and equity securities prices. Market risks can be classified as general market risks and individual risks. General market risks represent losses arising from price volatility related to events that have an impact on all markets, such as interest rates, stock prices, and exchange rates. Individual risks are losses from price volatility related to individual events by the issuer of bonds, stocks, and other securities. (B) Market Risk Management Market risk management refers to the entire process of identifying the sources of risks by risk factor on the trading sector, measuring the scale of market risks, and assessing the adequacy of the scale in order to make decisions to avert, take or mitigate risks. We use both a standard approach and an internal model to measure market risks. The standard approach is used for calculating individual risks of market risk capital charge, while the internal model is for calculating the general market risks of capital charge and for managing internal risks. WOORI BANKANNUAL REPORT 2017071 Relying on an internal model approved by the FSS, Woori Bank uses the historical simulation method at a 99 percent confidence level, once every 10 days, to measure Value at Risk (VaR) and calculate the market risk capital charge to compute the BIS ratio. For internal control pur- poses, we control daily limits by measuring VaR at 99 percent confidence level per day. Model validation is carried out through daily back-test- ing of the VaR measurement and actual profit/loss. In addition to VaR, we perform monthly stress testing to measure the loss amount in the event of abnormal market situations, such as IMF bor- rowings or a global financial crisis. Market risk limits, including VaR limits, loss limits and risk capital limits, are managed by business groups, departments or teams, while the Risk Management Committee sets the risk type and unit annually. Limits for subordinate units, excluding the derivatives books, are set by posi- tion-related departments within given limits. Compliance with limits is monitored by the Risk Management Department independently from working-level departments, and the monitoring reports are submitted to the Risk Management Council and Risk Management Committee on a regular basis. (5) Liquidity Risk (A) Definition Liquidity risk management is aimed at preventing potential losses to a financial institution arising from a shortage of funds, a goal that can be achieved by the effective management of a liquidity crunch due to the disparity in the maturity of assets and liabilities or unexpected outflow of funds. Therefore, derivative products that involve off-balance account cash flow, as well as all assets and liabilities appearing on financial statements, are subject to our liquidity risk management activities. (B) Methods ① Funding/Application Status Analysis by Maturity (Maturity Gap Model) In managing liquidity risk, we determine the maturity gaps and gap ratios from cash flow statements by time group (remaining maturities or contract periods), grouping assets and liabilities according to a different ALM chart of accounts. Based on the outcomes, we maintain the gap ratios within predetermined target ratios (limits). Our daily ALM system allows business groups to look up maturity classification reports while providing daily liquidity ratios for identifying liquidity risk management indicators and status at related departments. ② Actions in Response to Basel III We use the Basel III liquidity standards management system to calculate and control the liquidity coverage ratio (LCR) and net stable funding ratio (NSFR) on a daily or monthly basis. We provide relevant information according to the disclosure standards imposed by the Basel Commit- tee on Banking Supervision (BCBS). ③ Contingency Planning & Implementation To effectively respond to capital outflow and funding risks arising from abrupt and unforeseeable changes in market environments, we have prepared bank-wide contingency plans to conduct regular monitoring of various checkpoints related to liquidity risks on a daily or weekly basis. 071071 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017072 INDePeNDeNT aUDITORS’ RePORT Deloitte Anjin LLC 9F., One IFC, 10, Gukjegeumyung-ro, Youngdeungpo-gu, Seoul 07326, Korea Tel: +82 (2) 6676 1000 Fax: +82 (2) 6674 2114 www.deloitteanjin.co.kr INDEPENDENT AUDITORS’ REPORT English Translation of a Report Originally Issued in Korean on March 14, 2018 To the Shareholders and the Board of Directors of Woori Bank Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Woori Bank and subsidiaries (the “Group”). The financial statements consist of the consolidated statements of financial position as of December 31, 2017 and the consolidated statements of comprehensive income for the years ended December 31, 2017 and 2016, consolidated statements of changes in shareholders’ equity and consolidated statements of cash flows, all expressed in Korean Won, for the years ended December 31, 2017 and 2016, respectively, and a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Consolidated Financial Statements The Group’s management is responsible for the preparation and fair presentation of the accompanying consolidated financial statements in accordance with Korean International Financial Reporting Standards (“K-IFRS”) and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Independent Auditors’ Responsibility Our responsibility is to express an audit opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Korean Standards on Auditing (“KSAs”). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 072072 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 073073 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 073 Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2017 and 2016, respectively, and its financial performance and its cash flows for the years then ended in accordance with K-IFRS. March 14, 2018 Notice to Readers This report is effective as of March 14, 2018, the auditors’ report date. Certain subsequent events or circumstances may have occurred between the auditors’ report date and the time the auditors’ report is read. Such events or circumstances could significantly affect the consolidated financial statements and may result in modifications to the auditors’ report. WOORI BANKANNUAL REPORT 2017 074 WOORI BaNK aND SUBSIDIaRIeS CONSOLIDaTeD STaTemeNTS OF FINaNCIaL POSITION AS OF DECEMBER 31, 2017 AND 2016 WOORI BANK AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2017 AND 2016 ASSETS Cash and cash equivalents (Note 6) Financial assets at fair value through profit or loss (Notes 4,7,11,12,18 and 26) Available-for-sale financial assets (Notes 4,8,11,12 and 18) Held-to-maturity financial assets (Notes 4,9,11,12 and 18) Loans and receivables (Notes 4,10,11,12,18 and 45) Investments in joint ventures and associates (Note 13) Investment properties (Note 14) Premises and equipment (Notes 15 and 18) Intangible assets and goodwill (Note 16) Assets held for sale (Note 17) Current tax assets (Note 42) Deferred tax assets (Note 42) Derivative assets (Notes 4,11,12 and 26) Net defined benefit assets (Note 24) Other assets (Notes 19 and 45) Total assets LIABILITIES Financial liabilities at fair value through profit or loss (Notes 4,11,12,20 and 26) Deposits due to customers (Notes 4,11,21 and 45) Borrowings (Notes 4,6,11,12 and 22) Debentures (Notes 4,6,11 and 22) Provisions (Notes 23, 44 and 45) Net defined benefit liability (Note 24) Current tax liabilities (Note 42) Deferred tax liabilities (Note 42) Derivative liabilities (Notes 4,11,12 and 26) Other financial liabilities (Notes 4,11,12, 25 and 45) Other liabilities (Notes 25 and 45) Total liabilities (Continued) December 31, December 31, 2017 2016 (Korean Won in millions) 6,908,286 7,591,324 5,843,077 15,352,950 16,749,296 267,106,204 417,051 371,301 2,477,545 518,599 48,624 4,722 280,130 59,272 - 158,404 316,295,461 5,650,724 20,817,583 13,910,251 258,392,633 439,012 358,497 2,458,025 483,739 2,342 6,229 232,007 140,577 70,938 128,846 310,682,727 3,427,909 234,695,084 14,784,706 27,869,651 410,470 43,264 232,600 22,681 67,754 13,892,461 283,981 295,730,561 3,803,358 221,020,411 18,769,515 23,565,449 428,477 64,666 171,192 22,023 7,221 21,985,086 299,376 290,136,774 074074 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 075 WOORI BaNK aND SUBSIDIaRIeS CONSOLIDaTeD STaTemeNTS OF FINaNCIaL POSITION AS OF DECEMBER 31, 2017 AND 2016 (CONTINUED) WOORI BANK AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2017 AND 2016 (CONTINUED) EQUITY Owners’ equity: Capital stock (Note 28) Hybrid securities (Note 29) Capital surplus (Note 28) Other equity (Note 30) Retained earnings (Notes 31 and 32) (Regulatory reserve for credit loss as of December 31, 2017 and 2016 is 2,438,191 million Won and 2,255,252 million Won, respectively Regulatory reserve for credit loss to be reserved as of December 31, 2017 and 2016 is 140,266 million Won and 182,939 million Won, respectively Planned provision of regulatory reserve for credit loss as of December 31, 2017 and 2016 is 140,266 million Won and 182,939 million Won, respectively) Non-controlling interests Total equity Total liabilities and equity See accompanying notes December 31, December 31, 2017 2016 (Korean Won in millions) 20,365,892 3,381,392 3,017,888 285,880 (1,939,274) 20,386,160 3,381,392 3,574,896 286,331 (1,468,025) 15,620,006 199,008 20,564,900 316,295,461 14,611,566 159,793 20,545,953 310,682,727 075075 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 076076 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 076 WOORI BaNK aND SUBSIDIaRIeS CONSOLIDaTeD STaTemeNTS OF COmPReheNSIVe INCOme FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 WOORI BANK AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 Interest income Interest expense Net interest income (Notes 34 and 45) Fees and commissions income Fees and commissions expense Net fees and commissions income (Notes 35 and 45) Dividend income (Note 36) Net gain on financial instruments at fair value through profit or loss (Note 37) Net loss on available-for-sale financial assets (Note 38) Impairment losses on credit loss (Notes 39 and 45) General and administrative expenses (Notes 40 and 45) Net other operating expenses (Notes 40 and 45) Operating income Share of losses of joint ventures and associates (Note 13) Net other non-operating income (expense) Non-operating income (loss) (Note 41) Net income before income tax expense Income tax expense (Note 42) Net income 2017 2016 (Korean Won in millions, except for per share data) 8,550,687 (3,330,037) 5,220,650 8,512,312 (3,492,768) 5,019,544 2,069,198 (998,732) 1,070,466 124,992 (104,827) 192,708 (785,133) (3,530,801) (31,313) 2,156,742 (101,514) (105,722) (207,236) 1,865,470 (928,339) 937,131 184,510 114,387 (1,035) (834,076) (3,478,476) (367,779) 1,574,206 (19,507) (1,310) (20,817) 1,949,506 1,553,389 (419,418) (275,856) (Net income after the provision of regulatory reserve for credit loss for the years ended December 31, 2017 and 2016 are 1,389,822 million Won and 1,094,594 million Won, respectively) (Note 32) 1,530,088 1,277,533 Remeasurement of the net defined benefit liability Items that will not be reclassified to profit or loss Gain (loss) on available-for-sale financial assets Share of other comprehensive gain (loss) of joint ventures and associates Gain (loss) on foreign currency translation of foreign operations Gain on valuation of cash flow hedge Equity related to non-current assets held for sale Items that may be reclassified to profit or loss Other comprehensive income , net of tax 10,497 10,497 (84,498) 612 (208,329) 777 4,145 (287,293) (276,796) 34,162 34,162 12,586 (7,937) 28,712 10,371 - 43,732 77,894 Total comprehensive income 1,253,292 1,355,427 Net income attributable to: Net income attributable to owners Net income attributable to non-controlling interests Total comprehensive income attributable to: Comprehensive income attributable to owners Comprehensive income attributable to non-controlling interests Net income per share (Note 43) 1,512,148 17,940 1,249,057 4,235 1,261,266 16,267 1,332,614 22,813 Basic and diluted earnings from operations per share (In Korean Won) 1,999 1,567 See accompanying notes WOORI BANKANNUAL REPORT 2017 077 WOORI BaNK aND SUBSIDIaRIeS CONSOLIDaTeD STaTemeNTS OF ChaNGeS IN eQUITy FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 WOORI BANK AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 January 1, 2016 Net income Dividends Change in capital surplus of consolidated subsidiaries Changes in non-controlling interests due to acquisition of subsidiary Gain on valuation of available- for-sale financial assets Share of other comprehensive loss of joint ventures and associates Gain on foreign currencies translation of foreign operations Remeasurement of the net defined benefit liability Gain on valuation of cash flow hedge Dividends to hybrid securities Issuance of hybrid securities Redemption of hybrid January 1, 2017 Net income Dividends Subsidiary capital increase Gain(loss) on valuation of available-for-sale financial assets Share of other comprehensive gain of joint ventures and associates Loss on foreign currencies translation of foreign operations Gain on valuation of cash flow hedge Remeasurement of the net defined benefit liability Equity related to non-current assets held for sale Dividends on hybrid securities Issuance of hybrid securities Redemption of hybrid Capital stock Hybrid securities Capital surplus Other Equity Retained earnings Controlling interests (Korean Won in millions) 3,381,392 3,334,002 - - - - 294,259 (1,547,303) 13,726,122 19,188,472 - 1,261,266 1,261,266 (168,317) - (168,317) - - Non- controlling interests Total equity 121,443 19,309,915 16,267 1,277,533 (169,603) (1,286) - (7,928) 7,930 - - - 12,296 - - - 2 - 2 - 16,823 16,823 12,296 290 12,586 - (7,937) - (7,937) - (7,937) - - - - - 22,436 34,182 - - 22,436 6,276 28,712 34,182 (20) 34,162 10,371 - - - (206,515) - 10,371 (206,515) 549,904 - - - 10,371 (206,515) 549,904 - - - - - - - - - - - - - - - - 549,904 securities December 31, 2016 (309,010) 3,381,392 3,574,896 - - (310,000) 286,331 (1,468,025) 14,611,566 20,386,160 (990) - 3,381,392 3,574,896 - - - - - - 286,331 (1,468,025) 14,611,566 20,386,160 1,512,148 1,512,148 (336,636) (451) (336,636) - - - (451) - - - - (310,000) 159,793 20,545,953 159,793 20,545,953 17,940 1,530,088 (338,190) (1,554) 36,083 36,534 - - - - - - - - - - - - - - - 559,565 - (85,051) - (85,051) 553 (84,498) - 612 - 612 - 612 - (194,347) - (194,347) (13,982) (208,329) - - - - - 777 10,773 4,145 - - - - 777 - 777 10,773 (276) 10,497 - (167,072) - 4,145 (167,072) 559,565 - - - 4,145 (167,072) 559,565 securities December 31, 2017 - (1,116,573) 3,381,392 3,017,888 - - (1,324,731) 285,880 (1,939,274) 15,620,006 20,365,892 (208,158) - (1,324,731) 199,008 20,564,900 See accompanying notes 077077 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 078 WOORI BaNK aND SUBSIDIaRIeS CONSOLIDaTeD STaTemeNTS OF CaSh FLOWS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 WOORI BANK AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 Cash flows from operating activities: Net income Adjustment to net income: Income tax expense Interest income Interest expense Dividend income Additions of expenses not involving cash outflows: Impairment losses due to credit loss Loss on valuation of financial instruments at fair value through profit or loss Loss on available-for-sale financial assets Loss on investments in joint ventures and associates Loss on transaction and valuation of derivatives instruments (hedging) Loss on hedged items (fair value hedge) Provisions Retirement benefits Depreciation and amortization Loss on disposal of investments in joint ventures and associates Loss on disposal of premises and equipment and other assets Impairment loss on premises and equipment and other assets Deduction of incomes not involving cash inflows: Gain on valuation of financial instruments at fair value through profit or loss Gain on available-for-sale financial assets Gain on valuation of investments in joint ventures and associates Gain on transaction and valuation of derivatives instruments (hedging) Gain on hedged items (fair value hedge) Reversal of provisions Gain on disposal of investments in joint ventures and associates Gain on disposal of premises and equipment and other assets Reversal of impairment loss on premises and equipment and other assets Changes in operating assets and liabilities: Financial instruments at fair value through profit or loss Loans and receivables Other assets Deposits due to customers Provision Net defined benefit liability Other financial liabilities Other liabilities (Continued) 2016 2017 (Korean Won in millions) 1,530,088 1,277,533 419,418 (8,550,687) 3,330,037 (124,992) (4,926,224) 275,856 (8,512,312) 3,492,768 (184,510) (4,928,198) 785,133 15,267 - 185,020 109,569 - 107,028 142,902 235,795 38,713 9,994 390 1,629,811 - 192,708 83,506 122 53,532 2,567 39,932 5,028 666 378,061 834,076 - 1,035 56,264 98,981 475 34,774 152,609 252,031 15,060 9,718 1,936 1,456,959 75,690 - 36,757 130 99,302 1,396 23,457 1,885 3,581 242,198 (583,068) (9,647,563) 35,953 13,634,873 (122,711) (46,789) (7,966,786) (27,550) (4,723,641) (99,581) (14,433,390) 219,323 11,878,628 34,376 (261,097) 5,158,055 (6,163) 2,490,151 078078 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 079 WOORI BaNK aND SUBSIDIaRIeS CONSOLIDaTeD STaTemeNTS OF CaSh FLOWS WOORI BANK AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 (CONTINUED) Cash received from (paid for) operating activities: Interest income received Interest expense paid Dividends received Income tax paid Net cash provided by (used in) operating activities Cash flows from investing activities: Cash in-flows from investing activities: Disposal of available-for-sale financial assets Redemption of held-to-maturity financial assets Disposal of investments in joint ventures and associates Disposal of subsidiaries Disposal of investment properties Disposal of premises and equipment Disposal of intangible assets Disposal of assets held for sale Cash out-flows from investing activities: Net cash flows through business combination Acquisition of available-for-sale financial assets Acquisition of held-to-maturity financial assets Acquisition of investments in joint ventures and associates Acquisition of investment properties Acquisition of premises and equipment Acquisition of intangible assets Cash out-flow related to derivatives for risk hedge Net cash provided by (used in) investing activities Cash flows from financing activities: Cash inflows from financing activities: Increase in borrowings Issuance of debentures Issuance of hybrid securities Capital increase of subsidiaries Cash outflows from financing activities: Decrease in borrowings Repayment of debentures Payment of dividends Dividends paid on hybrid securities Redemption of hybrid securities Dividends paid on non-controlling interests Net cash provided by (used in) financing activities Net increase (decrease) in cash and cash equivalents 2017 2016 (Korean Won in millions) 8,570,715 (3,404,608) 127,343 (404,428) (1,979,005) 8,511,349 (3,593,358) 184,674 (251,627) 4,905,285 24,912,752 8,587,092 70,180 203 418 7,428 1,188 24,808 33,604,069 - 19,674,346 11,521,065 143,161 9,872 162,245 195,929 13,742 31,720,360 1,883,709 9,057,999 18,438,221 559,565 35,841 28,091,626 12,692,883 13,620,520 336,636 177,730 1,323,400 1,554 28,152,723 (61,097) (156,393) 20,395,744 8,462,346 97,135 - - 63 4,325 22,723 28,982,336 132,301 23,844,849 8,818,376 43,281 4,428 131,009 191,161 42,544 33,207,949 (4,225,613) 8,259,380 15,848,055 549,904 - 24,657,339 9,524,626 14,118,720 168,317 201,328 310,000 1,286 24,324,277 333,062 1,012,734 Cash and cash equivalents, beginning of the period 7,591,324 6,644,055 Effects of exchange rate changes on cash and cash equivalents (526,645) (65,465) Cash and cash equivalents, end of the period 6,908,286 7,591,324 See accompanying notes 079079 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 080 WOORI BaNK aND SUBSIDIaRIeS NOTeS TO CONSOLIDaTeD FINaNCIaL STaTemeNTS WOORI BANK AND SUBSIDIARIES AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 1. GENERAL (1) Summary of the parent company Woori Bank (hereinafter referred to the “Bank”), which is a controlling entity in accordance with Korean International Financial Reporting Standards (“K-IFRS”) 1110 – Consolidated Financial Statements, was established in 1899 and is engaged in the commercial banking business under the Banking Act, trust business and foreign exchange business under the Financial Investment Services and Capital Market Act. Previously, Woori Finance Holdings Co., Ltd., the former holding company of Woori Financial Group, established on March 27, 2001 held a 100% ownership of the Bank. Effective November 1, 2014, Woori Finance Holdings Co., Ltd. completed its merger (the “Merger”) with and into the Bank. Accordingly, the shares of the Bank, 597 million shares, prior to the merger, were reduced to nil in accordance with capital reduction procedure, and then, in accordance with the merger ratio, the Bank newly issued 676 million shares. As a result, as of December 31, 2017, the common stock of the Bank amounts to 3,381,392 million Korean won. During the year ended December 31, 2016, the Korea Deposit Insurance Corporation (“KDIC”), the majority shareholder of the Bank, sold its 187 million shares in the Bank in accordance with the contract of “Disposal of Woori Bank’s shares to Oligopolistic Shareholders”. In addition to the sale, during the year ended December 31, 2017, KDIC sold additional 33 million shares. As of December 31, 2017 and 2016, KDIC held 125 million shares and 158 million shares (18.43% and 23.37% ownership interest) respectively, of the Bank’s shares issued. On June 24, 2002, Woori Finance Holdings Co., Ltd. listed its common shares on the Korea Exchange through public offering. In addition, on September 29, 2003, the holding company registered with the Securities and Exchange Commission in the United States of America and, on the same day, listed its American Depositary Shares on the New York Stock Exchange. As Woori Finance Holdings Co., Ltd. was merged into the Bank, the Bank, which is the existing company, succeeded such rights and obligations as a listed company on the Korea Exchange and the New York Stock Exchange. As a result of such merger, the Bank incorporated Woori Card Co., Ltd., Woori Investment Bank Co., Ltd., Woori FIS Co., Ltd., Woori Private Equity Asset Management Co., Ltd., and Woori Finance Research Institute Co., Ltd. as its subsidiaries. The head office of the Bank is located in 51, Sogong-ro, Jung Gu, Seoul, Korea. The Bank has 876 branches and offices in Korea, and 23 branches and offices overseas as of December 31, 2017. 080080 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 081081 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 081 - 2 - (2) The consolidated financial statements for Woori Bank and its subsidiaries (the “Group”) include the following subsidiaries: Subsidiaries Main business Woori Bank: Woori FIS Co., Ltd. Woori Private Equity Asset Management Co., Ltd. Woori Finance Research Institute Co., Ltd. Woori Card Co., Ltd. Woori Investment Bank Co., Ltd. (*1) Woori Credit Information Co., Ltd. Woori America Bank Woori Global Markets Asia Limited Woori Bank China Limited AO Woori Bank PT Bank Woori Saudara Indonesia 1906 Tbk(*1) Banco Woori Bank do Brasil S.A. Korea BTL Infrastructure Fund Woori Fund Service Co., Ltd. Woori Finance Cambodia PLC. Woori Finance Myanmar Co., Ltd. Wealth Development Bank Woori Bank Vietnam Limited Kumho Trust First Co., Ltd. (*2) Asiana Saigon Inc. (*2) An-Dong Raja First Co., Ltd. (*6) Consus Eighth Co., LLC (*2) KAMCO Value Recreation First Securitization Specialty Co., Ltd. (*2) Hermes STX Co., Ltd. (*2) BWL First Co., LLC (*2) Woori Poongsan Co., Ltd. (*6) Deogi Dream Fourth Co., Ltd. (*2) Jeonju Iwon Ltd. (*2) Wonju I one Inc. (*2) Heitz Third Co., Ltd. (*2) Woorihansoop 1st Co., Ltd. (*2) Electric Cable First Co., Ltd (*2) Woori International First Co., Ltd. (*2) Woori HJ First Co., Ltd. (*2) Woori WEBST 1st Co., Ltd. (*2) HNLD 1st Inc.(*2) Wibihansoop 1st Co., Ltd. (*2) HNLD 1st Inc.(*2) Uri QS 1st Co., Ltd (*2) Uri Display 1st Co., Ltd.(*2) Tiger Eyes 2nd Co., Ltd.(*2) Woori Serveone 1st Co., Ltd. (*2) HeungkukWoori Tech Company Private Placement Investment Trust No.1 and 5 beneficiary certificates (*3) Principle Guaranteed Trust (*4) Principle and Interest Guaranteed Trust (*4) Woori Bank and Woori Private Equity Asset System software development & maintenance Finance Other service business Finance Other credit finance business Credit information Finance 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 Asset securitization 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 〃 Securities investment and others Trust 〃 Management Co., Ltd.: Woori Private Equity Fund (*5) Woori Private Equity Fund: Woori EL Co., Ltd. (*5) Other financial business Other financial business Percentage of ownership (%) December 31, 2017 December 31, 2016 Location Financial statements as of (2017) 100.0 100.0 Korea December 31 100.0 100.0 100.0 59.8 100.0 100.0 100.0 100.0 100.0 79.9 100.0 99.9 100.0 100.0 100.0 51.0 100.0 0.0 0.0 - 0.0 15.0 0.0 0.0 - 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 - 0.0 0.0 - - 100.0 100.0 100.0 58.2 100.0 100.0 100.0 100.0 100.0 74.0 100.0 99.9 100.0 100.0 100.0 51.0 100.0 0.0 0.0 0.0 0.0 15.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 - - - - - - - - December 31 Korea December 31 Korea December 31 Korea December 31 Korea December 31 Korea December 31 U.S.A. Hong Kong December 31 China December 31 December 31 Russia December 31 Indonesia Brazil December 31 Korea December 31 Korea December 31 Cambodia December 31 December 31 Myanmar Philippines December 31 December 31 Vietnam Korea December 31 Korea December 31 Korea - Korea December 31 Korea Korea Korea Korea Korea Korea Korea Korea Korea Korea Korea Korea Korea Korea Korea Korea Korea Korea Korea Korea December 31 December 31 December 31 - December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 - 0.0 0.0 Korea Korea Korea December 31 December 31 December 31 31.9 Korea 100.0 Korea - - WOORI BANKANNUAL REPORT 2017 082082 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 082 - 3 - Main business Asset securitization Asset securitization 〃 〃 Percentage of ownership (%) December 31, 2017 December 31, 2016 Location Financial statements as of (2017) 5.0 5.0 5.0 5.0 5.0 Korea December 31 - Korea December 31 - Korea December 31 - Korea December 31 Finance 100.0 100.0 Myanmar December 31 Asset securitization 〃 0.5 0.5 - Korea December 31 - Korea December 31 Woori Investment Bank: Subsidiaries Dongwoo First Securitization Specialty Co., Ltd. (*2) Seari First Securitization Specialty Co., Ltd. (*2) Namjong 1st Securitization Specialty Co., Ltd. (*2) Bukgeum First Securitization Specialty Co., Ltd. (*2) Woori Card Co., Ltd.: TUTU Finance-WCI Myanmar Co., Ltd. Woori Card one of 2017-1 Securitization Specialty Co., Ltd. (*2) Woori Card one of 2017-2 Securitization Specialty Co., Ltd. (*2) (*1) The ownership ratio has been increased, attributed to unequal capital increase of the subsidiary. (*2) The entity was a structured entity for the purpose of asset securitization and was in scope for consolidation. Although the Group is not a majority shareholder, the Group 1) had the power over the investee, 2) was exposed, or had rights, to variable returns from its involvement with the investee, and 3) had the ability to use its power to affect its returns. (*3) The entity was a structured entity for the purpose of investment in securities and was in scope for consolidation, considering that the Group 1) had the power over the investee, 2) was exposed, or has rights, to variable returns from its involvement with the investee, and 3) had the ability to use its power to affect its returns. (*4) The entity was a money trust under the Financial Investment Services and Capital Markets Act and was in scope for consolidation. Although the Group was not a majority shareholder, the Group 1) had the power over the investee, 2) was exposed, or had rights, to variable returns from its involvement with the investee, and 3) had the ability to use its power to affect its returns. (*5) Due to liquidation of Woori Private Equity Asset Management Co., Ltd., the entity was excluded from subsidiaries during the year ended December 31, 2017. (*6) Due to liquidation for the years ended as of December 31, 2017, the entity was excluded from the scope for consolidation. (3) As of December 31, 2017 and 2016, despite having more than a 50% ownership interest, the Group has not consolidated the following companies as the Group does not have the ability to control following subsidiaries: Subsidiaries Golden Bridge NHN Online Private Equity Investment (*) Mirae Asset Maps Clean Water Private Equity Investment Trust 7th (*) Kiwoom Yonsei Private Equity Investment Trust (*) Hana Walmart Real Estate Investment Trust 41-1 (*) IGIS Global Private Placement Real Estate Fund No. 148-1 (*) IGIS Global Private Placement Real Estate Fund No. 148-2 (*) As of December 31, 2017 Location Korea Korea Korea Korea Korea Korea Main Business Securities Investment Securities Investment Securities Investment Securities Investment Securities Investment Securities Investment Percentage of ownership (%) 60.0 59.7 88.9 90.1 75.0 75.0 (*) The Group owns the majority ownership interest in these structured entities, but has no power on the investees’ relevant activities. As results, it is deemed that the Group has no power or control on the structured entities. Subsidiaries Golden Bridge NHN Online Private Equity Investment (*) Mirae Asset Maps Clean Water Private Equity Investment Trust 7th (*) Kiwoom Yonsei Private Equity Investment Trust (*) Kiwoom Frontier Professional Investment Private Fund 6(Bond) (*) As of December 31, 2016 Location Korea Korea Korea Korea Main Business Securities Investment Securities Investment Securities Investment Securities Investment Percentage of ownership (%) 60.0 59.7 88.9 50.0 (*) The Group owns the majority ownership interest in these structured entities, but has no power on the investees’ relevant activities. As results, it is deemed that the Group has no power or control on the structured entities. WOORI BANKANNUAL REPORT 2017 083083 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 083 - 4 - (4) The summarized financial information before the elimination of intercompany transactions of the subsidiaries whose financial information was prepared under K-IFRS for the Group’s consolidated financial statements is as follows (Unit: Korean Won in millions): Woori FIS Co., Ltd. Woori Private Equity Asset Management Co., Ltd. Woori Finance Research Institute Co., Ltd. Woori Card Co., Ltd. Woori Investment Bank Co., Ltd. Woori Credit Information Co., Ltd. Woori America Bank Woori Global Markets Asia Limited Woori Bank (China) Limited AO Woori Bank PT Bank Woori Saudara Indonesia 1906 Tbk Banco Woori Bank do Brasil S.A. Korea BTL Infrastructure Fund Woori Fund Service Co., Ltd. Woori Finance Cambodia PLC. Woori Finance Myanmar Co., Ltd. Wealth Development Bank Woori Bank Vietnam Limited Money trust under the FISCM Act (*) Structured entity for the securitization of financial assets Structured entity for the investments in securities As of and for the year ended December 31, 2017 Assets Liabilities 103,932 71,386 42,894 3,790 8,605,993 1,880,157 33,298 1,954,301 290,226 4,960,637 201,704 2,230,617 213,889 786,480 12,653 51,304 18,236 191,049 775,758 1,560,672 2,670 350 6,973,705 1,588,610 6,175 1,679,248 178,343 4,458,683 149,101 1,745,171 181,544 301 1,242 32,873 5,307 156,808 632,160 1,530,760 Operating revenue 252,460 7,257 4,733 1,771,157 183,376 31,580 81,337 11,345 388,913 15,656 192,485 20,455 30,240 9,021 5,895 2,506 13,632 29,698 44,344 Net income (loss) attributable to owners Comprehensive income (loss) attributable to owners 1,940 (2,963) (4,114) 83 101,214 20,023 861 11,869 1,922 13,809 4,748 38,488 1,843 26,390 1,398 983 791 1,323 2,436 582 (4,074) 64 107,321 20,210 752 (16,833) (12,544) (15,252) 1,217 (18,689) (2,840) 26,390 1,398 (473) 15 (1,093) (15,347) 582 867,583 1,275,719 22,730 1,179 (2,800) 34,939 76 377 (475) (38,592) (*) FISCM Act: Financial Investment Services and Capital Markets Act As of and for the year ended December 31, 2016 Assets Liabilities Net income (loss) attributable to owners Comprehensive income (loss) attributable to owners Operating revenue Woori FIS Co., Ltd. Woori Private Equity Asset Management Co., Ltd. Woori Finance Research Institute Co., Ltd. Woori Card Co., Ltd. Woori Investment Bank Co., Ltd. Woori Credit Information Woori America Bank Woori Global Markets Asia Limited Woori Bank (China) Limited AO Woori Bank PT Bank Woori Saudara Indonesia 1906 Tbk Banco Woori Bank do Brasil S.A. Korea BTL Infrastructure Fund Woori Fund Service Co., Ltd. Woori Finance Cambodia PLC. Woori Finance Myanmar Co., Ltd. Wealth Development Bank Woori Bank Vietnam Limited Money trust under the FISCM Act (*) 141,329 105,821 244,783 1,048 97,338 53,244 2,154 312 3,710 7,606,108 1,576,627 31,292 2,186,049 272,008 4,984,017 239,860 2,089,822 241,229 784,770 11,386 32,405 4,305 209,779 159,223 1,525,145 334 6,180,893 1,404,566 4,416 1,973,263 147,581 4,466,812 188,474 1,693,111 206,043 299 1,372 24,751 2,651 174,446 278 1,495,815 4,445 1,555,373 178,572 27,884 73,909 7,255 475,174 16,221 179,014 17,059 33,476 7,787 4,545 380 12,519 - 55,540 108 109,393 23,872 543 15,266 1,863 32,025 5,650 24,573 2,786 29,617 1,011 1,250 (613) 1,248 (346) 697 1,432 219 100 116,381 23,897 618 20,899 5,582 11,505 15,553 48,542 9,600 29,617 1,011 1,494 (569) 1,876 3,545 697 WOORI BANKANNUAL REPORT 2017 084084 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 084 - 5 - As of and for the year ended December 31, 2016 Assets Liabilities Net income (loss) attributable to owners Comprehensive income (loss) attributable to owners Operating revenue Structured entity for the securitization of financial assets Structured entity for the investments in 487,431 895,824 29,480 6,912 securities 4,397,163 1,898,977 137,896 56,605 7,138 61,535 (*) FISCM Act: Financial Investment Services and Capital Markets Act (5) The financial support that the Group provides to consolidated structured entities is as follows: - Structured entity for the securitization of financial assets The structured entity is established for the purpose of securitization of project financing loans, corporate bonds, and other financial assets. The Group is involved with the structured entity through providing with credit facility over asset-backed commercial papers issued by the entity, originating loans directly to the structured entity, or purchasing 100% of the subordinated debts issued by the structured entity. - Structured entity for the investments in securities The structured entity is established for the purpose of investments in securities. The Group acquires beneficiary certificates through its contribution of fund to the structured entity, and it is exposed to the risk that it may not be able to recover its fund depending on the result of investment performance of asset managers of the structured entity. - Money trust under the Financial Investment Services and Capital Markets Act The Group provides with financial guarantee of principal and interest or principal only to some of its trust products. Due to the financial guarantees, the Group may be obliged to supplement when the principal and interest or principal of the trust product sold is short of the guaranteed amount depending on the result of investment performance of the trust product. (6) The details of the limitations with regard to the transfer of assets or the redemption of liabilities within the Group are provided below. Some subsidiaries are regulated by the rules of the jurisdictions, in which they were incorporated, with regard to funding or management of deposits. Also, there is the limitation that they must have pre-approval from their regulators in case of remittance of earnings to the Group. (7) The Group has entered into various agreements with structured entities such as asset securitization vehicles, structured finance and investment funds, and monetary funds. Where it is determined in accordance with K- IFRS 1110 that the Group has no controlling power over such structured entities, the entities are not consolidated. The nature of interests, which the Group retains, and the risks, to which the Group is exposed, of the unconsolidated structured entities are as follows: The interests to unconsolidated structured entities, which the Group retains, are classified to asset securitization vehicles, structured finance and investment fund, based on the nature and the purpose of the structured entities. Asset securitization vehicle issues asset-backed securities and redeems the principal and interest or distributes dividends on asset-backed securities with profits from collecting cash flows or sale of securitized assets. The Group, as a secondary guarantor, provides purchase commitments for its asset- backed securities or guarantees to such asset securitization vehicle and recognizes commission income or interest income related to the commitment or guarantees. Therefore, the Group would be exposed to risks to purchases or pays back asset-backed securities issued by the vehicles when a primary guarantor fails to provide the financing asset securitization vehicles. WOORI BANKANNUAL REPORT 2017 085 085085 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner - 6 - Structured finance includes investments in project financing on real estates, social overhead capital (“SOC”), infrastructure and shipping finance. They are formed as special purpose entity by funding through equity investments and loans from various investors. Investment decisions are made by the Group based on business outlook of such projects. In relation to such investments, the Group recognizes interest income on loans, gains or losses on valuation of equity investments or dividend income. The structured finance is secured by additional funding agreement, guarantee or credit facilities. However, the structured financing project would fail to return the capital of equity investments or principal of loans to the Group if it is discontinued or did not achieve business outcome. Investment funds include trusts and private equity funds. A trust is formed by contributions from various investors, operated by a manager engaged to the trust and distributed proceeds from sales of investments to the investors. A private equity fund is established in order to acquire ownership interests in a portfolio company with exit strategy after implementing financial and operational restructuring of the company. The Group recognizes unrealized gains or losses on change in value of investments in proposition of ownership interests in investments. The Group would be exposed to risks of loss when the value of portfolio investment is decreased. Total assets of the unconsolidated structured entities, the carrying value of the related items recorded, the maximum exposure to risks, and the loss recognized in conjunction with the unconsolidated structured entities as of December 31, 2017 and 2016 are as follows (Unit: Korean Won in millions): Total asset of the unconsolidated structured entities Assets recognized in the consolidated financial statements related to the unconsolidated structured entities Loans and receivables Financial assets held for trading Available-for-sale financial assets Held-to-maturity financial assets Investments in joint ventures and associates Derivative assets Liabilities recognized in the consolidated financial statements related to the unconsolidated structured entities Derivative liabilities Other liabilities (including provisions) The maximum exposure to risks Investments Credit facilities Loss recognized on unconsolidated structured entities Total asset of the unconsolidated structured entities Assets recognized in the consolidated financial statements related to the unconsolidated structured entities Loans and receivables Financial assets held for trading Available-for-sale financial assets Held-to-maturity financial assets Investments in joint ventures and associates Derivative assets Liabilities recognized in the consolidated financial statements related to the unconsolidated structured entities Derivative liabilities Other liabilities (including provisions) The maximum exposure to risks Investments Purchase agreements December 31, 2017 Asset securitization vehicle 7,295,601 Structured finance 40,172,830 Investment Funds 13,641,135 3,215,159 43,180 - 902,390 2,269,451 - 138 1,433 575 858 4,032,531 3,215,159 817,372 837 2,314,043 1,969,760 233,428 106,819 - - 4,036 1,506 968 538 2,918,448 2,314,043 604,405 3,939 1,138,523 - 10,160 904,774 - 223,589 - - - - 1,138,523 1,138,523 - 5,993 December 31, 2016 Asset securitization vehicle 8,426,713 Structured finance 61,324,862 Investment Funds 9,131,362 3,361,910 65,470 - 1,216,446 2,079,648 - 346 1,363 201 1,162 4,263,993 3,361,910 28,000 2,790,215 2,414,044 254,150 115,843 - - 6,178 1,224 362 862 3,802,210 2,790,215 - 1,749,494 - - 1,664,865 - 84,629 - - - - 1,749,494 1,749,494 - WOORI BANKANNUAL REPORT 2017 086 - 7 - Credit facilities Other commitments Loss recognized on unconsolidated structured entities December 31, 2016 Asset securitization vehicle 834,083 40,000 6,353 Structured finance 970,195 41,800 71,185 Investment Funds - - 683 (8) Subsidiaries of which non-controlling interests are significant to the Group’s consolidated financial statements are as follows (Unit: Korean Won in millions): 1) Accumulated non-controlling interests at the end of the reporting period Woori Investment Bank PT Bank Woori Saudara Indonesia 1906 Tbk Wealth Development Bank December 31, 2017 119,111 64,877 16,778 December 31, 2016 73,986 70,249 16,983 2) Net income attributable to non-controlling interests Woori Investment Bank PT Bank Woori Saudara Indonesia 1906 Tbk Wealth Development Bank 8,370 8,882 648 9,990 6,383 611 For the year ended December 31, 2017 For the year ended December 31, 2016 3) Dividends to non-controlling interests PT Bank Woori Saudara Indonesia 1906 Tbk 1,513 1,242 For the year ended December 31, 2017 For the year ended December 31, 2016 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (1) Basis of presentation The Group’s consolidated financial statements are prepared in accordance with K-IFRS. The significant accounting policies that have been applied for the preparation of the consolidated financial statements for the year ended December 31, 2017 are described below, and the significant accounting policies are the same as the accounting policies applied for the preparation of the previous year’s consolidated financial statements, except the impacts from the adoptions of accounting standards or interpretations which are explained below. The Group’s consolidated financial statements have been prepared based on the historical cost method except for specific non-current assets and certain financial assets or liabilities reported at fair value. The historical cost is generally measured by fair value of acquired assets. The consolidated financial statements of the Group were approved by the board of directors on March 2, 2018. 086086 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 087 - 8 - 1) The Group has newly adopted the following amendment to K-IFRS that affected the Group’s accounting policies. Amendments to K-IFRS 1007 – Statement of Cash Flows The amendments require an entity to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both cash and non-cash changes. Additional disclosure required related to the first time application of these amendments in the current year are in note 6. Consistent with the transition provisions of the amendments, the Group has not disclosed comparative information for the prior period. Apart from the additional disclosure in note 6, the application of these amendments has no material impact on the disclosures or the amounts recognized in the Group’s consolidated financial statements. Amendments to K-IFRS 1012 – Income Taxes The amendments clarify that in evaluating the deferred tax assets arising from deductible temporary difference of debt instruments measured at fair value, the carrying amount of an asset does not limit the estimation of probable future taxable profits. The application of these amendments has no material impact on the disclosures or the amounts recognized in the Group’s consolidated financial statements. Other than the amendment stated above, there are several annual improvements in the current period, but the application of the amendments has had no material effect on the Group’s consolidated financial statements. 2) The Group has not applied the following K-IFRSs that have been issued but are not yet effective: Enactments to K-IFRS 1109 – Financial Instruments The standards include the requirements for the classification and measurement of financial instruments based on their business model whose objective is achieved both by collecting contractual cash flows and selling financial assets and based on the contractual terms that give rise on specified dates to cash flows, impairment methodology based on the expected credit losses, broadened types of instruments that qualify as hedging instruments, the types of risk components of non-financial items that are eligible for hedge accounting and the change in the hedge effectiveness test. This standards supersedes K-IFRS 1039 - Financial Instruments: Recognition and Measurement, and will be applied for annual periods beginning on or after January 1, 2018. In principle, K-IFRS 1109 must be applied retrospectively. However, there are certain exemptions to the application of retroactive approach such as presenting comparative information on classification, measurement and impairment of financial instruments. In addition, K-IFRS 1109 are applied prospectively for hedge accounting with exceptions such as accounting for the time value of options. The Group has completed the implementation of the design of the internal controls and/or financial reporting processes related to the presentation of financial instruments in order to adopt K-IFRS 1109. The Group has completed a financial impact analysis on the 2017 financial statements based on available information as of year-end in order to determine the impact of adopting K-IFRS 1109 for the first time. The expected financial impact of each key issue on the financial statement, is as follows. a) Classification and Measurement of Financial Instruments When K-IFRS 1109 is adopted, all recognized financial assets that in scope are subsequently measured at either amortized cost, fair value through other comprehensive income (FVTOCI), or fair value through profit or loss (FVTPL) as shown below, based on the business model for managing financial assets and based on the nature of contractual cash flows arising from the financial assets. Also, when hybrid contracts contain financial asset as its host contract, the embedded derivative will not be bifurcated as the whole hybrid contract would be classified as a financial asset. 087087 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 088088 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 088 - 9 - Nature of the contractual cash flow Principal and Interest only Amortized Cost(*1) Collection of the contractual cashflow Business Model Collection of the contractual cashflow and sale of asset Sale of asset, others FVTOCI(*1) FVTPL Other than the above FVTPL(*2) (*1) An irrevocable election is available to designate a financial asset to be classified as FVTPL, for the purpose of eliminating or reducing accounting discrepancies. (*2) For equity securities held for purposes other than short-term trading, an irrevocable election is available to designate them as FVTOCI financial assets. As the requirements to classify a financial asset as either amortized cost or FVTPL are more stringent in K- IFRS 1109 than in K-IFRS 1039, the variability of net income may increase as the amount of FVTPL financial assets is increased due to the adoption of K-IFRS 1109. As of year-end the Group currently holds loans and receivables amounting to 267,106,204 million Won, held-to-maturity financial assets amounting to 16,749,296 million Won, available-for-sale financial assets amounting to 15,352,950 million Won, and FVTPL financial assets amounting to 2,727,303 million Won. According to K-IFRS 1109, a financial asset may be measured at amortized cost only when its cashflows are solely principal and interest on specified dates on the contract and when the purpose of holding such asset is only to receive the contractual cashflows. As of year-end the Group holds loans and receivables amounting to 267,106,204 million Won and held-to-maturity financial assets amounting to 16,749,296 million Won which are measured at amortized cost. This amount includes 51,653 million Won of hybrid contracts in which the host contract, after separating the embedded derivatives, is a debt security. The estimated impact on the classification and measurement of Group’s financial assets (except derivatives) as of year-end is presented as follows. The following information is constructed from the accounting system for financial instruments built for the purpose of adopting K-IFRS 1109. Classification per K-IFRS 1039 Classification per K-IFRS 1109 Amount per K-IFRS 1039 Amount per K-IFRS 1109 (Unit : Korean Won in millions) Accounts Deposits Deposits Debt securities Debt securities Debt securities Debt securities Debt securities Amortized cost Loans and receivables Financial assets at FVTPL FVTPL Financial assets at FVTPL FVTPL FVTPL AFS financial assets FVTOCI AFS financial assets AFS financial assets Amortized cost Held-to-maturity financial assets Amortized cost Equity securities Financial assets at FVTPL FVTPL FVTPL Equity securities AFS financial assets FVTOCI Equity securities AFS financial assets FVTPL Loans Amortized cost Loans Other financial Loans and receivables Loans and receivables assets Loans and receivables Amortized cost Total financial assets except derivatives 8,870,835 25,972 2,654,027 46,855 12,874,209 308,181 8,870,835 25,972 2,654,027 46,855 12,874,209 322,300 16,749,296 47,304 1,273,498 850,207 279,032 253,014,491 16,749,296 47,304 1,274,716 850,207 280,001 253,014,491 6,772,088 303,765,995 6,772,088 303,782,301 WOORI BANKANNUAL REPORT 2017 089 - 10 - Among the financial assets measured at amortized cost, loans and receivables and held-to-maturity financial assets amounting to 279,032 million Won and AFS financial assets amounting to 1,320,353 million Won would be reclassified to FVTPL financial assets as a result of adopting K-IFRS 1109. b) Classification and Measurement of Financial Liabilities According to the K-IFRS 1109, the amount of changes in the fair value of financial liabilities measured at FVTPL due to changes in credit risk is presented as part of other comprehensive income, and such amount is not recycled subsequently in profit or loss. However, when recognizing the fair value changes in other comprehensive income causes or magnifies accounting discrepancies, the amount is recognized in profit or loss instead. As of year-end the Group holds financial liabilities amounting to 295,386,968 million Won, and out of this amount 251,796 million Won has been designated as FVTPL financial liabilities. In relation to these financial liabilities, the increase in fair value amounting to 31,275 million Won has been recognized as losses in the current period. The results of the analysis conducted to determine the financial impact of applying K-IFRS 1109 on FVTPL financial liabilities as of year-end show that the cumulative changes in fair value of FVTPL financial liabilities as a result of changes in credit risk amounted to 133 million Won. c) Impairment: Financial assets and Contract assets K-IFRS 1109 requires the recognition of allowance for expected credit losses for debt instruments, lease receivables, contract assets, loan commitments and financial guarantee contracts measured at either amortized cost or FVTPL. The allowance to be recognized under K-IFRS 1109 is the amount of expected 12-month credit loss or the expected lifetime credit loss, according to the 3 stages of credit risk deterioration since initial recognition as shown below. Stage 1 Credit risk has not significantly increased since initial recognition(*) Expected 12-month credit losses: Expected credit losses due to possible defaults on financial instruments within 12-month period from the year-end. Allowance for expected credit losses Stage 2 Credit risk has significantly increased since initial recognition Stage 3 Credit has been impaired Expected lifetime credit losses: Expected credit losses from all possible defaults during the expected lifetime of the financial instruments. (*) Credit risk may be considered to not have been significantly increased when credit risk is low at year-end. Meanwhile, for financial assets already impaired at initial recognition, the allowance for expected credit losses per K-IFRS 1109 is the amount of cumulative changes in the expected lifetime credit losses after its initial recognition. As of year-end the Group holds loans and receivables amounting to 267,106,204 million Won in accordance with K-IFRS 1039. In relation to this am ount, the Group has recognized allowance for credit losses amounting to 1,830,242 million Won. The expected impact on the allowance for credit losses as of year-end using the Group’s system for allowances is as follows. 089089 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 090 090090 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner - 11 - Allowance for credit losses per K-IFRS 1039(A) Allowance for credit losses per K-IFRS 1109 (B) Increases(B-A) (Unit : Korean Won in millions) 2,458 - - - 1,827,785 183,247 66,115 2,079,605 3,092 9,331 4,253 5,078 2,075,752 192,376 104,887 2,385,438 634 9,331 4,253 5,078 247,967 9,129 38,772 305,833 Accounts Deposits Debt securities AFS debt securities Held-to-maturity debt securities Loan receivables and other financial assets Guarantees Loan commitments Total d) Hedge accounting The requirements for hedge accounting in K-IFRS 1109 has become more lenient as compared to K-IFRS 1039. That is, more financial instruments may now be considered to be a hedged item and/or a hedging instrument, the quantitative basis for evaluating high hedge effectiveness (80~125%) has been abolished, and the retroactive assessment requirement has also been abolished. These allow the firms to concentrate on hedging activities. There are no significant impacts to the Group’s financial statements related to hedge accounting as a result of adopting K-IFRS 1109. Enactments to K-IFRS 1115 – Revenue from Contracts with Customers The core principle under K-IFRS 1115 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments introduces a 5-step approach to revenue recognition and measurement: 1) Identify the contract with a customer, 2) Identify the performance obligations in the contract, 3) Determine the transaction price, 4) Allocate the transaction price to the performance obligations in the contract, 5) Recognize revenue when (or as) the entity satisfies a performance obligation. This standard will supersede K-IFRS 1011 - Construction Contracts, K-IFRS 1018- Revenue, K-IFRS 2113 - Customer Loyalty Programmes, K-IFRS 2115-Agreements for the Construction of Real Estate, K-IFRS 2118 - Transfers of Assets from Customers, and K-IFRS 2031-Revenue-Barter Transactions Involving Advertising Services. The enactsments are effective for annual periods beginning on or after 1 January 2018. Enactments to K-IFRS 1116—Leases K-IFRS 16 introduces a comprehensive model for the identification of lease arrangements and accountings treatments for both lessors and lessees. K-IFRS 16 will supersede the current lease guidance including K- IFRS 1017 Leases and the related interpretations. The enactments are effective for annual periods beginning on or after 1 January 2019. K-IFRS 1116 distinguishes leases and service contracts on the basis of whether an identified asset is controlled by a customer. Distinctions of operating leases and finance leases are removed for lessee accounting, and is replaced by model where a right-of-use asset and corresponding liability have to be recognized for all leases by lessees except for short-term leases and leases of low value assets. WOORI BANKANNUAL REPORT 2017 091091 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 091 - 12 - The right-of-use asset is initially measured at cost and subsequently measured at cost (subject to certain exceptions) less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at that date. Subsequently, the lease liability is adjusted for interest and lease payments, as well as the impact of lease modifications, amongst others. Furthermore, the classification of cash flows will also be affected as operating lease payments under K-IFRS 1017 are presented as operating cash flows; whereas under the K-IFRS 1116 model, the lease payments will be split into a principal and an interest portion which will be presented as financing and operating cash flows respectively. In contrast to lessee accounting, K-IFRS 1116 substantially carries forward the lessor accounting requirements in K-IFRS 1017, and continues to require a lessor to classify a lease either as an operating lease or a finance lease. Furthermore, extensive disclosures are required by K-IFRS 1116. In contrast, 1) for finance leases where the Group is a lessee and 2) in cases where the Group is a lessor, the Group do not anticipate that the application of K-IFRS 1116 will have a significant impact on the amounts recognized in the Group’s consolidated financial statements. Amendments to K-IFRS 1102—Share-based Payment The amendments include: 1) when measuring the fair value of share-based payment, the effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payment should be consistent with the measurement of equity-settled share-based payment, 2) Share-based payment transaction in which the Group settles the share-based payment arrangement net by withholding a specified portion of the equity instruments per statutory tax withholding requirements would be classified as equity-settled in its entirety, if otherwise would be classified as equity-settled without the net settlement feature, and 3) when a cash-settled share-based payment changes to an equity-settled share-based payment because of modifications of the terms and conditions, the original liability recognized is derecognized and the equity-settled share-based payment is recognized at the modification date fair value. Any difference between the carrying amount of the liability at the modification date and the amount recognized in equity at the same date would be recognized in profit and loss immediately. The amendments are effective for annual periods beginning on or after January 1, 2018. Amendments to K-IFRS 1040—Transfers of Investment Property The amendments clarify that a transfer to, or from, investment property necessitates an assessment of whether a property meets, or has ceased to meet, the definition of investment property, supported by observable evidence that a change in use has occurred. The amendments further clarify that situations other than the ones listed in K-IFRS 1040 may evidence a change in use, and that a change in use is possible for properties under construction (i.e. a change in use is not limited to completed properties). The amendments are effective for annual periods beginning on or after January 1, 2018 with earlier application permitted. Entities can apply the amendments either retrospectively (if this is possible without the use of hindsight) or prospectively. Enactments to K-IFRS 2122—Foreign Currency Transactions and Advance Consideration The interpretation addresses how to determine the ‘date of transaction’ for the purpose of determining the exchange rate to use on initial recognition of an asset, expense or income, when consideration for that item has been paid or received in advance in a foreign currency which resulted in the recognition of a non- monetary asset or non-monetary liability (e.g. a non-refundable deposit or deferred revenue). The interpretation specifies that the date of transaction is the date on which the entity initially recognizes the non-monetary asset on non-monetary liability arising from the payment or receipt of advance consideration. If there are multiple payments or receipts in advance, the interpretation requires an entity to determine the date of transaction for each payment or receipt of advance consideration. The interpretation is effective for annual periods beginning on or after January 1, 2018 with earlier application permitted. Entities can apply the interpretation either retrospectively or prospectively. Specific transition provisions apply to prospective application. WOORI BANKANNUAL REPORT 2017 092 - 13 - Annual Improvements to K-IFRS 2014-2016 Cycle The amendments include partial amendments to K-IFRS 1101 ‘First-time Adoption of K-IFRS’ and K-IFRS 1028 ‘Investments in Associates and Joint Ventures.’ Amendments to K-IFRS 1028 provide that an investment company such as a venture capital investment vehicle may selectively designate each of its investment in associates and/or joint ventures to be measured at FVTPL, and that such designation must be made at the time of each investment’s initial recognition. In addition, when non-investment companies apply equity method to investment in associates and/or joint ventures that are investment companies, these companies may apply the same fair value measurement used by the said associates to value their own subsidiaries. This accounting treatment may be selectively applied to each associate. These amendments should be applied retrospectively and are available for early adoption. The amendments are effective for annual periods beginning on or after 1 January 2018. The Group is neither a venture capital investment vehicle nor is adopting K-IFRS for the first time, thus it is expected that the amendments explained above will not affect the Group’s financial statements. Furthermore, the Group does not own shares of an associate or a joint venture that are classified as investment companies. The Group is in the process of evaluating the impact of the above-mentioned amendments in the consolidated financial statements. (2) Basis of consolidated financial statement presentation The consolidated financial statements incorporate the financial statements of the Bank and the entities (including structured entities) controlled by the Bank (and its subsidiaries, that is the Group). Control is achieved where the Group 1) has the power over the investee, 2) is exposed, or has rights, to variable returns from its involvement with the investee, and 3) has the ability to use its power to affect its returns. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. When the Group has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Group considers all relevant facts and circumstances in assessing whether or not the Group's voting rights in an investee are sufficient to give it power, including: • The relative size of the Group's holding of voting rights and dispersion of holdings of the other vote holders; • Potential voting rights held by the Group, other vote holders or other parties; • Rights arising from other contractual arrangements; • Any additional facts and circumstances that indicate that the Group has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders' meetings. Income and expenses of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the date the Group gains control until the date when the Group ceases to control the subsidiary. Profit or loss and each component of other comprehensive income are attributed to the owner of the Group and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owner of the Group and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intra-group transactions and, related assets and liabilities, income and expenses are eliminated in full on consolidation. 092092 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 093 093093 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner - 14 - Changes in the Group’s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group’s interests and the non- controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owner of the Group. When the Group loses control of a subsidiary, a gain or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non- controlling interests. When assets of the subsidiary are carried at revalued amounts or fair values and the related cumulative gain or loss has been recognized in other comprehensive income and accumulated in equity, the amounts previously recognized in other comprehensive income and accumulated in equity are accounted for as if the Group had directly disposed of the relevant assets (i.e. reclassified to profit or loss or transferred directly to retained earnings). The fair value of any investment retained in the former subsidiary at the date when control is lost is recognized as the fair value on initial recognition for subsequent accounting under K-IFRS 1039 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or a joint venture. (3) Business Combinations Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition- date fair values of the assets transferred by the Group, liabilities assumed by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition- related costs are generally recognized in net income as incurred. At the acquisition date, the acquiree’s identifiable assets, liabilities and contingent liabilities that meet the condition for recognition under K-IFRS 1103 are recognized at their fair value, except that: • deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements are recognized and measured in accordance with K-IFRS 1012 Income Taxes and K-IFRS 1019 Employee Benefits, respectively; • liabilities or equity instruments related to share-based payment arrangements of the acquiree or share- based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with K-IFRS 1102 Share-based Payment at the acquisition date; and • non-current assets (or disposal groups) that are classified as held for sale in accordance with K-IFRS 1105 Non-current Assets Held for Sale and Discontinued Operations are measured at the lower of their previous carrying amounts and fair value less costs to sell. Any excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the Group’s previously held equity interest (if any) in the acquiree over the net of identifiable assets and liabilities assumed of the acquiree at the acquisition date is recognized as goodwill which is included in intangible assets. If, after reassessment, the Group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any), the excess is recognized immediately in net income as a bargain purchase gain. Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non- controlling interests' proportionate share of the recognized amounts of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another K-IFRS. WOORI BANKANNUAL REPORT 2017 094094 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 094 - 15 - When the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the ‘measurement period’ (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date. The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with K-IFRS 1039 Financial Instruments: Recognition and Measurement, or K-IFRS 1037 Provisions, Contingent Liabilities and Contingent Assets, as appropriate, with the corresponding gain or loss being recognized in profit or loss. When a business combination is achieved in stages, the Group's previously held equity interest in the acquiree is remeasured at fair value at the acquisition date (i.e. the date when the Group obtains control) and the resulting gain or loss, if any, is recognized in net income. Amounts arising from changes in value of interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are reclassified to net income where such treatment would be appropriate if that interest were disposed of. In case where i) a common entity ultimately controls over all participating entities, or businesses, in business combination transaction, prior to and after the transaction continuously, and ii) the control is not temporary, the transaction meets the definition of “business combination under common control” and it is deemed that the transaction only results in the changes in legal substance, not economic substance, from the perspective of the ultimate controlling party. Thus, in such transactions, the acquirer recognizes the assets and liabilities of the acquiree on its financial statements at the book values as recognized in the ultimate controlling party’s consolidated financial statements, and the difference between the book value of consideration transferred to and the book value of net assets transferred in is recognized as equity. (4) Investments in joint ventures and associates An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in making decision on the financial and operating policy of the investee but is not control or joint control over those policies. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to net assets relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The net income of current period and the financial results of the joint ventures and associates are incorporated in these consolidated financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with K-IFRS 1105 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, an investment in the joint ventures and associates is initially recognized in the consolidated statements of financial position at cost and adjusted thereafter to recognize the Group's share of the net assets of the joint ventures and associates and any impairment. When the Group's share of losses of the joint ventures and associates exceeds the Group's interest in the associate, the Group discontinues recognizing its share of further losses. Additional losses are recognized only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the joint ventures and associates. Any excess of the cost of acquisition over the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the joint ventures and associates recognized at the date of acquisition is recognized as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is recognized immediately in net income. WOORI BANKANNUAL REPORT 2017 095 095095 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner - 16 - Upon a loss of significant influence over the joint ventures and associates, the Group discontinues the use of the equity method and measures at fair value of any investment that the Group retains in the former joint ventures and associates from the date when the Group loses significant influence. The fair value of the investment is regarded as its fair value on initial recognition as a financial asset in accordance with K-IFRS 1039 Financial Instruments; Recognition and Measurement. The Group recognized differences between the carrying amount and fair value in net income and it is included in determination of the gain or loss on disposal of joint ventures and associates. The Group accounts for all amounts recognized in other comprehensive income in relation to that joint ventures and associates on the same basis as would be required if the joint ventures and associates had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognized in other comprehensive income by an associate would be reclassified to net income on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to net income as a reclassification adjustment. When the Group’s ownership of interest in an associate or a joint venture decreases but the Group continues to maintain significant influence over an associate or a joint venture, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been recognized in other comprehensive income relating to that decrease in ownership interest if the gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities. Meanwhile, if interest on associate or joint venture meets the definition of non- current asset held for sale, it is accounted for in accordance with K-IFRS 1105. The requirements of K-IFRS 1039 Financial Instruments: Recognition and Measurement to determine whether there has been a loss event are applied to identify whether it is necessary to recognize any impairment loss with respect to the Group’s investment in the joint ventures and associates. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with K-IFRS 1036 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognized is not allocated to any asset (including goodwill), which forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognized in accordance with K-IFRS 1036 to the extent that the recoverable amount of the investment subsequently increases. The Group continues to use the equity method when an investment in an associate becomes an investment in a joint venture or an investment in a joint venture becomes an investment in an associate. There is no remeasurement to fair value upon such changes in ownership interests. When a subsidiary transacts with an associate or a joint venture of the Group, profits and losses resulting from the transactions with the associate or joint venture are recognized in the Group's consolidated financial statements only to the extent of interests in the associate or joint venture that are not related to the Group. (5) Investment in joint operation A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. When the Group operates as a joint operator, it recognizes in relation to its interest in a joint operation: (a) its assets, including its share of any assets held jointly; (b) its liabilities, including its share of any liabilities incurred jointly; (c) its revenue from the sale of its share of the output arising from the joint operation; (d) its share of the revenue from the sale of the output by the joint operation; and (e) its expenses, including its share of any expenses incurred jointly. The Group accounts for the assets, liabilities, revenues and expenses relating to its interest in a joint operation in accordance with the IFRSs applicable to the particular assets, liabilities, revenues and expenses. When the Group enters into a transaction with a joint operation in which it is a joint operator, such as a sale or contribution of assets, it is conducting the transaction with the other parties to the joint operation and, as such, the Group recognizes gains and losses resulting from such a transaction only to the extent of the other parties’ interests in the joint operation. WOORI BANKANNUAL REPORT 2017 096096 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 096 - 17 - When the Group enters into a transaction with a joint operation in which it is a joint operator, such as a purchase of assets, it does not recognize its share of the gains and losses until it resells those assets to a third party. (6) Revenue recognition 1) Interest income Interest income on financial assets that are classified as loans and receivables, available-for-sale or held-to- maturity is determined using the effective interest method. The effective interest method is a method of calculating the amortized cost of a financial asset (or group of financial assets) and of allocating the interest income over the expected life of the asset. The effective interest rate is the rate that exactly discounts estimated future cash flows to the instrument's initial carrying amount. Calculation of the effective interest rate takes into account fees payable or receivable that is an integral part of the instrument's yield, premiums or discounts on acquisition or issue, early redemption fees and transaction costs. All contractual terms of a financial instrument are considered when estimating future cash flows. 2) Loan origination fees and costs The commission fees earned on loans, which is part of the effective interest rate of loans, is accounted for deferred origination fees. Incremental cost related to the acquisition or disposal is accounted for deferred origination costs, and it is amortized on the effective interest method and included in interest revenues on loans. 3) Fees and commissions income Commitment and utilization fees are determined as a percentage of the outstanding facility. If it is unlikely that a specific lending arrangement will be entered into, such fees are taken to net income over the life of the facility otherwise they are deferred and included in the effective interest rate on the advance. Fees in respect of services are recognized as the right to consideration accrues through the provision of the service to the customer. The arrangements are generally contractual and the cost of providing the service is incurred as the service is rendered. The price is usually fixed and determinable. Credit card fees include commission received from merchants for processing credit card transaction and annual fees received from credit card holders. Revenue from the commission is accrued to net income when the service performed and annual fee is deferred and recognized as income over the period of the service provided. 4) Trust fees and compensation related to trust accounts The Group receives fees for its management of unconsolidated trust assets, which are recognized on an accrual basis when the management services are provided and earned. The Group also is entitled to receive performance-based fees for certain trust accounts. These performance-based fees are recognized at the end of the performance period. In addition, a certain trust account which the Group guarantees to repay the principals and minimum interests of the trust account to its beneficiaries shall be included in the consolidated financial statements. The Group recognizes incomes when earned and expenses when interests to be paid to beneficiaries are accrued. (7) Accounting for foreign currencies The Group’s consolidated financial statements are presented in Korean Won, which is the functional currency of the Group. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at its prevailing exchange rates at the date. Foreign exchange differences on monetary items that qualify as hedging instruments in a cash flow hedge or that form part of net investment in foreign operations are recognized in equity. WOORI BANKANNUAL REPORT 2017 097 097097 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner - 18 - A monetary available-for-sale (“AFS”) financial asset is treated as if it were carried at amortized cost in the foreign currency. Accordingly, for such financial assets, exchange differences resulting from retranslating amortized cost are recognized in net income. Non-monetary items denominated in foreign currencies that are stated at fair value are translated into Korean Won at foreign exchange rates at the dates the values were determined. Translation differences arising on non- monetary items measured at fair value are recognized in net income except for differences arising on non- monetary AFS financial assets, for example equity shares, which are included in the AFS reserve in equity unless the asset is the hedged item in a fair value hedge. The Group identifies the most appropriate functional currency for each foreign operation based on the foreign operation’s activities. If Korean Won is not the foreign operation’s functional currency, its assets and liabilities, including goodwill and fair value adjustments arising on acquisition, are translated into Korean Won at foreign exchange rates at the end of each reporting date while the revenues and expenses are translated into Korean Won at average exchange rates for the period unless these do not approximate to the foreign exchange rates at the dates of the transactions. Foreign exchange differences arising on the translation of a foreign operation are recognized directly in equity and included in net income on its disposal. (8) Cash and cash equivalents Cash and cash equivalents consist of cash on hand, demand deposits, interest-earning deposits with original maturities of up to 3 months of acquisition date and highly liquid investment assets that are readily convertible to known amounts of cash and subject to an insignificant risk of changes in value. (9) Financial assets and financial liabilities 1) Financial assets A regular way purchase or sale of financial assets is recognized or derecognized on the trade or settlement date. A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose term requires delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned. On initial recognition, financial assets are classified into financial assets at fair value through profit or loss (“FVTPL”), AFS financial assets, held-to-maturity (“HTM”) and loans and receivables. a) Financial assets at FVTPL: A financial asset is classified as held for trading if:    it has been acquired principally for the purpose of selling it in the near term; or on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of short-term profit-taking; or it is a derivative that is not designated and effective as a hedging instrument. A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial recognition if:    such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or it forms part of a contract containing one or more embedded derivatives, and K-IFRS 1039 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL. WOORI BANKANNUAL REPORT 2017 098 - 19 - Financial assets designated by the Group on initial recognition as at FVTPL are recognized at fair value, with transaction costs recognized in net income, and are subsequently measured at fair value. Gains and losses on financial assets that are designated as at FVTPL are recognized in net income as they arise. b) AFS financial assets: Financial assets that are not classified as HTM, financial assets at FVTPL, or loans and receivables, are classified as AFS. Financial assets can be designated as AFS on initial recognition. AFS financial assets are initially recognized at fair value plus directly related transaction costs. They are subsequently measured at fair value. Unquoted equity investments whose fair value cannot be measured reliably are carried at cost and classified as AFS financial assets. Impairment losses in monetary and non-monetary AFS financial assets and dividends on non-monetary financial assets are recognized in net income. Interest revenue on monetary financial assets is calculated using the effective interest method. Other changes in the fair value of AFS financial assets and any related tax are reported in a separate component of shareholders' equity until disposal, when the cumulative gain or loss is recognized in net income. c) HTM investments: A financial asset may be classified as a HTM investment only if it has fixed or determinable payments, a fixed maturity, and the Group has the positive intention and ability to hold the financial asset to maturity. HTM investments are initially recognized at fair value plus directly related transaction costs. They are subsequently measured at amortized cost using the effective interest method less any impairment losses. d) Loans and receivables: Non-derivative financial assets with fixed or determinable repayments that are not quoted in an active market are classified as loans and receivables, except those that are classified as AFS or as held-for-trading, or designated as at FVTPL. Loans and receivables are initially recognized at fair value plus directly related transaction costs. They are subsequently measured at amortized cost using the effective interest method less any impairment losses. Interest income is recognized using the effective interest method, except for the short-term receivables to which the present value discount is not meaningful. 2) Financial liabilities On initial recognition financial liabilities are classified financial liabilities at FVTPL (held for trading, and financial liabilities designated as at FVTPL) and financial liabilities measured at amortized cost. A financial liability is classified as held-for-trading if it is incurred principally for repurchase in the near term, or forms part of a portfolio of financial instruments that are managed together and for which there is evidence of short-term profit taking, or it is a derivative (not in a qualifying hedge relationship). Held-for- trading financial liabilities are recognized at fair value with transaction costs being recognized in net income. Subsequently, they are measured at fair value. Gains and losses are recognized in net income as they arise. A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial recognition if:    such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group's documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or it forms part of a contract containing one or more embedded derivatives, and K-IFRS 1039 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL. 098098 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 099 - 20 - Financial liabilities that the Group designates on initial recognition as being at FVTPL are recognized at fair value, with transaction costs being recognized in net income, and are subsequently measured at fair value. Gains and losses on financial liabilities that are designated as at FVTPL are recognized in net income as they arise. All other financial liabilities, such as deposits due to customers, borrowings, and debentures, are measured at amortized cost using the effective interest method. 3) Reclassifications Held-for-trading and AFS financial assets that meet the definition of loans and receivables (non-derivative financial assets with fixed or determinable payments that are not quoted in an active market) may be reclassified to loans and receivables if the Group has the intention and ability to hold the financial asset for the foreseeable future or until maturity. The Group typically regards the foreseeable future as twelve months from the date of reclassification. Reclassifications are made at fair value. This fair value becomes the asset's new cost or amortized cost as appropriate. Gains and losses recognized up to the date of reclassification are not reversed. 4) Derecognition of financial assets and liabilities The Group derecognizes a financial asset when the contractual right to the cash flows from the asset is expired, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another company. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognizes its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognize the financial asset and also recognizes a collateralized borrowing for the proceeds received. On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulated gain or loss that had been recognized in other comprehensive income and accumulated in equity is recognized in profit or loss. On derecognition of a financial assets other than in its entirety (e.g. when the Group retains an option to repurchase part of a transferred asset, or it retains a residual interest and such an retained interest indicates that the transferor has neither transferred nor retained substantially all the risks and rewards of ownership and has retained control of the transferred asset), the Group allocates the previous carrying amount of the financial asset between the part it continues to recognize under continuing involvement, and the part it no longer recognizes on the basis of the relative fair value of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognized and the sum of the consideration received for the part that is no longer recognized and any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in profit or loss. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues to be recognized and the part that is no longer recognized on the basis of the relative fair value of those parts. The Group derecognizes the financial liability, when Group's obligations are discharged, canceled or expired. The difference between paid cost and the carrying amount of financial liabilities is recorded in profit or loss. 099099 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 100 - 21 - 5) Fair value of financial assets and liabilities Financial instruments classified as held-for-trading or designated as at FVTPL and financial assets classified as AFS are recognized in the financial statements at fair value. All derivatives are measured at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in and orderly transaction between market participants at the measurement date. Fair values are determined from quoted prices in active markets for identical financial assets or financial liabilities where these are available. The Group characterizes active markets as those in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. Where a financial instrument is not in active market characterized by low transaction volumes, price quotations which vary substantially among market participants, or in which minimal information is released publicly, fair values are established using valuation techniques rely on alternative market data or internally developed models using significant inputs that are generally readily observable from objective sources. Market data includes prices of financial instruments with similar maturities and characteristics, duration, interest rate yield curves, and measures of volatility. The amount determined to be fair value may incorporate the management of the Group’s own assumptions (including assumptions that the Group believes market participants would use in valuing the financial instruments and assumptions relating to appropriate risk adjustments for nonperformance and lack of marketability). The valuation techniques used to estimate the fair value of the financial instruments include market approach and income approach, each of which involves a significant degree of judgment. Under the market approach, fair value is determined by reference to a recent transaction involving the financial instruments or by reference to observable valuation measures for comparable companies or assets. Under the income approach, fair value is determined by converting future amounts (e.g., cash flows or earnings) to a single present amount (discounted) using current market expectations about the future amounts. In determining value under this approach, the Group makes assumptions regarding, among other things, revenues, operating income, depreciation and amortization, capital expenditures, income taxes, working capital needs, and terminal value of the financial investments. These valuation techniques involve a degree of estimation, the extent of which depends on the instrument’s complexity and the availability of market-based data. The following are descriptions of valuation methodologies used by the Group to measure various financial instruments at fair value. a. Financial assets at FVTPL and AFS financial assets: The fair value of the securities included in financial assets at FVTPL and AFS financial assets are recognized in the consolidated statements of financial position based on quoted market prices, where available. For debt securities traded in the OTC market, the Group generally determines fair value based on prices obtained from independent pricing services. Specifically, with respect to independent pricing services, the Group obtains three prices per instrument from reputable independent pricing services in Korea, and generally uses the lowest of the prices obtained from such services without further adjustment. For non-marketable equity securities, the Group obtains prices from the independent pricing services. The Group validates prices received from such independent pricing services using a variety of means, including verification of the qualification of the independent pricing services, corroboration of the pricing by comparing the prices among the independent pricing services and by reference to other available market data, and review of the pricing model and assumptions used by the independent pricing services by the Group’s personnel who are familiar with market-related conditions. 100100 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 101 - 22 - b. Derivative assets and liabilities: Quoted market prices are used for the Group’s exchange-traded derivatives, such as certain interest rate futures and option contracts. All of the Group’s derivatives are traded in OTC markets where quoted market prices are not readily available are valued using internal valuation techniques. Valuation techniques and inputs to internally developed models depend on the type of derivative and nature of the underlying rate, price or index upon which the derivative’s value is based. If the model inputs for certain derivatives are not observable in a liquid market, significant judgments on the level of inputs used for valuation techniques are required. c. Valuation Adjustments: By using derivatives, the Group is exposed to credit risk if counterparties to the derivative contracts do not perform as expected. If counterparty fails to perform, counterparty credit risk is equal to the amount reported as a derivative asset in the consolidated statements of financial position. The amounts reported as a derivative asset are derivative contracts in a gain position. Few of the Group’s derivatives are listed on an exchange. The majority of derivative positions are valued using internally developed models that use as their basis observable market inputs. Therefore, an adjustment is necessary to reflect the credit quality of each counterparty to arrive at fair value. Counterparty credit risk adjustments are applied to derivative assets, such as OTC derivative instruments, when the market inputs used in valuation models may not be indicative of the creditworthiness of the counterparty. Adjustments are also made when valuing financial liabilities to reflect the Group’s own credit standing. The adjustment is based on probability of default of a counterparty and loss given default. The adjustment also takes into account contractual factors designed to reduce the Group’s credit exposure to each counterparty. To the extent derivative assets (liabilities) are subject to master netting arrangements, the exposure used to calculate the credit risk adjustment is net of derivatives in a loss (gain) position with the same counterparty and cash collateral received (paid). 6) Impairment of the financial assets The Group assesses at the end of each reporting date whether there is any objective evidence that a financial asset or group of financial assets classified as AFS, HTM or loans and receivables is impaired. A financial asset or portfolio of financial assets is impaired and an impairment loss incurred if there is objective evidence of impairment as result of one or more events that occurred after the initial recognition asset and that event (or events) has an impact on the estimated future cash flows of the financial asset. a) Financial assets carried at amortized cost: If there is objective evidence that an impairment loss on a financial asset or group of financial assets classified as HTM investments or as loans and receivables has been incurred, the Group measures the amount of the loss as the difference between the carrying amount of the asset or group of assets and the present value of estimated future cash flows from the asset or group of assets discounted at the effective interest rate of the instrument at initial recognition. For collateralized loans and receivables, estimated future cash flows include cash flows that may result from foreclosure less the costs of obtaining and selling the collateral. Impairment losses are assessed individually for financial assets that are individually significant and assessed either individually or collectively for assets that are not individually significant. In making collective assessment of impairment, financial assets are grouped into portfolios on the basis of similar risk characteristics. Future cash flows from these portfolios are estimated on the basis of the contractual cash flows and historical loss experience for assets with similar credit risk characteristics. Historical loss experience is adjusted, on the basis of observable data, to reflect current conditions not affecting the period of historical experience. 101101 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 102102 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 102 - 23 - Impairment losses are recognized in net income and the carrying amount of the financial asset or group of financial assets reduced by establishing a provision for impairment losses. If, in a subsequent period, the amount of the impairment loss reduces and the reduction can be ascribed to an event after the impairment was recognized (i.e., improvement in the credit quality of a debtor), the previously recognized loss is reversed by adjusting the provision. Once an impairment loss has been recognized on a financial asset or group of financial assets, interest income is recognized on the carrying amount using the rate of interest at which estimated future cash flows were discounted in measuring impairment. It is not the Group’s usual practice to write-off the asset at the time an impairment loss is recognized. Impaired loans and receivables are written off (i.e. the impairment provision is applied in writing down the loan's carrying value in full) when the Group concludes that there is no longer any realistic prospect of recovery of part or the entire loan. Amounts recovered after a loan has been written off are reflected to the provision for the period in which they are received. b) Financial assets carried at fair value: When a decline in the fair value of a financial asset classified as AFS has been recognized directly in other comprehensive income and there is objective evidence that the asset is impaired, the cumulative loss is removed from other comprehensive income and recognized in net income. The loss is measured as the difference between the amortized cost of the financial asset and its current fair value. Impairment losses on AFS equity instruments are not reversed through net income, but those on AFS debt instruments are reversed, if there is a decrease in the cumulative impairment loss that is objectively related to a subsequent event. (10) Offsetting financial instruments Financial assets and liabilities are presented in net in the consolidated statements of financial position when the Group has an enforceable legal right to set off and an intention to settle on a net basis or to realize an asset and settle the liability simultaneously. (11) Investment properties The Group classifies a property held to earn rentals and/or for capital appreciation as an investment property. Investment properties are measured initially at cost, including transaction costs, less subsequent depreciation and impairment. Subsequent costs are included in the carrying amount of the asset or recognized as a separate asset if it is probable that future economic benefits associated with the assets will flow into the Group and the cost of an asset can be measured reliably. Routine maintenance and repairs are expensed as incurred. While land is not depreciated, all other investment properties are depreciated based on the respective assets’ estimated useful lives using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any change in estimate accounted for on a prospective basis. An investment property is derecognized from the consolidated financial statements on disposal or when it is permanently withdrawn from use and no future economic benefits are expected even from its disposal. The gain or loss on derecognition of an investment property is calculated as the difference between the net disposal proceeds and the carrying amount of the property and is recognized in profit or loss in the period of the derecognition. (12) Premises and equipment Premises and equipment are stated at cost less subsequent accumulated depreciation and accumulated impairment losses. The cost of an item of premises and equipment is directly attributable to their purchase or construction, which includes any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. It also includes the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located. WOORI BANKANNUAL REPORT 2017 103 103103 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner - 24 - Subsequent costs to replace part of the premises and equipment are recognized in carrying amount of an asset or as an asset if it is probable that the future economic benefits associated with the assets will flow into the Group and the cost of an asset can be measured reliably. Routine maintenance and repairs are expensed as incurred. While land is not depreciated, for all other premises and equipment, depreciation is charged to net income on a straight-line basis on the estimated economic useful lives as follows: Buildings used for business purpose Structures in leased office Properties for business purpose Leased assets Useful life 35 to 57 years 4 to 5 years 4 to 5 years Useful lives of the same kind or similar other premises and equipment The Group reassesses the depreciation method, the estimated useful lives and residual values of premises and equipment at the end of each reporting period. If expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate. When the carrying amount of a fixed asset exceeds the estimated recoverable amount, the carrying amount of such asset is reduced to the recoverable amount. (13) Intangible assets and goodwill Intangible assets are stated at the manufacturing cost or acquisition cost plus additional incidental expenses less accumulated amortization and accumulated impairment losses. The Group’s software and industrial property right (trademark) are amortized over five years using the straight-line method. The estimated useful life and amortization method are reviewed at the end of each reporting period. If expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate. Industrial property rights Development costs Software and others Useful life 10 years 5 years 4 to 5 years In addition, when an indicator that intangible assets are impaired is noted, and the carrying amount of the asset exceeds the estimated recoverable amount of the asset, the carrying amount of the asset is reduced to its recoverable amount immediately. Goodwill acquired in a business combination is included in intangible assets. Goodwill is not amortized but tested for impairment annually to the extent of reporting unit and when there is any indication of impairment. Goodwill acquired is allocated to each of the Group’s cash-generating units (“CGU”) expected to benefit from the synergies of the combination. A CGU to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication that the CGU may be impaired. If the recoverable amount of the CGU is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to the other assets of the CGU on a pro-rata basis based on the carrying amount of each asset in the CGU. Any impairment loss for goodwill is recognized directly in net income in the consolidated statements of comprehensive income. An impairment loss recognized for goodwill is not reversed in subsequent periods. (14) Impairment of non-monetary assets Intangible assets with indefinite useful lives, such as goodwill and membership, or intangible assets that are not yet available for use are tested for impairment annually, regardless of whether or not there is any indication of impairment. All other assets are tested for impairment when there is an objective indication that the carrying amount may not be recoverable, and if the indication exists. The Group estimates the recoverable amount. Recoverable amount is the higher of value in use and net fair value less costs to sell. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount and such impairment loss is recognized immediately in net income. WOORI BANKANNUAL REPORT 2017 104 - 25 - (15) Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. 1) As a lessor Amounts due from lessees under finance leases are recognized as receivables at the amount of the Group’s net investment in the leases being the minimum lease payments and any unguaranteed residual value discount interest rate implicit in the lease. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group’s net investment outstanding in respect of the leases. Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a straight-line basis over the lease term. Operating lease assets are included within others in other assets and depreciated over their useful lives. 2) As a lessee Assets held under finance leases are initially recognized as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the consolidated statements of financial position as a finance lease obligation. Lease payments are apportioned between finance expenses and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Contingent rentals arising under finance leases are recognized as expenses in the periods in which they are incurred. Operating lease payments are recognized as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognized as expenses in the period in which they are incurred. (16) Derivative instruments Derivative instruments are classified as forward, futures, option, and swap, depending on the types of transactions and are classified as either trading or hedging depending on the purpose. Derivatives are initially recognized at fair value at the date the derivative contract is entered into and are subsequently measured to their fair value at the end of each reporting period. The resulting gain or loss is recognized in net income immediately unless the derivative is designated and effective as a hedging instrument. A derivative embedded in a contract is accounted for as a stand-alone derivative if its economic characteristics are not closely related to the economic characteristics of the host contract; unless the entire contract is measured at fair value with changes in fair value recognized in net income. The Group designates certain hedging instruments to (a) hedge of the exposure to changes in fair value of a recognized asset or liability or an unrecognized firm commitment (fair value hedge); (b) hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction (cash flow hedge); and (c) hedge of a net investment in a foreign operation. At the inception of the hedge relationship, the Group documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item. 104104 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 105 105105 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner - 26 - 1) Fair value hedge Changes in the fair value of derivatives that are designated and qualified as fair value hedges are recognized in net income immediately, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. Hedge accounting is discontinued when the Group revokes the hedging relationship or when the hedging instrument is no longer qualified for hedge accounting. The fair value adjustment to the carrying amount of the hedged item is amortized to net income from that date to maturity using the effective interest method. 2) Cash flow hedge The effective portion of changes in the fair value of derivatives that are designated and qualified as cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in net income. Amounts previously recognized in other comprehensive income and accumulated in equity are reclassified to net income when the hedged item is recognized in net income. Hedge accounting is discontinued when the hedging instrument is expired or sold, or it is no longer qualified for hedge accounting, and any cumulative gain or loss in other comprehensive income remains in equity until the forecast transaction is ultimately recognized in net income. When a forecasted transaction is no longer expected to occur, the gain or loss accumulated in equity is recognized immediately in net income. (17) Assets (or Disposal group) held for sale The Group classifies a non-current asset (or disposal group) as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell. (18) Provisions The Group recognizes provision if it has a present or contractual obligations as a result of the past event, it is probable that an outflow of resources will be required to settle the obligation, and the amount of the obligation is reliably estimated. Provision is not recognized for the future operating losses. The Group recognizes provision related to the unused portion of point rewards earned by credit card customers, payment guarantees, loan commitment and litigations. Where the Group is required to restore a leased property that is used as a branch, to an agreed condition after the contractual term expires, the present value of expected amounts to be used to dispose, decommission or repair the facilities is recognized as an asset retirement obligation. Where there are a number of similar obligations, the probability that an outflow will be required in settlement is determined by considering the obligations as a whole. Although the likelihood of outflow for any one item may be small, if it is probable that some outflow of resources will be needed to settle the obligations as a whole, a provision is recognized. (19) Capital and compound financial instruments The Group classifies a financial instrument that it issues as a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. An instrument is classified as a liability if it is a contractual obligation to deliver cash or another financial asset, or to exchange financial assets or financial liabilities on potentially unfavorable terms. An instrument is classified as equity if it evidences a residual interest in the assets of the Group after the deduction of liabilities. The components of a compound financial instrument issued by the Group are classified and accounted for separately as financial liabilities or equity as appropriate. The Group recognizes common stock as equity and redeemable preferred stocks as a liability. Direct expenses related to the issuance of new shares or options are recognized as a deduction from equity, net of any tax effects. WOORI BANKANNUAL REPORT 2017 106 - 27 - If the Group reacquires its own equity instruments, those instruments (“treasury shares”) are presented as a deduction from total equity. The gain or loss on the purchase, sale, issue, or cancellation of treasury shares is not recognized in net income but recognized directly in equity. (20) Financial guarantee contracts Under a financial guarantee contract, the Group, in return for a fee, undertakes to meet a customer’s obligations under the terms of a debt instrument if the customer fails to do so. A financial guarantee is recognized as a liability; initially at fair value and will be amortized, if not designated as at FVTPL, subsequently at the higher of its initial value less cumulative amortization and any provision under the contract measured in accordance with provision policy. Amortization is calculated so as to recognize fees in net income over the period of the guarantee. (21) Employee benefits and pensions The Group recognizes the undiscounted amount of short-term employee benefits expecting payment in exchange for the services, when employee renders services. Also, the Group recognizes expenses and liabilities in the case of accumulating compensated absences, when the employees render service that increases their entitlement to future compensated absences. Though the Group may have no legal obligation to pay a bonus, considering some cases, the Group has a practice of paying bonuses. In such cases, the Group has a constructive obligation, and thus recognizes expenses and liabilities when the employees render service. The Group is operating defined contribution retirement pension plans and defined benefit retirement pension plans. Contributions to defined contribution retirement pension plans are recognized as an expense when employees have rendered service entitling them to the contributions. For defined benefit retirement pension plans, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the end of each reporting period. Remeasurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return on plan assets (excluding interest), is reflected immediately in the consolidated statement of financial position with a charge or credit recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income will not be reclassified to profit or loss. Past service cost is recognized in profit or loss in the period of a plan amendment. Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are composed of service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements), net interest expense (income), and remeasurement. The Group presents the service cost and net interest expense (income) components in profit or loss, and the remeasurement component in other comprehensive income. Curtailment gains and losses are accounted for as past service costs. The retirement benefit obligation recognized in the consolidated statement of financial position represents the actual deficit or surplus in the Group’s defined benefit plans. Any surplus resulting from this calculation is limited to the present value of any economic benefits available in the form of refunds from the plans or reductions in future contributions to the plans. Liabilities for termination benefits are recognized at the earlier of either 1) when the Group has become not able to cancel its proposal for termination benefits, or 2) when the Group has recognized the cost of restructuring that accompanies the payment of termination benefits. 106106 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 107 - 28 - (22) Income taxes Income tax expense represents the sum of the tax currently payable and deferred tax. Current income tax expense approximates taxes to be paid or refunded for the current period and deferred income tax expense is provided on an asset and liability method whereby deferred tax assets are recognized for deductible temporary differences, including operating losses and tax credit carryforwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the carrying values of assets and liabilities for financial reporting purposes and their tax bases. Deferred income tax benefit or expense is then recognized for the change in deferred tax assets or liabilities between periods. Deferred tax assets and liabilities are measured at the tax rates on the date of enactment or substantive enactment that are expected to apply in the period in which the liability is settled or the asset realized. Deferred tax assets, including the carry forwards of unused tax losses, are recognized to the extent it is probable that the deferred tax assets will be realized. Deferred income tax assets and liabilities are offset if, and only if the Group has a legally enforceable right to offset current tax assets against current tax liabilities, and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred liabilities are not recognized if the temporary difference arises from goodwill. Deferred tax assets or liabilities are not recognized if they arise from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively. (23) Earnings per share (“EPS”) Basic EPS is calculated by earnings subtracting the dividends paid to holders of preferred stock and hybrid securities from the net income attributable to ordinary shareholders from the statements of comprehensive income and dividing by the weighted average number of common shares outstanding. Diluted EPS is calculated by adjusting the earnings and number of shares for the effects of all dilutive potential common shares. 107107 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 108 - 29 - 3. SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS The significant accounting estimates and assumptions are continually evaluated and are based on historical experiences and various factors including expectations of future events that are considered to be reasonable. Actual results can differ from those estimates based on such definitions. The accounting estimates and assumptions, which involve potential significant risks that may materially impact the book values of assets and liabilities on the Group’s consolidated financial statements, are as follows: (1) Income taxes The Group is subject to income taxes in numerous jurisdictions, which requires significant judgment in determining realization of deferred tax. Actual tax payment may be different from the provision estimate and such difference may affect the income tax expense. There are various transactions and calculations for which the ultimate tax determination is uncertain. Deferred tax assets relating to tax losses carried forward and deductible temporary differences are recognized, only to the extent that it is probable that future taxable profit will be available against which the tax losses carried forward and the deductible temporary differences can be utilized. This assessment requires significant management estimates and judgments. Future taxable profit is estimated based on, among other relevant factors, forecasted operating results, which are based on historical financial performance. In the event the Group was to determine that it would be able to realize its deferred income tax assets in the future at an amount different than their net recorded amount, the Group would make an adjustment to the provision for income taxes at such time. (2) Valuation of Financial Instruments Financial instruments classified as held-for trading or designated as at FVTPL and financial instruments classified as AFS are recognized in the financial statements at fair value. All derivatives are measured at fair value. Financial instruments, which are not traded in active market will have less objective fair value and require broad judgment in liquidity, concentration, uncertainty in market factors and assumption in price determination and other risks. The fair value of those assets is established by using valuation techniques. As described in the significant accounting policies in Note 2-(9)-5), ‘ Fair value of financial assets and liabilities’, a range of valuation techniques, which include market approach and income approach and internally developed models that incorporate various types of assumptions and variables, are used to determine the fair value of financial instruments. (3) Impairment of loans Impairment loss for loans and receivables carried at amortized cost is measured as the difference between such assets’ carrying value and the present value of estimated recoverable cash flows (not include any future loss events that have not occurred) discounted by using the initial effective interest rate. After initial recognition, when the estimated cash flow of the financial asset is affected by one or more loss events, it is determined that the financial asset is impaired. The objective evidences that a financial asset is impaired incorporate below loss events: 1) Financial assets that are individually assessed - Past due - Debt restructuring - Possible state of debtor’s bankruptcy or liquidation - Occurrence of significant impairment on securities - Breach of limit or debt covenant - Deterioration of operating performance 2) Financial assets that are not individually assessed - Repayment status of debtor or observable macro-economic indexes 108108 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 109 109109 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner - 30 - The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant (individual evaluation of impairment), and individually or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment (collective evaluation of impairment). There are two components to the Group's loan impairment provisions (individual and collective). Individual assessment of impairment losses are calculated by discounting the expected future cash flows of a loan at its original effective interest rate and comparing the resultant present value with the loan’s carrying amount. This process normally encompasses management’s best estimate, such as operating cash flow of debtor and net realizable value of any collateral held and the timing of anticipated receipts. Collective assessment of impairment losses are established on a portfolio basis using the methodology based on historical loss experience. The methodology based on historical loss experience is used to estimate inherent incurred loss on groups of assets for collective evaluation of impairment. Such methodology incorporates factors such as type of product and debtors, credit rating, portfolio size, loss emergence period and recovery period and applies probability of default on each assets (or pool of assets) and loss given default by type of collateral. Also, consistent assumptions are applied to form a formula-based model in estimating inherent loss and to determine factors on the basis of historical loss experience and current condition. The methodology and assumptions used for estimating future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience. (4) Defined benefit plan The Group operates defined benefit retirement pension plans. Defined benefit retirement pension plans are measured through actuarial valuation and the Group estimates discount rate, future wage growth rate, mortality ratio to produce actuarial valuation. Defined benefit retirement pension plans contain significant uncertainty in these estimates due to its long-term characteristic. 4. RISK MANAGEMENT The Group’s operating activity is exposed to various financial risks. The Group is required to analyze and assess the level of complex risks, and determine the permissible level of risks and manage such risks. The Group’s risk management procedures have been established to improve the quality of assets for holding or investment purposes by making decisions as how to avoid or mitigate risks through the identification of the source of the potential risks and their impact. The Group has established an approach to manage the acceptable level of risks and reduce the excessive risks in financial instruments in order to maximize the profit given risks present, for which the Group has implemented processes for risk identification, assessment, control, and monitoring and reporting. The risk is managed by the risk management department in accordance with the Group’s risk management policy. The Risk Management Committee makes decisions on the risk strategies such as the avoidance of concentration on capital at risk and the establishment of acceptable level of risk. (1) Credit risk Credit risk represents the possibility of financial losses incurred when the counterparty fails to fulfill its contractual obligations. The goals of credit risk management are to maintain the Group’s credit risk exposure to a permissible degree and to optimize its rate of return considering such credit risk. WOORI BANKANNUAL REPORT 2017 110 - 31 - 1) Credit risk management The Group considers the probability of failure in performing the obligation of its counterparties, credit exposure to the counterparty, the related default risk and the rate of default loss. The Group uses the credit rating model to assess the possibility of counterparty’s default risk; and when assessing the obligor’s credit grade, the Group utilizes credit grades derived using statistical methods. In order to manage credit risk limit, the Group establishes the appropriate credit line per obligor, company or industry. It monitors obligor’s credit line, total exposures and loan portfolios when approving the loan. The Group mitigates credit risk resulting from the obligor’s credit condition by using financial and physical collateral, guarantees, netting agreements and credit derivatives. The Group has adopted the entrapment method to mitigate its credit risk. Credit risk mitigation is reflected in qualifying financial collateral, trade receivables, guarantees, residential and commercial real estate and other collaterals. The Group regularly performs a revaluation of collateral reflecting such credit risk mitigation. 2) Maximum exposure to credit risk The Group’s maximum exposure to credit risk refers to net book value of financial assets net of allowances, which shows the uncertainties of maximum changes of net value of financial assets attributable to a particular risk without considering collateral and other credit enhancements obtained. However, the maximum exposure is the fair value amount (recorded on the books) for derivatives, maximum contractual obligation for payment guarantees and loan commitment for loan contracts. The maximum exposure to credit risk is as follows (Unit: Korean Won in millions): December 31, 2017 December 31, 2016 Loans and receivables: Korean treasury and government agencies Banks Corporates Consumers Sub-total Financial assets at fair value through profit or loss (“FVTPL”): Gold banking assets Debt securities held for trading Financial assets designated at FVTPL Derivative assets for trading Sub-total Available-for-sale (“AFS”) debt securities Held-to-maturity (“HTM”) securities Derivative assets for hedging Off-balance accounts : Guarantees Loan commitments Sub-total Total 8,823,584 26,845,309 90,570,551 140,866,760 267,106,204 25,972 2,644,333 9,694 3,115,775 5,795,774 13,229,244 16,749,296 59,272 12,859,715 80,760,325 93,620,040 396,559,830 16,058,305 20,242,260 88,985,566 133,106,502 258,392,633 26,180 2,644,916 4,348 2,898,295 5,573,739 16,541,888 13,910,251 140,577 14,761,784 83,795,496 98,557,280 393,116,368 110110 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 111111 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 111 - 32 - a) Credit risk exposure by geographical areas The following tables analyze credit risk exposure by geographical areas (Unit: Korean Won in millions): Loans and receivables Financial assets at FVTPL AFS debt securities HTM securities Derivative assets Off-balance accounts Total Loans and receivables Financial assets at FVTPL AFS debt securities HTM securities Derivative assets Off-balance accounts Total December 31, 2017 UK USA Korea China 250,678,479 4,104,912 2,823,247 - - 5,551,870 - 12,407,602 - 16,606,692 - 16,590 91,603,852 25,039 376,865,085 4,689,301 3,210,680 1,353,599 406,929 Others (*) Japan 1,094,988 381,890 8,022,688 92,012 148,955 618,252 - 78,872 - 42,682 - 1,222,412 66,974 10,034,236 151,131 63,732 2,937 52,259 529,193 172,570 - - - Total 267,106,204 5,795,774 13,229,244 16,749,296 59,272 93,620,040 396,559,830 Korea China December 31, 2016 UK USA Japan Others (*) Total 241,380,250 4,286,018 2,792,088 895,874 323,470 81 - - - 23,250 8,714,933 258,392,633 5,573,739 5,205,849 234,892 16,541,888 16,155,290 131,052 13,910,251 13,758,863 140,577 74,166 96,245,092 1,367,464 98,557,280 372,819,510 5,043,901 3,053,415 1,304,594 346,801 10,548,147 393,116,368 - 261,547 - - 66,342 80,831 6,525 13,845 - - 737,513 137,861 20,336 - 103,130 99,737 69 (*) Others consist of financial assets in Indonesia, Vietnam, Panama, European countries and others. b) Credit risk exposure by industries The following tables analyze credit risk exposure by industries, which are service, manufacturing, finance and insurance, construction, individuals and others in accordance with the Korea Standard Industrial Classification Code (Unit: Korean Won in millions): Service Manufacturing Finance and insurance Construction Individuals Others Total December 31, 2017 47,192,641 34,502,509 38,260,051 3,574,746 133,094,287 10,481,970 267,106,204 100,766 83,239 4,640,068 15,073 1,040 955,588 5,795,774 707,737 1,348,754 - 37,719 7,331,774 - 10,962,149 59,272 - 153,534 296,214 - - - - 4,998,480 4,142,179 - 13,229,244 16,749,296 59,272 16,892,926 66,242,824 21,427,378 9,841,379 56,050,845 71,094,693 3,842,479 36,928,554 7,882,046 170,023,881 4,687,324 93,620,040 25,265,541 396,559,830 Service Manufacturing Finance and insurance Construction Individuals Others Total December 31, 2016 46,040,278 35,652,974 37,711,983 3,789,670 125,558,637 9,639,091 258,392,633 77,198 360,881 4,093,567 24,140 993 1,016,960 5,573,739 1,092,279 1,673,971 - 57,781 - - 9,568,151 8,290,451 140,577 63,166 251,599 - - - - 5,760,511 16,541,888 3,694,230 13,910,251 140,577 - 18,423,611 67,307,337 26,878,320 9,927,574 62,949,956 69,732,303 4,621,971 33,603,651 5,102,153 98,557,280 8,750,546 159,163,281 25,212,945 393,116,368 Loans and receivables Financial assets at FVTPL AFS debt securities HTM securities Derivative assets Off-balance accounts Total Loans and receivables Financial assets at FVTPL AFS debt securities HTM securities Derivative assets Off-balance accounts Total WOORI BANKANNUAL REPORT 2017 112 - 33 - 3) Credit risk of loans and receivables The credit exposure of loans and receivables by customer and loan condition is as follows (Unit: Korean Won in millions): Korean treasury and government agencies Banks General business Small and medium sized enterprise Project financing and others Sub-total Consumers Total December 31, 2017 Corporates 8,825,767 26,861,286 50,463,112 34,107,547 5,547,950 90,118,609 139,886,407 265,692,069 8 - - 65,616 63,067 - 128,683 878,406 1,007,097 - 1,402,131 251,431 46,717 1,700,279 537,001 2,237,280 8,825,775 26,861,286 51,930,859 34,422,045 5,594,667 91,947,571 141,301,814 268,936,446 2,191 15,977 1,078,733 8,823,584 26,845,309 50,852,126 267,162 1,830,242 34,154,883 5,563,542 90,570,551 140,866,760 267,106,204 31,125 1,377,020 435,054 Korean treasury and government agencies Banks General business Small and medium sized enterprise Project financing and others Sub-total Consumers Total December 31, 2016 Corporates 16,062,399 20,258,860 49,815,352 31,520,617 7,142,440 88,478,409 132,195,005 256,994,673 - - - 48,294 57,245 - 105,539 765,829 871,368 - 1,404,568 429,955 208,372 2,042,895 510,793 2,553,688 16,062,399 20,258,860 51,268,214 32,007,817 7,350,812 90,626,843 133,471,627 260,419,729 4,094 16,600 1,156,000 16,058,305 20,242,260 50,112,214 424,142 2,027,096 31,583,675 7,289,677 88,985,566 133,106,502 258,392,633 61,135 1,641,277 365,125 Loans and receivables neither overdue nor impaired Loans and receivables overdue but not impaired Impaired loans and receivables Total Allowance for credit losses Total, net Loans and receivables neither overdue nor impaired Loans and receivables overdue but not impaired Impaired loans and receivables Total Allowance for credit losses Total, net a) Credit quality of loans and receivables The Group manages credit quality of its loans and receivables, (neither overdue nor impaired, net of allowance) through an internal rating system. Segregation of credit quality is as follows (Unit: Korean Won in millions): Korean December 31, 2017 Corporates treasury and government agencies 8,823,576 26,845,309 43,613,460 6,565,274 8,823,576 26,845,309 50,178,734 General business Banks - - Project financing and others Sub-total Small and medium sized enterprise 23,191,627 4,623,750 71,428,837 135,893,496 242,991,218 10,767,062 3,835,030 22,065,902 33,958,689 5,522,286 89,659,709 139,728,526 265,057,120 898,536 18,230,872 Consumers Total 1,409 483,469 19,868,185 29,600,362 2,642,674 52,111,221 114,441,637 167,037,736 Upper grade (*1) Lower grade (*2) Total Value of collateral(*3) 112112 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 113 - 34 - Korean December 31, 2016 Corporates treasury and government agencies 16,058,288 20,242,260 41,461,420 7,941,871 16,058,305 20,242,260 49,403,291 General business Banks 17 - Project financing and others Sub-total Small and medium sized enterprise 18,755,963 5,337,033 65,554,416 128,374,017 230,228,981 12,550,282 1,763,658 22,255,811 3,680,920 25,936,748 31,306,245 7,100,691 87,810,227 132,054,937 256,165,729 Consumers Total - 358,456 18,003,674 25,493,006 3,996,162 47,492,842 111,054,910 158,906,208 Upper grade (*1) Lower grade (*2) Total Value of collateral(*3) (*1) AAA~BBB for corporates, and 1~6 level for consumers (*2) BBB- ~C for corporates, and 7~10 level for consumers (*3) The value of collateral is the allocated collateral amount when estimating the allowance for credit losses. Allowances for credit losses, for loans and receivables neither overdue nor impaired, amounting to 634,949 million Won and 828,944 million Won as of December 31, 2017 and 2016, respectively, which are deducted from the loans and receivables above. b) Aging analysis of loans and receivables Aging analysis of loans and receivables (overdue but not impaired, net of allowance) is as follows (Unit: Korean Won in millions): Korean treasury and government agencies Banks General business Small & medium sized enterprise December 31, 2017 Corporates 59,560 3,702 928 64,190 48,002 6,550 4,935 59,487 Project financing and others Sub-total - - - - 107,562 10,252 5,863 123,677 Consumers 683,445 94,376 55,011 832,832 Total 791,015 104,628 60,874 956,517 4,619 46,513 - 51,132 619,867 670,999 December 31, 2016 Corporates 45,255 1,553 337 47,145 41,329 8,933 2,123 52,385 Project financing and others Sub-total - - - - 86,584 10,486 2,460 99,530 Consumers 584,995 90,296 49,151 724,442 Total 671,579 100,782 51,611 823,972 7,021 45,304 - 52,325 546,164 598,489 8 - - 8 - - - - - - - - - - - - - - - - Korean treasury and government agencies Banks General business Small & medium sized enterprise Past due Less than 30 days 30~59 days 60~89 days Total Value of collateral (*) Past due Less than 30 days 30~59 days 60~89 days Total Value of collateral (*) (*) The value of collateral is the allocated collateral amount when estimating the allowance for credit losses. Allowances for credit losses, for loans and receivables that are overdue but not impaired, amounting to 50,580 million Won and 47,396 million Won as of December 31, 2017 and 2016, respectively, which are deducted from the loans and receivables above. 113113 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 114 - 35 - c) Impaired loans and receivables Impaired loans and receivables, net of allowance are as follows (Unit: Korean Won in millions): Korean treasury and government agencies Impaired loans Value of collateral (*) - - Korean treasury and government agencies Impaired loans Value of collateral (*) - - December 31, 2017 Corporates General business Banks Small & medium sized enterprise Project financing and others Sub-total Consumers Total - 609,202 136,707 41,256 787,165 305,402 1,092,567 - 562,638 141,026 20,351 724,015 227,966 951,981 December 31, 2016 Corporates General business Banks Small & medium sized enterprise Project financing and others Sub-total Consumers Total - 661,778 225,045 188,986 1,075,809 327,123 1,402,932 - 482,680 236,954 42,166 761,800 250,583 1,012,383 (*) The value of collateral held is recoverable amount used when calculating allowance for credit losses. Allowances for credit losses, for impaired loans and receivables amounting to 1,144,713 million Won and 1,150,756 million Won as of December 31, 2017 and 2016, respectively, are deducted from the impaired loans and receivables above. 4) Credit quality of debt securities The Group manages debt securities based on the external credit rating. Credit soundness of debt securities on the basis of External Credit Assessment Institution (ECAI)’s rating is as follows (Unit: Korean Won in millions): Financial assets at FVTPL (*) AFS debt securities HTM securities December 31, 2017 1,685,099 722,923 236,311 9,694 2,654,027 9,897,689 2,386,567 876,482 68,506 13,229,244 15,806,327 888,547 52,188 2,234 16,749,296 Financial assets at FVTPL (*) AFS debt securities HTM securities December 31, 2016 1,658,332 720,535 266,049 4,348 2,649,264 12,490,934 3,372,310 618,736 59,908 16,541,888 13,342,384 466,401 101,466 - 13,910,251 Total 27,389,115 3,998,037 1,164,981 80,434 32,632,567 Total 27,491,650 4,559,246 986,251 64,256 33,101,403 AAA AA- ~ AA+ BBB- ~ A+ Below BBB- Total AAA AA- ~ AA+ BBB- ~ A+ Below BBB- Total (*) Financial assets at FVTPL comprise debt securities held for trading and financial assets designated at FVTPL 114114 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 115 115115 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner - 36 - (2) Market risk Market risk is the possible risk of loss arising from trading activities and non-trading activities in the volatility of market factors such as interest rates, stock prices and foreign exchange rates. Market risk occurs as a result of changes in the interest rates and foreign exchange rates for financial instruments that are not yet settled, and all contracts are exposed to a certain level of volatility according to changes in the interest rates, credit spreads, foreign exchange rates and the price of equity securities. 1) Market risk management For trading activities and non-trading activities, the Group avoids, bears, or mitigates risks by identifying the underlying source of the risks, measuring parameters and evaluating their appropriateness. On a yearly basis, the Risk Management Committee establishes a Value at Risk (“VaR”, maximum losses) limit, loss limit and risk capital limit by subsidiaries for its management purposes. The limit by investment desk/dealer is independently managed to the extent of the limit given to subsidiaries and the limit by investment and loss cut is managed by the risk management personnel within the department. The Group uses both a standard-based and an internal model-based approach to measure market risk. The standard-based approach is used to calculate individual market risk of owned capital while the internal model-based approach is used to calculate general capital market risk and it is used to measure internal risk management measure. For the trading activities, the Risk Management department measures the VaR limit by department, risk factor and loss limit on a daily basis and reports regularly to the Risk Management Committee. 2) Sensitivity analysis of market risk The Group performs the sensitivity analyses both for trading and for non-trading activities. For trading activities, the Group uses a VaR model that uses certain assumptions of possible fluctuations in market condition and, by conducting simulations of gains and losses, under which the model estimates the maximum losses that may occur. A VaR model predicts based on statistics of possible losses on the portfolio at a certain period currently or in the future. It indicates the maximum expected loss with at least 99% credibility. In short, there exists a one percent possibility that the actual loss might exceed the predicted loss generated from the VaR calculation. The actual results are periodically monitored to examine the validity of the assumptions, variables, and factors that are used in VaR calculations. However, this approach cannot prevent the loss when the market fluctuation exceeds expectation. For the non-trading activities, interest rate Earning at Risk (“EaR”) and interest rate VaR, which is based on the simulations of the Net Interest Income (“NII”) and Net Present Value (“NPV”), are calculated for the Bank and the consolidated trusts, and the risks for all other subsidiaries are measured and managed by the interest rate EaR and the interest rate VaR calculations based on the Bank for International Settlements (“BIS”) Framework. NII is a profit-based indicator for displaying the profit changes in short term due to the short-term interest changes. It will be estimated as subtracting interest expenses of liabilities from the interest income of assets. NPV is an indicator for displaying risks in economic view according to unfavorable changes related to interest rate. It will be estimated as subtracting the present value of liabilities from the present value of assets. EaR shows the maximum profit-loss amount, which indicates the maximum deduction amount caused by the unfavorable changes related to the interest rate of a certain period (i.e. 1 year). Interest rate VaR shows the potential maximum loss generated by the unfavorable changes during a certain period of time in the present or future. WOORI BANKANNUAL REPORT 2017 116116 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 116 - 37 - a) Trading activities The minimum, maximum and average VaR for the years ended December 31, 2017 and 2016, respectively, and the VaR as of December 31, 2017 and 2016, respectively, are as follows (Unit: Korean Won in millions): Risk factor Interest rate Stock price Foreign currencies Commodity price Diversification Total VaR As of December 31, 2017 4,183 909 4,750 - (4,472) 5,370 For the year ended December 31, 2017 Average Maximum Minimum As of December 31, 2016 For the year ended December 31, 2016 3,799 2,863 5,051 31 (4,621) 7,123 4,918 4,419 6,636 188 (6,798) 9,363 2,467 909 4,061 - (2,067) 5,370 Average 2,844 3,456 4,914 113 (5,355) 5,972 3,250 4,191 4,396 152 (5,630) 6,359 Maximum Minimum 1,367 2,304 3,967 21 (4,034) 3,625 6,430 5,063 7,686 325 (10,385) 9,119 b) Non-trading activities The NII and NPV are calculated for the assets and liabilities owned by the Bank and consolidated trusts, respectively, by using the simulation method. The scenario responding to interest rate (“IR”) changes are as follows (Unit: Korean Won in millions): Base case Base case (Prepay) IR 100bp up IR 100bp down IR 200bp up IR 200bp down IR 300bp up IR 300bp down December 31, 2017 December 31, 2016 NII 4,916,138 4,916,015 5,361,546 4,386,437 5,806,723 3,452,590 6,251,897 2,254,609 NPV 23,472,792 23,163,942 22,886,122 24,127,559 22,372,208 24,830,482 21,929,189 26,633,807 NII 4,367,411 4,384,783 4,802,118 3,903,129 5,236,879 2,975,351 5,671,639 1,968,273 NPV 21,556,632 20,666,425 20,893,490 22,279,204 20,289,742 23,052,848 19,742,627 25,096,193 The interest EaR and VaR calculated based on the BIS Framework of subsidiaries other than the Bank and consolidated trusts are as follows (Unit: Korean Won in millions): December 31, 2017 EaR VaR December 31, 2016 EaR VaR 255,679 130,821 188,381 110,335 The Group estimates and manages risks related to changes in interest rate due to the difference in the maturities of interest-bearing assets and liabilities and discrepancies in the terms of interest rates. Cash flows(both principal and interest) from non-trading, interest bearing assets and liabilities, presented by each re-pricing date, are as follows (Unit: Korean Won in millions): Within 3 months 4 to 6 months December 31, 2017 10 to 12 months 7 to 9 months 1 to 5 years Over 5 years Total Asset: Loans and receivables AFS financial assets HTM financial assets Total Liability: Deposits due to customers Borrowings Debentures Total 161,653,892 41,671,530 2,500,103 2,161,467 6,411,841 54,150,998 26,272,958 297,775,378 601,735 13,866,019 2,367,762 345,868 17,284,095 1,687,362 166,090,779 46,333,100 11,064,295 10,466,965 67,749,792 27,220,561 328,925,492 7,614,159 2,016,711 1,433,425 2,150,708 2,286,179 4,229,000 9,369,794 106,815,564 9,865,249 1,955,902 118,636,715 37,750,367 1,056,579 2,452,240 41,259,186 25,117,556 412,966 1,018,563 26,549,085 27,585,458 437,431 1,752,847 29,775,736 37,518,878 2,709,010 19,770,538 59,998,426 91,246 234,879,069 14,961,062 479,827 2,869,766 29,819,856 3,440,839 279,659,987 WOORI BANKANNUAL REPORT 2017 117117 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network 117 - 38 - Within 3 months 4 to 6 months 7 to 9 months December 31, 2016 10 to 12 months 1 to 5 years Over 5 years Total 148,237,350 42,032,667 2,946,992 1,515,213 7,757,087 55,838,192 35,245,734 297,175,532 17,625,340 2,915,226 14,420,946 1,143,170 154,172,523 46,494,872 12,165,519 11,815,483 67,722,061 36,851,360 329,221,818 8,064,502 2,854,514 1,246,503 3,165,094 2,770,079 5,029,918 6,853,951 713,596 892,030 100,051,821 13,772,710 2,109,235 115,933,766 36,614,529 1,044,748 2,077,681 39,736,958 25,028,378 491,330 860,455 26,380,163 25,017,836 368,431 1,545,943 26,932,210 34,513,004 2,816,565 14,613,799 51,943,368 40,737 221,266,305 18,915,461 421,677 4,143,773 25,350,886 4,606,187 265,532,652 Asset: Loans and receivables AFS financial assets HTM financial assets Total Liability: Deposits due to customers Borrowings Debentures Total 3) Currency risk Currency risk arises from the financial instruments denominated in foreign currencies other than the functional currency. Therefore, no currency risk arises from non-monetary items or financial instruments denominated in the functional currency. Financial instruments in foreign currencies exposed to currency risk are as follows (Unit: USD in millions, JPY in millions, CNY in millions, EUR in millions, and Korean Won in millions): Asset: Loans and receivables Financial assets at FVTPL AFS financial assets HTM financial assets Total Liability: Financial liabilities at FVTPL Deposits due to customers Borrowings Debentures Other financial liabilities Total USD JPY December 31, 2017 CNY EUR Foreign currency Won equivalent Foreign currency Won equivalent Foreign currency Won equivalent Foreign currency Won equivalent Others Won equivalent Total Won equivalent 23,000 24,642,900 126,944 1,204,843 25,224 4,127,936 1,156 1,479,351 3,937,733 35,392,763 32 1,966 111 34,303 2,105,972 118,868 25 - - 238 - - 25,109 26,902,043 126,969 1,205,081 - 319 - - 52,259 - 25,543 4,180,195 27 - - 1,183 34,583 590 - 104,892 302,801 78,175 1,514,524 4,423,601 174,016 2,461,622 197,043 38,225,444 USD JPY December 31, 2017 CNY EUR Foreign currency Won equivalent Foreign currency Won equivalent Foreign currency Won equivalent Foreign currency Won equivalent Others Won equivalent Total Won equivalent 41 43,423 79 752 - - 19 24,878 69,977 139,030 13,744 14,725,686 195,176 1,852,440 21,865 - 700 7,080,118 3,714,411 21,056 - 2,218 - 6,604 3,467 3,578,142 - 114,555 883 1,129,802 315,685 247 - - 2,396,826 23,682,896 242,874 7,659,733 375,749 4,204,715 2,392 2,562,740 1,802 16,125 26,248 28,126,378 213,598 2,027,291 24,367 1,199 33,624 8,687,009 153,043 319,127 8,108 294,950 3,987,647 196,261 129 165,189 1,278 1,635,554 519,843 406 588,625 3,764,547 3,647,051 39,450,921 9,899,126 176,886 USD JPY December 31, 2016 CNY EUR Foreign currency Won equivalent Foreign currency Won equivalent Foreign currency Won equivalent Foreign currency Won equivalent Others Won equivalent Total Won equivalent 22,868 27,635,970 108,944 1,129,539 23,194 4,018,678 1,548 1,962,856 4,382,990 39,130,033 66 898 17 589 - - 23,849 28,820,981 109,001 1,130,128 79,386 1,085,108 20,517 57 - - - 80 - - 13,844 - 23,274 4,032,522 30 - - 37,562 570 - 1,578 2,000,988 34,124 151,661 144,799 1,244,321 164,052 143,535 4,705,448 40,690,067 Coporate Fact Book Off-balance accounts Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner Asset: Loans and receivables Financial assets at FVTPL AFS financial assets HTM financial assets Total WOORI BANKANNUAL REPORT 2017 118 - 39 - USD JPY December 31, 2016 CNY EUR Foreign currency Won equivalent Foreign currency Won equivalent Foreign currency Won equivalent Foreign currency Won equivalent Others Won equivalent Total Won equivalent Liability: Financial liabilities at FVTPL Deposits due to customers Borrowings Debentures Other financial liabilities Total Off-balance accounts (3) Liquidity risk 75 90,908 253 2,621 - - 88 111,098 115,980 320,607 11,294 7,193 2,931 13,648,729 8,692,792 3,541,769 124,790 1,293,835 33,625 - 3,243 - 18,950 3,283,291 - 121,282 - 700 651 222 - 825,165 280,894 - 2,402,076 21,453,096 115,332 9,122,643 228,720 3,891,771 2,235 23,728 8,593 2,700,703 28,674,901 10,384,163 12,390 128,464 140,676 1,458,545 297,304 28,675 1,508 261,278 21,158 3,665,851 183,883 1,061 245 310,396 1,206 1,527,553 473,845 374 846,990 4,247,831 3,709,098 39,035,948 312,187 11,651,382 Liquidity risk refers to the risk that the Group may encounter difficulties in meeting obligations from its financial liabilities. 1) Liquidity risk management Liquidity risk management is to prevent potential cash shortages as a result of mismatching the use of funds (assets) and sources of funds (liabilities) or unexpected cash outflows. The financial liabilities that are relevant to liquidity risk are incorporated within the scope of risk management. Derivatives instruments are excluded from those financial liabilities as they reflect expected cash flows for a pre-determined period. Assets and liabilities are grouped by account under Asset Liability Management (“ALM”) in accordance with the characteristics of the account. The Group manages liquidity risk by identifying the maturity gap and such gap ratio through various cash flows analysis (i.e. based on remaining maturity and contract period, etc.), while maintaining the gap ratio at or below the target limit. 2) Maturity analysis of non-derivative financial liabilities a) Cash flows of principals and interests by remaining contractual maturities of non-derivative financial liabilities are as follows (Unit: Korean Won in millions): Within 3 months 4 to 6 months December 31, 2017 10 to 12 months 7 to 9 months 1 to 5 years Over 5 years Total Financial liabilities at FVTPL Deposits due to customers Borrowings Debentures Other financial liabilities Total Financial liabilities at FVTPL Deposits due to customers Borrowings Debentures Other financial liabilities Total 1,717 155,984 168,442 327,030 148,008,777 29,563,310 18,175,348 32,468,110 7,409,118 2,624,594 238,249,257 6,115,732 1,893,173 1,489,272 1,178,107 3,924,681 479,568 15,080,533 1,955,255 2,452,565 1,018,714 1,744,731 19,770,380 2,869,699 29,811,344 128,940 2,730,001 10,144,982 7,121,342 163,369,548 34,227,903 20,685,876 35,392,463 31,233,494 8,703,862 293,613,146 162,871 1,003 375 512 825 - Within 3 months 4 to 6 months December 31, 2016 10 to 12 months 7 to 9 months 1 to 5 years Over 5 years Total 94 1,529 678,813 154,325 47 6,284,092 136,835,315 28,685,473 19,254,108 30,875,962 876,836 1,486,710 4,711,273 860,596 1,518,524 14,641,016 84,792 1,433 834,808 2,732,019 224,666,969 420,720 18,997,770 4,116,768 25,323,071 2,751,825 17,685,022 163,583,751 33,147,269 20,997,114 33,882,676 25,875,498 10,021,332 287,507,640 9,146,895 2,355,336 2,108,780 2,077,387 27,544 14,813,948 5,480 - 118118 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 119 - 40 - b) Cash flows of principals and interests by expected maturities of non-derivative financial liabilities are as follows (Unit: Korean Won in millions): Within 3 months 4 to 6 months December 31, 2017 10 to 12 months 7 to 9 months 1 to 5 years Over 5 years Total Financial liabilities at FVTPL 168,442 Deposits due to customers 159,146,602 6,115,732 Borrowings 1,955,255 Debentures 7,121,342 Other financial liabilities 174,507,373 Total 155,984 31,298,562 1,893,173 2,452,565 162,871 35,963,155 1,717 16,667,130 1,489,272 1,018,714 825 19,177,658 512 375 - 21,995,294 6,487,047 2,278,756 479,568 1,178,107 3,924,681 1,744,731 19,770,380 2,869,699 128,940 2,730,001 24,919,647 30,311,423 8,358,024 1,003 327,030 237,873,391 15,080,533 29,811,344 10,144,982 293,237,280 Within 3 months 4 to 6 months December 31, 2016 10 to 12 months 7 to 9 months 1 to 5 years Over 5 years Total Financial liabilities at FVTPL 678,813 834,808 Deposits due to customers 148,089,355 30,163,971 17,600,803 20,947,335 5,128,387 2,331,993 224,261,844 420,719 18,997,770 876,835 1,486,710 4,711,273 Borrowings 860,596 1,518,524 14,641,016 4,116,768 25,323,071 Debentures Other financial liabilities 84,792 2,751,825 17,685,022 174,837,797 34,625,763 19,343,808 23,954,049 24,719,793 9,621,305 287,102,515 Total 9,146,901 2,355,332 2,108,780 2,077,387 27,544 14,813,948 154,325 5,480 1,433 1,529 47 94 - 3) Maturity analysis of derivative financial liabilities is as follows (Unit: Korean Won in millions): Derivatives held for trading purpose are not managed in accordance with their contractual maturity, as the Group holds such financial instruments with the purpose of disposing or redemption before their maturity. As such, those derivatives are incorporated as “within 3 months” in the table below. The cash flow by the maturity of derivative financial liabilities as of December 31, 2017 and 2016 is as follows: December 31, 2017 December 31, 2016 Within 3 months 3,150,149 3,009,977 4 to 6 months Remaining maturity 10 to 12 months 7 to 9 months 1 to 5 years Over 5 years - - - - 381 208 67,373 7,013 Total 3,217,903 3,017,198 - - 4) Maturity analysis of off-balance accounts The Group provides guarantees on behalf of customers. A financial guarantee represents an irrevocable undertaking that the Group should meet a customer’s obligations to third parties if the customer fails to do so. Under a loan commitment, the Group agrees to make funds available to a customer in the future. Loan commitments that are usually for a specified term may persist or may be unconditionally cancellable, provided all conditions in the loan facility are satisfied or waived. Commitments to lend include commercial standby facilities and credit lines, liquidity facilities to commercial paper conduits and utilized overdraft facilities. The maximum limit to be paid by the Group in accordance with guarantees and loan commitment only applies to principal amounts. There are contractual maturities for financial guarantees, such as guarantees for debentures issued or loans, loan commitments, and other guarantees, however, under the terms of the guarantees and loan commitments, funds should be paid upon demand from the counterparty. Details of off-balance accounts are as follows (Unit: Korean Won in millions): Guarantees Loan commitments December 31, 2017 December 31, 2016 12,859,715 80,760,325 14,761,784 83,795,496 119119 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 120 - 41 - (4) Operational risk The Group defines the operational risk that could cause a negative effect on capital resulting from inadequate internal process, labor work and systematic problem or external factors. 1) Operational risk management The Group has been running the operational risk management system under Basel II. The Group developed advanced measurement approaches to quantify required capital for operational risk. This system is used for reinforcement in foreign competitions, reducing the amount of risk capitals, managing the risk, and precaution for any unexpected occasions. This system has been tested by an independent third party, and this system approved by the Financial Supervisory Service. 2) Operational risk measurement To quantify required capital for operational risk, the Group applies Advanced Measurement Approaches (AMA) using of internal and external loss data, business environment and internal control factors (BEICFs), and scenario analysis (SBA). For the operational risk management for its subsidiaries, the Group adopted the Basic Indicator Approach. (5) Capital management The Group complies with the standard of capital adequacy provided by financial regulatory authorities. The capital adequacy ratio is based on Basel III of Basel Committee on Banking Supervision and Basel III was applied from the end of December, 2013. The capital adequacy ratio is calculated by dividing own capital by asset (weighted with a risk premium – risk weighted assets) based on the consolidated financial statements of the Group. According to the above regulations, the Group is required to meet the following new minimum requirements: 6.25% and 5.38%, a minimum Tier 1 ratio of 7.75% and 6.88% and a minimum total regulatory capital of 9.75% and 8.88% as of December 31, 2017 and 2016, respectively. Details of the Bank’s capital adequacy ratio as of December 31, 2017 and 2016 are as follows (Unit: Korean won in millions): December 31, 2017 December 31, 2016 Tier 1 capital Other Tier 1 capital Tier 2 capital Total risk-adjusted capital Risk-weighted assets for credit risk Risk-weighted assets for market risk Risk-weighted assets for operational risk Total risk-weighted assets Common Equity Tier 1 ratio Tier 1 capital ratio Total capital ratio 16,074,987 3,041,664 3,486,555 22,603,206 134,767,711 2,316,938 9,677,559 146,762,208 10.95% 13.03% 15.40% 15,714,480 3,275,496 3,910,513 22,900,489 138,018,500 2,277,809 9,431,814 149,728,123 10.50% 12.68% 15.29% 120120 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 121 - 42 - 5. OPERATING SEGMENTS In evaluating the results of the Group and allocating resources, the Group’s Chief Operation Decision Maker (the “CODM”) utilizes the information per type of customers. This financial information of the segments is regularly audited by the CODM to make decisions about resources to be allocated to each segment and evaluate its performance. (1) Segment by type of customers The Group’s reporting segments comprise the following customers: consumer banking, corporate banking, investment banking, capital market, credit card market and headquarters and others. The reportable segments are classified based on the target customers for whom the service is being provided. • Consumer banking: Loans/deposits and financial services for retail and individual consumers, etc. • Corporate banking: Loans/deposits and export/import, financial services for corporations, etc. • Investment banking: Domestic/foreign investment, structured finance, M&A, Equity & fund investment related business, venture advisory related tasks, real estate SOC development practices, etc. • Capital market: Fund management, investment in securities and derivatives, etc. • Credit card: Credit card, cash service and card loan, etc. • Headquarter and others: Segments that do not belong to above operating segments The details of operating income by each segment are as follows (Unit: Korean Won in millions): Net Interest income Interest income Interest expense Inter-segment Net non-interest income Non-interest income Non-interest expense Inter-segment Other income(expense) Administrative expense Impairment losses due to credit loss and others Operating income Non-operating income(expense) Net income before income tax expense Income tax expense Net income Corporate Consumer banking banking 1,795,377 1,702,939 3,149,625 2,964,813 (955,836) (1,681,652) 512,216 (490,850) 571,336 649,950 680,778 802,387 (170,268) (253,961) 60,826 101,524 (1,906,561) (1,149,288) (832,429) (1,808,974) For the year ended December 31, 2017 Capital market 36,883 18,834 - 18,049 69,671 9,548,399 Credit Cards 463,603 599,550 (135,947) - 73,537 1,163,575 Investment Sub-total banking 4,633,716 12,124 8,242,056 148,500 (3,608,340) (243) - (136,133) 1,905,666 152,168 366,523 15,245,069 (214,355) (9,478,728) (1,090,038) (2,132,053) (13,339,403) - (4,443,080) (3,788,625) Headquarters and others 622,790 1,360,734 (834,662) 96,718 389,004 2,683,407 (162,350) (939,406) (954,238) - (398,652) (163,536) - 14,662 (16,567) - (63,835) (12,881) Adjust- Total ments 5,220,650 586,934 8,550,687 308,631 (3,330,037) 278,303 - - (745,990) 1,159,676 (395,833) 14,849,236 (350,157) (13,689,560) - (4,223,584) (3,530,801) - 219,496 257,824 (97,587) 446,328 (316,859) 1,217,425 (50,954) 100,457 31,229 121,216 (235,116) 138,488 14,832 72,388 (654,455) 2,096,302 (38,328) 60,440 (692,783) 2,156,742 (98,510) (3,153) 39,350 - (5,219) (112,734) (180,266) (26,970) (207,236) 347,818 (84,172) 263,646 1,214,272 (296,634) 917,638 139,807 (33,834) 105,973 121,216 (29,335) 91,881 133,269 (32,055) 101,214 (40,346) 63,396 23,050 1,916,036 (412,634) 1,503,402 33,470 (6,784) 26,686 1,949,506 (419,418) 1,530,088 121121 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 122 Net Interest income Interest income Interest expense Inter-segment Net non-interest income Non-interest income Non-interest expense Inter-segment Other expense Administrative expense Impairment losses on credit loss and others Operating income Non-operating income(expense) Net income before income tax expense Income tax expense Net income - 43 - For the year ended December 31, 2016 Capital market Investment Corporate Consumer banking banking banking 48,826 14,613 1,741,140 1,484,233 19,575 153,160 3,026,148 2,979,811 (324) (225) (1,023,290) (1,780,990) 29,575 (138,322) 495,982 4,033 160,885 550,194 535,514 7,590,087 605,026 (32,873) (444,141) (7,586,054) - 47,553 (51,995) (17,964) - (1,875,579) (1,476,190) (110,863) (14,983) (1,788,672) (472,288) 557,410 923,810 (405,912) 39,512 (966,878) Headquarter and Others 713,677 1,492,147 (863,523) 85,053 302,800 4,563,280 Sub-total Credit Card 4,430,585 428,096 8,227,523 556,682 (3,796,938) (128,586) - - 1,655,036 79,714 986,148 15,203,865 (906,434) (4,173,415) (13,548,829) - (87,065) (4,453,370) (574,606) (3,730,476) (793,978) - (364,137) (148,001) Adjust- Total ment 5,019,544 588,959 8,512,312 284,789 (3,492,768) 304,170 - - (955,696) 699,340 (433,880) 14,769,985 (521,816) (14,070,645) - (4,144,678) (3,478,476) - 308,692 252,000 (86,907) 166,064 (509,312) 815,144 (95,880) 64,635 (34,031) 864 (216,136) 143,673 219,372 441,871 (722,894) 1,632,251 56,692 (58,045) (666,202) 1,574,206 (35,081) (1,619) 46,559 (5,288) (1,504) 55,291 58,358 (79,175) (20,817) 130,983 (31,698) 99,285 813,525 (203,983) 609,542 111,194 (26,909) 84,285 (4,424) 1,071 (3,353) 142,169 (32,774) 109,395 497,162 16,476 513,638 1,690,609 (277,817) 1,412,792 (137,220) 1,961 (135,259) 1,553,389 (275,856) 1,277,533 (2) Information on products and services The products of the Group are classified as interest-bearing products such as loans, deposits and debt securities and non-interest bearing products such as loan commitment, credit commitment, equity securities, and credit card service. This classification of products has been reflected in the segment information presenting interest income and non-interest income. (3) Information on geographical areas Among the Group’s revenue (interest income and non-interest income) from services, revenue from the domestic customers for the years ended December 31, 2017 and 2016 amounted to 22,279,666 million Won and 22,265,508 million Won, respectively, and revenue from the foreign customers amounted to 1,120,257 million Won and 1,016,789 million Won, respectively. Among the Group’s non-current assets (investments in joint ventures and associates, investment properties, premises and equipment and intangible assets), non-current assets attributed to domestic subsidiaries as of December 31, 2017 and 2016 are 3,550,764 million Won and 3,498,327 million Won, respectively, and foreign subsidiaries are 233,732 million Won and 240,946 million Won, respectively. 122122 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017123 - 44 - 6. CASH AND CASH EQUIVALENTS (1) Details of cash and cash equivalents are as follows (Unit: Korean Won in millions): Cash Foreign currencies Demand deposits Fixed deposits Total December 31, 2017 2,009,363 617,155 3,423,355 858,413 6,908,286 December 31, 2016 2,113,739 742,340 4,238,956 496,289 7,591,324 (2) Significant transactions not involving cash inflows and outflows are as follows (Unit: Korean Won in millions): Changes in other comprehensive income due to valuation of AFS financial assets Changes in other comprehensive income (loss) of investment in associates Changes in other comprehensive income (loss) of foreign operations translation Changes in other comprehensive income related to valuation of cash flow hedging Changes in other comprehensive income due to remeasurement of the net defined benefit liability Changes in investments in associates due to equity swap and others Changes in investments in associates due to accounts transfer Changes in unpaid dividends of hybrid equity securities For the years ended December 31 2017 2016 (84,498) 612 (208,329) 777 10,497 51,227 12,586 (7,937) 28,712 10,371 34,162 - (62,571) (10,658) (156,708) 5,187 (3) Adjustments of liabilities from financing activities in current year are as follows (Unit: Korean Won in millions): For the year ended December 31, 2017 Not involving cash inflows and outflows Variation of gains on valuation of hedged items Foreign Exchange January 1,2017 18,769,515 23,565,449 42,334,964 Cash flow (3,634,883) 4,817,701 1,182,818 (350,429) (478,249) (828,678) - (39,373) (39,373) Others 503 4,123 4,626 December 31,2017 14,784,706 27,869,651 42,654,357 Borrowings Debentures Total 123123 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 124 - 45 - 7. FINANCIAL ASSETS AT FVTPL (1) Financial assets at FVTPL consist of as follows (Unit: Korean Won in millions): Financial assets held for trading Financial assets designated at FVTPL Total December 31, 2017 December 31, 2016 5,633,724 17,000 5,650,724 5,820,787 22,290 5,843,077 (2) Financial assets held for trading are as follows (Unit: Korean Won in millions): Deposits: Gold banking asset Securities: Debt securities December 31, 2017 December 31, 2016 25,972 26,180 Korean treasury and government agencies Financial institutions Corporates Equity securities Beneficiary certificates Securities loaned Derivatives assets Sub-total Total 540,438 1,476,498 627,397 21,666 13,041 - 2,679,040 3,115,775 5,820,787 519,337 1,444,459 681,120 35,983 23,891 4,459 2,709,249 2,898,295 5,633,724 (3) Financial assets designated at FVTPL are as follows (Unit: Korean Won in millions): Debt securities Equity securities Total December 31, 2017 December 31, 2016 4,348 12,652 17,000 9,694 12,596 22,290 124124 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 125 - 46 - 8. AVAILABLE FOR SALE FINANCIAL ASSETS Details of AFS financial assets are as follows (Unit: Korean Won in millions): Debt securities: As of December 31, 2017 Cumulative Cumulative losses on gains on valuation valuation Amortized cost Fair value Korean treasury and government agencies Financial institutions Corporates Asset-backed securities Bond denominated in foreign currencies Other debt securities Sub-total Equity securities Beneficiary certificates Securities loaned Total Debt securities: Korean treasury and government agencies Financial institutions Corporates Asset-backed securities Bond denominated in foreign currencies Other debt securities Sub-total Equity securities Beneficiary certificates Securities loaned Total 2,338,760 5,225,921 2,727,016 309,518 2,449,954 35,154 13,086,323 982,393 697,655 169,988 14,936,359 1,193 1,504 3,851 - 3,100 21 9,669 430,921 18,701 664 459,955 (9,386) (10,159) (5,635) (1,337) (10,475) (12) 2,330,567 5,217,266 2,725,232 308,181 2,442,579 35,163 (37,004) 13,058,988 1,411,078 (2,236) 712,628 (3,728) 170,256 (396) (43,364) 15,352,950 As of December 31, 2016 Cumulative Cumulative losses on gains on valuation valuation Amortized cost Fair value 3,778,688 6,310,517 4,336,195 250,630 1,226,893 73,360 15,976,283 1,034,299 2,802,847 493,625 20,307,054 13,700 7,585 93,957 - 1,076 1,871 118,189 420,038 40,405 3,040 581,672 (3,758) (3,904) (20,966) (1,427) (16,105) (3) 3,788,630 6,314,198 4,409,186 249,203 1,211,864 75,228 (46,163) 16,048,309 1,453,613 (724) 2,822,082 (21,170) (3,086) 493,579 (71,143) 20,817,583 125125 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 126 - 47 - 9. HELD TO MATURITY FINANCIAL ASSETS Details of HTM financial assets are as follows (Unit: Korean Won in millions): As of December 31, 2017 Cumulative Cumulative losses on gains on valuation valuation 6,944 2,923 12,367 832 23,066 (15,266) (15,067) (25,326) (1,024) (56,683) Amortized cost 3,994,857 7,245,426 5,311,970 197,043 16,749,296 Fair value 3,986,535 7,233,282 5,299,011 196,851 16,715,679 As of December 31, 2016 Cumulative Cumulative losses on gains on valuation valuation Fair value 26,366 9,236 58,176 - 93,778 (6,391) (4,940) (7,093) (428) (18,852) 3,774,331 5,172,783 4,874,439 163,624 13,985,177 Amortized cost 3,754,356 5,168,487 4,823,356 164,052 13,910,251 Korean treasury and government agencies Financial institutions Corporates Bond denominated in foreign currencies Total Korean treasury and government agencies Financial institutions Corporates Bond denominated in foreign currencies Total 10. LOANS AND RECEIVABLES (1) Details of loans and receivables are as follows (Unit: Korean Won in millions): Due from banks Loans Other loans and receivables Total December 31, 2017 December 31, 2016 14,815,476 235,400,585 8,176,572 258,392,633 8,868,378 251,523,301 6,714,525 267,106,204 (2) Details of due from banks are as follows (Unit: Korean Won in millions): December 31, 2017 December 31, 2016 Due from banks in local currency: Due from The Bank of Korea (“BOK”) Due from depository banks Due from non-depository institutions Due from the Korea Exchange Others Allowance for credit losses Due from banks in foreign currencies: Sub-total Due from banks on demand Due from banks on time Others Allowance for credit losses Sub-total Total 6,246,496 30,003 150 50,000 97,365 (1,541) 6,422,473 794,353 972,915 679,554 (917) 2,445,905 8,868,378 11,395,162 3 9,811 1,625 73,283 (2,798) 11,477,086 877,636 1,684,631 778,418 (2,295) 3,338,390 14,815,476 126126 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 127 - 48 - (3) Details of restricted due from banks are as follows (Unit: Korean Won in millions): Financial institution Counterparty Due from banks in local currency: Due from The BOK The BOK December 31, 2017 Reason of restriction Reserve deposits under The 6,246,496 BOK Act Others The Korea Exchange and Central Counter Party KRW others Sub-total 94,394 6,340,890 margin and others Due from banks in foreign currencies: Due from banks on demand The BOK and others Others The People’s Bank of China and others Sub-total Total Financial institution Counterparty Due from banks in local currency: Due from The BOK The BOK 787,520 Reserve deposits under The BOK Act and others Reserve deposits and others 367,108 1,154,628 7,495,518 December 31, 2016 Reason of restriction Reserve deposits under The 11,395,162 BOK Act Others The Korea Exchange and Central counter party KRW others Sub-total 70,304 11,465,466 margin and others Due from banks in foreign currencies: Due from banks on demand The BOK and others Others The People’s Bank of China and others Sub-total Total 854,612 Reserve deposits under The BOK Act and others Reserve deposits and others 778,418 1,633,030 13,098,496 (4) Details of loans are as follows (Unit: Korean Won in millions): Loans in local currency Loans in foreign currencies Domestic banker’s letter of credit Credit card accounts Bills bought in foreign currencies Bills bought in local currency Factoring receivables Advances for customers on guarantees Privately placed bonds Securitized loans Call loans Bonds purchased under resale agreements Loan origination costs and fees Others Present value discount Allowance for credit losses Total December 31, 2017 December 31, 2016 191,309,481 14,101,839 3,754,030 6,673,765 7,758,575 414,451 96,763 25,197 328,405 252,690 2,985,077 8,854,753 458,639 251,635 (13,827) (1,850,888) 235,400,585 200,213,230 13,147,888 2,516,907 6,827,295 8,197,159 334,714 137,523 23,620 362,319 563,152 3,003,455 16,859,064 510,860 607,325 (10,988) (1,770,222) 251,523,301 127127 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 128 - 49 - (5) Details of other loan and receivables are as follows (Unit: Korean Won in millions): CMA accounts Receivables Accrued income Telex and telephone subscription rights and refundable deposits Other debtors Allowance for credit losses Total December 31, 2017 December 31, 2016 190,000 5,417,676 1,080,489 135,000 4,459,318 1,026,273 984,620 166,877 (57,563) 6,714,525 1,019,577 639,945 (171,115) 8,176,572 (6) Changes in allowance for credit losses on loans and receivables are as follows (Unit: Korean Won in millions): Beginning balance Net provision Recoveries of loans previously charged off Charge-offs Sales of loans and receivables Unwinding effect Others (*) Ending balance Consumers (163,858) (131,275) Corporates For the year ended December 31, 2017 Others (209,024) 12,192 (155,372) (203,968) Credit card (1,498,842) (539,222) Total (2,027,096) (862,273) (45,060) 142,099 898 8,643 908 (187,645) (84,413) 453,249 65,145 36,548 211,729 (1,355,806) (51,366) 228,640 - - 1 (182,065) (68) 63,181 29,186 - (193) (104,726) (180,907) 887,169 95,229 45,191 212,445 (1,830,242) Beginning balance Net provision Recoveries of loans previously charged off Charge-offs Sales of loans and receivables Unwinding effect Others (*) Ending balance Consumers (203,433) (73,356) (53,679) 155,424 2,055 10,319 (1,188) (163,858) Corporates For the year ended December 31, 2016 Others (442,620) (73,318) (145,810) (207,730) Credit card (1,686,194) (536,359) Total (2,478,057) (890,763) (192,183) 722,359 113,177 66,901 13,457 (1,498,842) (44,393) 242,561 - - - (155,372) (19,233) 236,857 91,800 - (2,510) (209,024) (309,488) 1,357,201 207,032 77,220 9,759 (2,027,096) (*) Others are due to debt-equity swap, fluctuation of foreign currencies exchange rates, etc. 11. THE FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES (1) The fair value hierarchy The fair value hierarchy is determined by the levels of judgment involved in estimating fair values of financial assets and liabilities. The specific financial instruments characteristics and market condition such as volume of transactions and transparency are reflected to the market observable inputs. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities. The Group maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value of its financial assets and financial liabilities. Fair value is measured based on the perspective of a market participant. As such, even when market assumptions are not readily available, the Group’s own assumptions reflect those that market participants would use for measuring the assets or liabilities at the measurement date. 128128 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 129 129129 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner - 50 - The fair value measurement is described in the one of the following three levels used to classify fair value measurements: • • • Level 1—fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. The types of financial assets or liabilities generally included in Level 1 are publicly traded equity securities, derivatives, and debt securities issued by governmental bodies. Level 2— fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. prices) or indirectly (i.e. derived from prices). The types of financial assets or liabilities generally included in Level 2 are debt securities not traded in active markets and derivatives traded in OTC but not required significant judgment. Level 3— fair value measurements are those derived from valuation technique that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). The types of financial assets or liabilities generally included in Level 3 are non-public securities and derivatives and debt securities of which valuation techniques require significant judgments and subjectivity. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Group’s assessment of the significance of a particular input to a fair value measurement in its entirety requires judgment and consideration of inherent factors of the asset or liability. (2) Fair value hierarchy of financial assets and liabilities measured at fair value are as follows (Unit: Korean Won in millions): Level 1 (*1) Level 2 (*1) Level 3 (*2) Total December 31, 2017 Financial assets: Financial assets held for trading Deposits Debt securities Equity securities Beneficiary certificates Derivative assets Sub-total Financial assets designated at FVTPL Debt securities Equity securities Sub-total AFS financial assets Debt securities Equity securities Beneficiary certificates Securities loaned Sub-total Derivative assets Total Financial liabilities: Financial liabilities held for trading Deposits Derivative liabilities Securities sold Sub-total Financial liabilities designated at FVTPL 25,972 405,942 21,666 - 1,021 454,601 - 2,238,391 - 13,041 3,093,272 5,344,704 - - - - - - - - - - 21,482 21,482 9,694 12,596 22,290 2,710,172 399,214 - 69,778 3,179,164 10,348,815 - 68,722 100,478 10,518,015 - 3,633,765 59,272 15,921,991 - 1,011,864 643,906 - 1,655,770 - 1,699,542 25,972 2,644,333 21,666 13,041 3,115,775 5,820,787 9,694 12,596 22,290 13,058,987 1,411,078 712,628 170,256 15,352,949 59,272 21,255,298 25,964 2,613 - 28,577 - 3,126,585 - 3,126,585 - 20,951 - 20,951 25,964 3,150,149 - 3,176,113 WOORI BANKANNUAL REPORT 2017 130130 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 130 - 51 - Level 1 (*1) Level 2 (*1) Level 3 (*2) Total December 31, 2017 - - - - 91,739 91,739 - 28,577 67,754 3,286,078 160,057 - 160,057 - 181,008 160,057 91,739 251,796 67,754 3,495,663 Level 1 (*1) Level 2 (*1) Level 3 (*2) Total December 31, 2016 26,180 370,636 35,983 - 4,459 3,233 440,491 - 2,274,280 - 23,891 - 2,871,909 5,170,080 - - - - - - - - - - - 23,153 23,153 4,348 12,652 17,000 26,180 2,644,916 35,983 23,891 4,459 2,898,295 5,633,724 4,348 12,652 17,000 2,288,917 13,759,392 - 2,291,571 102,300 3,108,874 16,153,263 428,678 - 391,279 - 1,024,935 530,511 - 1,555,446 16,048,309 1,453,613 2,822,082 493,579 20,817,583 140,478 3,549,365 21,463,821 - 99 1,595,698 140,577 26,608,884 26,501 1,750 28,251 - 2,974,703 2,974,703 - 33,524 33,524 26,501 3,009,977 3,036,478 - - - 197 92,974 93,171 - 28,251 7,221 3,075,095 673,709 - 673,709 - 707,233 673,906 92,974 766,880 7,221 3,810,579 Equity-linked securities Debentures Sub-total Derivative liabilities Total Financial assets: Financial assets held for trading Deposits Debt securities Equity securities Beneficiary certificates Securities loaned Derivative assets Sub-total Financial assets designated at FVTPL Debt securities Equity securities Sub-total AFS financial assets Debt securities Equity securities Beneficiary certificates Securities loaned Sub-total Derivative assets Total Financial liabilities: Financial liabilities held for trading Deposits Derivative liabilities Sub-total Financial liabilities designated at FVTPL Equity-linked securities Debentures Sub-total Derivative liabilities Total (*1) There is no transfer between level 1 and level 2 of financial assets and liabilities measured at fair value. The Group recognizes transfers between the levels at the end of reporting period within which events or conditions change. (*2) Certain AFS unquoted equity securities were measured at cost as of December 31, 2017 and 2016, that are amounting to 37,092 million Won and 43,202 million Won, respectively. These unquoted equity instruments mostly represent minority investments in special purposed entity vehicles such as asset securitization structures. They are measured at cost because (a) observable inputs of financial information to measure fair value was not available to obtain, or (b) there is a significant variance in likely estimated cash flows or (c) the probabilities for the various estimated cash flows could not be measured reliably. In addition, the Group has no intention to dispose these investments in the foreseeable future. WOORI BANKANNUAL REPORT 2017 131 - 52 - Certain financial assets are carried at cost, even though under K-IFRS it is required to be subsequently measured at their fair value, since they do not have quoted market prices in an active market and cannot be measured at fair value reliably. The carrying amount of the financial assets which have been disposed for the year ended December 31, 2017 is 1,266 million Won and the related gain from the disposals is 657 million Won. Financial assets and liabilities designated at FVTPL, held-for-trading financial assets and liabilities, AFS financial assets, and derivative assets and liabilities are recognized at fair value. Fair value is the amount that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Financial instruments are measured at fair value using a quoted market price in active markets. If there is no active market for a financial instrument, the Group determines the fair value using alternative assumptions and developing fair value measurement methods. Input variables and fair value measurement methods for each type of financial instruments are as follows: Fair value measurement methods Input variables Risk-free market rate, credit spread Risk-free market rate, market risk premium, Beta, etc. Risk-free market rate, forward rate, volatility, foreign exchange rate, stock prices, etc. Debt securities Equity securities and Beneficiary certificates Derivatives The fair value is measured by discounting the projected cash flows of debt securities by applying the market discount rate that has been applied to a proxy company that has similar credit rating to the issuers of the securities. Among DCF (Discounted Cash Flow) Model, FCFE (Free Cash Flow to Equity) Model, Comparable Company Analysis, Dividend Discount Model, Risk-adjusted Rate of Return Method, and Net Asset Value Method, more than one method is used given the characteristic of the subject of fair value measurement. The in-house developed model which is based on the models that are used by market participants in the valuation of general OTC derivative products, such as options, interest rate swaps, currency swap and currency forward that are based on inputs observable in the market. However, for some complicated financial instruments of which valuation should be based on some assumptions since some significant or all inputs to be used in the model are not observable in the market, the in-house derived model which is developed from the general valuation models, such as Finite Difference Method (“FDM”) or Monte Carlo Simulation. Equity-linked securities The fair value of security linked to stock prices or derivatives is measured by the models such as DCF model, FDM, or Monte Carlo Simulation given the natures of the securities or underlying assets. Values of underlying assets, risk- free market rate, market rate, dividend and convenience yield, volatility, correlation coefficient, credit spread, and foreign exchange rate Debentures The fair value is measured by discounting the Risk-free market rate, forward rate projected cash flows of a debenture by applying the market discount rate that is reflecting credit rating of the Group. 131131 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 132 - 53 - Valuation methods of financial assets and liabilities measured at fair value and classified into Level 3 and significant but unobservable inputs are as follows: Fair value measurement technique Derivative assets Option valuation Input variable Range Correlation model and others coefficient Volatility of underlying asset Derivative liabilities Option valuation model and others Correlation coefficient Volatility of underlying asset Equity linked securities Monte Carlo Simulation and others Correlation coefficient Volatility of underlying asset Equity securities and Beneficiary certificates External appraisal value and others Expected growth rate Volatility of real estate sale price Discount rate of lease cash flow and others 0.900~0.980 12.1%~28.1% 0.900~0.980 12.1%~28.1% 0.363~0.694 6.8%~58.9% 0.0%~1.0% 0% 8.31%~8.54% Impact of changes in significant unobservable inputs on fair value measurement Variation of fair value increases as correlation coefficient increases. Variation of fair value increases as volatility increases. Variation of fair value increases as correlation coefficient increases. Variation of fair value increases as volatility increases. Equity linked securities’ variation of fair value increases if both volatility and correlation coefficient increase. However when correlation coefficient decreases, despite the increase in volatility, the variation of fair value of equity linked securities may decrease. Fair value increases as expected growth rate increases. Fair value increases as sale price Increases Fair value increases as discount rate of lease cash flow decreases Fair value of financial assets and liabilities classified into level 3 is measured by the Group using its own valuation techniques or using external specialists. Unobservable inputs used in the fair value measurements are produced by the internal system of the Group and the appropriateness of inputs is reviewed regularly. 132132 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 133 - 54 - (3) Changes in financial assets and liabilities classified into level 3 are as follows (Unit: Korean Won in millions): January 1, 2017 Net Income (loss) (*1) For the year ended December 31, 2017 Other comprehensive income Purchases/ Issuances Disposals/ Settlements Transfer to or out of level 3 (*2) December 31, 2017 Financial assets: Financial assets held for trading Derivative assets Financial assets designated at FVTPL Debt securities Equity securities Sub-total AFS financial assets Equity securities Beneficiary certificates Sub-total Derivative assets Total Financial liabilities: Financial liabilities held for trading 23,153 22,362 - 1,398 (25,431) - 21,482 4,348 12,652 17,000 1,024,935 530,511 1,555,446 99 1,595,698 346 (56) 290 27,986 212 28,198 329 51,179 - - - 5,000 - 5,000 - - - 24,442 (4,321) 20,121 65,961 226,975 292,936 (131,460) (109,471) (240,931) - 20,121 - 299,334 (428) (266,790) - - - - - - - - 9,694 12,596 22,290 1,011,864 643,906 1,655,770 - 1,699,542 Derivative liabilities 33,524 24,866 - 500 (37,939) - 20,951 Financial liabilities designated at FVTPL Equity-linked securities Total 673,709 707,233 112,015 136,881 - - - 500 (625,667) (663,606) - - 160,057 181,008 (*1) The losses which increase the financial liabilities are presented as positive amounts and the gains which decrease the financial liabilities are presented as negative amounts. The loss amounting to 34,621 million Won for the year ended December 31, 2017, which is from financial assets and liabilities that the Group holds, has been recognized in net gain (loss) on financial instruments at FVTPL and net gain (loss) on AFS financial assets in the consolidated statement of comprehensive income. (*2) The Group recognizes transfers between levels at the end of reporting period within which events have occurred or conditions have changed. 133133 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 134 - 55 - For the year ended December 31, 2016 January 1, 2016 Net Income (loss) (*1) Other comprehensive income (loss) Purchases/ Issuances Disposals/ Settlements Transfer to or from level 3 (*2) December 31, 2016 Financial assets: Financial assets held for trading Derivative assets (*3) Financial assets designed at FVTPL Debt securities Equity securities Sub-total AFS financial assets: Equity securities (*4) Beneficiary certificates Others Sub-total 78,676 (29,117) - 13,640 (39,506) (540) 23,153 986 11,609 12,595 (161) 1,043 882 - - - 4,509 - 4,509 (986) - (986) - - - 4,348 12,652 17,000 993,368 377,070 5,308 1,375,746 (6,986) (868) 594 (7,260) 57,323 205,749 5,794 174,024 - (643) 62,474 379,773 (205,348) (25,509) (5,259) (236,116) (19,171) 1,024,935 530,511 - (19,171) 1,555,446 - - Derivative assets Total 5,973 1,472,990 3,877 (31,618) - - 62,474 397,922 (9,751) (286,359) - 99 (19,711) 1,595,698 Financial liabilities: Financial liabilities held for trading Derivative liabilities 78,607 (8,322) - 1,155 (37,916) - 33,524 Financial liabilities designated at FVTPL Equity-linked securities Total 747,351 825,958 71,079 62,757 - - - 1,155 (144,721) (182,637) - - 673,709 707,233 (*1) The losses which increase the financial liabilities are presented as positive amounts and the gains which decrease the financial liabilities are presented as negative amounts. The loss amounting to 94,238 million Won for the year ended December 31, 2016, which is from financial assets and liabilities that the Group holds, has been recognized in net gain (loss) on financial instruments at FVTPL and net gain (loss) on AFS financial assets in the consolidated statement of comprehensive income. (*2) The Group recognizes transfers between levels at the end of reporting period within which events have occurred or conditions have changed. (*3) As the variables used for the valuation of currency related derivatives were observable in the market, such derivatives were transferred into level 2 from level 3. (*4) AFS financial assets were transferred out of level 1 to level 3 upon the change of the fair value measurement method of the assets by using market the external valuation specialists from previously using quoted prices in the active market, in the opposite case, they were transferred out of level 3 to level 1. (4) Sensitivity analysis on the unobservable inputs used for measuring level 3 financial instruments The sensitivity analysis of the financial instruments has been performed by classifying with favorable and unfavorable changes based on how changes in unobservable assumptions would have effects on the fluctuations of financial instruments’ value. When the fair value of a financial instrument is affected by more than one unobservable assumption, the below table reflects the most favorable or the most unfavorable changes which resulted from varying the assumptions individually. The sensitivity analysis was performed for two types of level 3 financial instruments: (1) debt securities, equity securities, interest rate related derivatives, currency related derivatives, equity related derivatives, and equity-linked securities of which fair value changes are recognized as net income; (2) equity securities and beneficiary certificates of which fair value changes are recognized as other comprehensive income. Equity securities classified as level 3 but measured at costs are excluded from sensitivity analysis. 134134 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 135 - 56 - The following table presents the sensitivity analysis to disclose the effect of reasonably possible volatility on the fair value of a level 3 financial instruments as of December 31, 2017 and 2016. (Unit: Korean Won in millions): For the year ended December 31, 2017 Net income (loss) income (loss) Other comprehensive For the year ended December 31, 2016 Net income (loss) income (loss) Other comprehensive Favorable Unfavorable Favorable Unfavorable Favorable Unfavorable Favorable Unfavorable Financial assets: Financial assets held for trading Derivatives assets (*1)(*2) Financial assets designed at FVTPL Debt securities (*5) Equity securities (*5) AFS Financial assets Equity securities (*3)(*4) Beneficiary certificates (*4) Total Financial liabilities: Financial liabilities held for trading Derivative liabilities (*1)(*2) Financial liabilities designated at FVTPL Equity-linked securities (*1) Total 1,234 (526) 265 670 (309) (624) - - 2,169 - - (1,459) - - - - - - 861 (2,248) - 707 - (657) - - - - - - 28,583 (15,246) - - 31,412 (18,551) 1,861 30,444 (1,857) (17,103) - 1,568 - (2,905) 2,903 34,315 (2,571) (21,122) 5 (513) - - 4,892 (3,568) - 8 13 (7) (520) - - - - 905 5,797 (857) (4,425) - - - - - (*1) Fair value changes of equity related derivatives assets and liabilities and equity-linked securities are calculated by increasing or decreasing historical volatility of the stock price and correlation, which are major unobservable variables, by 10%, respectively. In the case of interest rate related derivative assets and liabilities, fair value changes are calculated by increasing or decreasing the volatility of interest rate, which are major unobservable variables, by 10%, respectively. (*2) Both derivative assets and liabilities for held for trading and hedging are included. (*3) Fair value changes of equity securities are calculated by increasing or decreasing growth rate (0~1%) and discount rate or liquidation value (-1~1%) and discount rate. The growth rate, discount rate, and liquidation value are major unobservable variables. (*4) Among the equity securities, even if the sensitivity analysis of the capital contributions and beneficiary certificates is not possible in practice, fair value changes of beneficiary certificates and other securities whose major unobservable variables are composed of the real estate are calculated by increasing or decreasing price fluctuation of real estate which is underlying assets and discount rate by 1%. (*5) Changes of fair value are measured by increasing or decreasing the discount rate by 10%, which is major unobservable variable, respectively. 135135 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 136 - 57 - (5) Fair value and carrying amount of financial assets and liabilities that are recorded at amortized cost are as follows (Unit: Korean Won in millions): Financial assets: HTM financial assets Loans and receivables Financial liabilities: Deposits due to customers Borrowings Debentures Other financial liabilities Financial assets: HTM financial assets Loans and receivables Financial liabilities: Deposits due to customers Borrowings Debentures Other financial liabilities As of December 31, 2017 Fair value Level 1 Level 2 Level 3 Total 1,206,292 15,509,387 16,715,679 - - 265,570,649 265,570,649 - Book value 16,749,296 267,106,204 - 234,682,775 - 14,754,506 - 27,889,781 - 13,890,789 - 234,682,775 14,754,506 - 27,889,781 - 13,890,789 - 234,695,084 14,784,706 27,869,651 13,892,461 As of December 31, 2016 Fair value Level 1 Level 2 Level 3 Total 741,880 13,243,297 13,985,177 - - 259,565,952 259,565,952 - Book Value 13,910,251 258,392,633 - 221,001,466 - 18,785,325 - 24,004,668 - 21,984,171 - 221,001,466 18,785,325 - 24,004,668 - 21,984,171 - 221,020,411 18,769,515 23,565,449 21,985,086 The fair values of financial instruments are measured using quoted market price in active markets. In case there is no active market for financial instruments, the Group determines the fair value using alternative assumptions through developing fair value measurement methods. Input variables and fair value measurement methods for financial assets and liabilities that are measured at amortized costs are given as follows: Debt securities Fair value measurement technique Input variables The fair value is measured by Risk-free market rate and discounting the projected cash flows of debt securities by applying the market discount rate that has been applied to a proxy company that has similar credit rating to the issuers of the securities. credit spread Loans and receivables The fair value is measured by discounting the projected cash flows of loan products by applying the market discount rate that has been applied to a proxy company that has similar credit rating to the debtor. Risk-free market rate, credit spread and prepayment-rate Deposit due to customers, borrowings, debentures, and other financial liabilities The fair value is measured by Risk-free market rate and discounting the projected cash flows of debt products by applying the market discount rate that is reflecting credit rating of the Group. forward rate 136136 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 137 - 58 - 12. DERECOGNITION AND OFFSET OF FINANCIAL INSTRUMENTS (1) Derecognition of financial assets 1) Transferred financial assets that meet condition of derecognition The book value, fair value of, and maximum exposure to loss from the financial assets that were derecognized from the consolidated financial statements of the Group through disposals, but the Group still have continuous involvements are given as follows (Unit: Korean Won in millions): Type of continuous involvement December 31, 2017 Book value of continuous participation Fair value of continuous participation Maximum exposure to loss Conditional disposal of loans to KAMCO (*) Post settlement - - - (*) The post settlement had been settled up as of December 31, 2017, and there are no financial instruments which meet the derecognition conditions but the group has continuous involvements. Type of continuous involvement December 31, 2016 Book value of continuous participation Fair value of continuous participation Maximum exposure to loss Conditional disposal of loans to KAMCO (*) Post settlement - - 701 (*) For ex-post settling up amount of the collateral is not fixed yet, expected cash flow cannot be reliably measured as of December 31, 2016, and the maximum exposure to loss is disclosed at the transfer price. Though the transfer does not qualify for derecognition in accordance with K-IFRS 1039 – Financial Instrument: Recognition and Measurement, the Group derecognized the financial asset from the consolidated financial statements applying exception for retrospective application of transactions before the date of transition to IFRSs in K-IFRS 1101 – First-time Adoption of K-IFRS. 2) Transferred financial assets that do not meet condition of derecognition a) Disposal of securities under repurchase agreements The financial instruments that were disposed but the Group agreed to repurchase at the fixed amounts at the same time, so that they did not meet the conditions of derecognition, are as follows (Unit: Korean Won in millions): Assets transferred AFS financial assets HTM financial assets Total December 31, 2017 9,998 5,436 15,434 December 31, 2016 2,546,683 7,133 2,553,816 Related liabilities Bonds sold under repurchase agreements 3,173 2,004,905 137137 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 138 - 59 - b) Securities loaned When the Group loans its securities to outside parties, the legal ownerships of the securities are transferred, however, they should be returned at the end of lending period therefore the Group does not derecognize them from the consolidated financial statements as it owns majority of risks and benefits from the securities continuously regardless of the transfer of legal ownership. The carrying amounts of securities loaned are as follows (Unit: Korean Won in millions): Financial assets at Korean equity securities FVTPL AFS financial Korean treasury and assets government agencies and others Total December 31, 2017 December 31, 2016 Loaned to Samsung Securities Co., - 4,459 Ltd. and others Korea Securities Finance Corporation and others 170,256 170,256 493,579 498,038 The details of the transferred financial assets that are not derecognized in their entirety, such as disposal of securities under repurchase agreement or securities loaned, are explained in Note 18. (2) The offset of financial assets and liabilities The Group possesses both the uncollected domestic exchange receivables and unpaid domestic exchange payable, which satisfy offsetting criteria of K-IFRS 1032. Therefore, the total number of uncollected domestic exchange receivables or unpaid domestic exchange payable has been countervailed with part of unpaid domestic exchange payable or uncollected domestic exchange receivables, respectively, and has been disclosed in loans and receivables or other financial liabilities of the Group’s statements of financial position and loans and receivables, respectively. The Group possesses the derivative assets, derivative liabilities, receivable spot exchange, and payable spot exchange which do not satisfy the offsetting criteria of K-IFRS 1032, but provide the Group the right of, under the circumstances of the trading party’s defaults, insolvency, or bankruptcy, the offsetting. Item such as cash collateral cannot satisfy the offsetting criteria of K-IFRS 1032, but in accordance with the collateral arrangements and under the circumstances of the trading party’s default, insolvency, or bankruptcy, the derivative assets, derivative liabilities, receivable spot exchange, and the net amount of payable spot exchange can be offset. The Group has entered into a sale and repurchase agreements and accounted it as collateralized borrowing. Also, the Group has entered into a purchase and resale agreement and accounted it as secured loans. The repurchase and resale agreement can have the offsetting right only under the trading party’s default, insolvency, or bankruptcy which do not satisfy the offsetting criteria of K-IFRS 1032, the Group recorded the collateralized borrowings in borrowings and the secured loans in loans and receivables. The Group under the repurchase agreements has offsetting right only upon the counter-party’s default, insolvency or bankruptcy, thus the repurchase agreements are applied by the TBMA/ISMA Global Master Repurchase Agreement of which do not satisfy the offsetting criteria of K-IFRS 1032. The Group disclosed bonds sold (purchased) under repurchase agreements as borrowings (loans and receivables). 138138 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 139 - 60 - As of December 31, 2017 and 2016, the financial instruments to be set off and may be covered by master netting agreements and similar agreements are given as below (Unit: Korean Won in millions): December 31, 2017 Gross amounts of recognized financial assets Gross amounts of recognized financial assets set off Net amounts of financial assets presented Related amounts not set off in the consolidated statement of financial position Netting agreements and others Cash collateral received Net amounts 2,992,476 3,767,726 1,710 - 2,990,766 3,767,726 5,787,448 174,415 796,629 16,859,064 - 16,859,064 16,859,064 - - 39,050,227 - 62,669,493 38,987,064 23,682,429 22,646,512 38,985,354 64,873 - 174,415 64,873 861,502 Financial assets: Derivative assets and others (*1) Receivable spot exchange (*2) Bonds purchased under resale agreements (*2) Domestic exchanges receivable (*2)(*5) Total December 31, 2017 Gross amounts of recognized financial liabilities Gross amounts of recognized financial liabilities set off Net amounts of financial liabilities presented Related amounts not set off in the consolidated statement of financial position Netting agreements and others Cash collateral pledged Net amounts Financial liabilities: Derivative liabilities and others (*1) Payable spot exchange (*3) Bonds sold under repurchase agreements (*4) Domestic exchanges payable (*3)(*5) Total 3,160,217 3,723,886 1,710 - 3,158,507 3,723,886 5,866,682 157,750 857,961 3,173 - 3,173 3,173 - - 40,284,515 38,985,354 47,171,791 38,987,064 1,299,161 8,184,727 1,293,931 7,163,786 - 157,750 5,230 863,191 December 31, 2016 Gross amounts of recognized financial assets Gross amounts of recognized financial assets set off Net amounts of financial assets presented Related amounts not set off in the consolidated statement of financial position Netting agreements and others Cash collateral received Net amounts 2,962,969 4,678,089 8,442 - 2,954,527 4,678,089 6,546,232 69,834 1,016,550 8,854,753 - 8,854,753 8,854,753 - - 31,456,123 30,883,281 - 47,951,934 30,891,723 17,060,211 15,400,985 572,842 - 572,842 69,834 1,589,392 Financial assets: Derivative assets and others (*1) Receivable spot exchange (*2) Bonds purchased under resale agreements (*2) Domestic exchanges receivable (*2)(*5) Total 139139 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 140140 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 140 - 61 - December 31, 2016 Gross amounts of recognized financial liabilities Gross amounts of recognized financial liabilities set off Net amounts of financial liabilities presented Related amounts not set off in the consolidated statement of financial position Netting agreements and others Cash collateral pledged Net amounts 3,467,374 4,682,775 8,442 - 3,458,932 4,682,775 6,695,062 105,270 1,341,375 2,004,905 - 2,004,905 2,004,905 - - 39,345,524 30,883,281 6,161,151 49,500,578 30,891,723 18,608,855 14,861,118 8,462,243 - 2,301,092 105,270 3,642,467 Financial liabilities: Derivative liabilities and others (*1) Payable spot exchange (*3) Bonds sold under repurchase agreements (*4) Domestic exchanges payable (*3)(*5) Total (*1) The items include derivatives held for trading, derivatives for hedging and equity linked securities. (*2) The items are included in loans and receivables. (*3) The items are included in other financial liabilities. (*4) The items are included in borrowings. (*5) Certain financial assets and liabilities are presented at as net amounts. 13. INVESTMENTS IN JOINT VENTURES AND ASSOCIATES (1) Investments in joint ventures and associates accounted for using the equity method of accounting are as follows (Unit: Korean Won in millions): Joint ventures and Associates Main business Woori Bank and Woori Private Equity Asset Management Co., Ltd.: Woori Blackstone Korea Percentage of ownership (%) December 31, 2017 December 31,2016 Financial statements as of December 31, 2017 Opportunity No.1 Private Equity Fund (*19) Other finance business - 26.4 - Woori Bank: Kumho Tire Co., Inc. (*1)(*2) Woori Service Networks Co., Ltd. (*4) Korea Credit Bureau Co., Ltd. (*5) Korea Finance Security Co., Ltd. (*4) Chin Hung International Inc. (*2)(*9) Poonglim Industrial Co., Ltd. (*6)(*12)(*14) STX Engine Co., Ltd. (*1)(*2)(*20) Samho International Co., Ltd. (*2)(*18) Force TEC Co., Ltd. (*6)(*15) STX Corporation (*1)(*2)(*6)(*13) Saman Corporation (*5) Dongwoo C & C Co., Ltd. (*6) SJCO Co., Ltd. (*6) G2 Collection Co., Ltd. (*6) The Base Enterprise Co., Ltd. (*6) Heungjiwon Co., Ltd. (*6)(*17) Kyesan Engineering Co., Ltd. (*6) Good Software Lap Co., Ltd. (*6) Wongwang Co., Ltd. (*6) Manufacturing Freight & staffing services Credit information Security service Construction Construction Manufacturing Construction Freight & staffing services Wholesale of non- specialized goods General construction Technology service Construction Aggregate transportation and wholesale Wholesale and retail sales Manufacturing Other printing Construction Service Wholesale and real estate 14.2 4.9 9.9 15.0 25.3 29.4 29.2 - - 19.7 9.2 23.2 26.5 28.9 48.4 - 23.2 28.9 29.0 14.2 September 30 (*3) 4.9 9.9 15.0 28.4 31.0 29.2 7.8 34.4 November 30 (*3) December 31 November 30 (*3) November 30 (*3) September 30 (*3) - - - 9.5 September 30 (*3) 9.2 23.2 September 30 (*3) - 26.5 28.9 48.4 27.8 23.2 28.9 29.0 - - - - - - - WOORI BANKANNUAL REPORT 2017 141 - 62 - Joint ventures and Associates Sejin Construction Co., Ltd. (*6) Deokwon Food Co., Ltd. (*6)(*17) QTS Shipping Co., Ltd. (*6) DAEA SNC Co., Ltd. (*6) ARES-TECH Co., Ltd. (*6) Reading Doctors Co., Ltd. (*6)(*10) PREXCO Co., Ltd. (*6)(*10) Hyunwoo International Co., Ltd. (*6)(*10) Jiwon Plating Co., Ltd. (*6)(*16) Cultizm Korea LTD Co., Ltd. (*6)(*16) Gil Co.,Ltd. (*6)(*16) NK Eng Co., Ltd. (*6)(*10) Woori Growth Partnerships New Technology Main business Construction Poultry processing and storage Complex transportation brokerage Wholesale and retail sales Electronic component manufacturing Other service business Manufacturing Manufacturing Plating Wholesale and retail sales Manufacturing Manufacturing Percentage of ownership (%) December 31, 2017 29.6 December 31,2016 29.6 Financial statements as of December 31, 2017 - - 49.4 24.0 23.4 35.4 28.1 25.9 20.5 31.3 26.1 23.1 27.3 49.4 24.0 23.4 - - - - - - - - - - - - - - - - - - Private Equity Fund Other financial business 23.1 23.1 December 31 2016KIF-IMM Woori Bank Technology Venture Fund K BANK Co., Ltd. (*5) Smart Private Equity Fund No.2 (*11) Woori Bank-Company K Korea Movie Asset Fund (*11) Well to Sea No. 3 Private Equity Fund (*11) Woori Private Equity Fund: Other financial business Finance Other financial business Other financial business Finance 20.0 13.0 20.0 25.0 50.0 20.0 13.0 - December 31 November 30 (*3) December 31 - - December 31 September 30 (*3) Woori Renaissance Holdings (*7) Other financial business Woori Private Equity Asset Management Co., Ltd.,: Woori Columbus 1st Private Equity Fund (*8) Other financial business Woori Investment Bank Co., Ltd. Nomura-Rifa Private Real Estate Investment - - 51.6 2.0 - - Trust No.17 (*11) Other financial business 25.0 - December 31 (*1) The Group has significant influence on these entities through its position in the creditors' council which is the decision making body regarding to financial and operational policies of associates. (*2) The investments in associates that have quoted market prices are Kumho Tire Co., Ltd. (current period: KRW 4,425, previous year: KRW 8,480), Chin Hung International Inc. (current period: KRW 1,915, previous year: KRW 2,090), STX Engine Co., Ltd. (current period: KRW 9,150, previous year: KRW 6,630), Samho International Co., Ltd. (previous year: KRW 16,900), STX Corporation. (previous year: KRW 1,660). (*3) The significant transactions and events between the end of reporting period of the associates and the Group have been properly incorporated. (*4) Most of the significant business transactions of associates are with the Group as of December 31, 2017 and 2016. (*5) The Group can participate in decision-making body and exercise significant influence over associates through business partnerships. (*6) The carrying values of investments in Reading Doctors Co., Ltd., PREXCO Co., Ltd., Hyunwoo International Co., Ltd., Jiwon Plating Co., Ltd., Cultizm Korea LTD Co., Ltd., Gil Co., Ltd. and NK Eng Co., Ltd. are nil as of December 31, 2017 and those of investments in Force TEC Co., Ltd., STX Corporation and Deokwon Food Co., Ltd. are nil as of December 31, 2016. Furthermore, those of investments in Poonglim Industrial Co., Ltd., Dongwoo C&C Co., Ltd., SJCO Co., Ltd., G2 collection Co., Ltd., The Base Enterprise Co., Ltd., Heungjiwon Co., Ltd., Kyesan Engineering Co., Ltd., Good Software Lab Co., Ltd., Wongwang Co., Ltd., Sejin Construction Co., Ltd., QTS Shipping Co., Ltd., DAEA SNC Co., Ltd. and ARES-TECH Co., Ltd. are nil as of both December 31, 2017 and 2016. 141141 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 142 - 63 - (*7) The Group owns over 50% ownership as of December 31, 2016. However, the investment in this entity was accounted for using equity method as the ownership and related contracts meet the definition of joint arrangement under K-IFRS 1111 Joint Arrangements. As of December 31, 2017 the entity has been excluded from the range of associates as liquidated. (*8) As a general partner of Woori Columbus 1st Private Equity Fund, the Group had significant influence over the entity’s operational and financial policy making process, including participating in making decision of dividend or other distribution. As such, the investment in this entity was accounted for using equity method as of December 31, 2016. The Woori Columbus 1st Private Equity Fund has been removed from the list of associated companies as it was liquidated during the current period. (*9) Due to consolidation of stocks and debt-equity swap, the Group’s number of holding shares and ownership ratio have decreased. (*10) Even though the Group’s ownership ratio of the entity was more than 20% as of December 31, 2016, the Group did not have significant influence over the entity due to the fact that the entity was going through workout process under receivership, and thus the entity was excluded from the investment in associates. However, as the workout process was completed during the years ended December 31, 2017, it has been included in the investment in associates. (*11) Due to capital contribution by the Group during the years ended December 31, 2017, the entities were included in the investment in associates. (*12) The Group has sold a part of shares of the associates so the number of shares holding has decreased during the years ended December 31, 2017. (*13) Due to debt-equity swap capital stock, the Group ownership ratio have increased during the years ended December 31, 2017. (*14) As the carrying amounts of certain investments in associates had been reduced to zero, the Group discontinued the use of the equity method in accounting for those investments, and unrecognized losses due to the restricted application of equity method amount to 16,344 million Won and 612 million Won as of December 31, 2017 and 2016, respectively. (*15) Not in scope for the associates, because the Group does not have significant influence over the entity due to the fact that it is going through workout process under receivership as of December 31, 2017. (*16) Due to debt-equity swap, the entity was included in the investment in associates during the years ended December 31, 2017. (*17) As the Group sold its entire ownership interest of the entities, it was exclude from the investment in associates during the years ended December 31, 2017. (*18) The entity was sold after it was transferred to assets held for sale and was excluded from the investment in associates. (*19) It has been removed from the list of associated companies as it was liquidated during the current period. (*20) The shares of STX Engine Co., Ltd. owned by the Group were reclassified as assets held for sale, as the creditor financial institutions committee entered into a contract with UAMCO.,Ltd during the current period to sell STX Engine Co., Ltd. shares. 142142 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 143 - 64 - (2) Changes in the carrying value of investments in joint ventures and associates accounted for using the equity method of accounting are as follows (Unit: Korean Won in millions): Acquisiti- on cost January 1, 2017 Share of profits (losses) Acquisi- tion (*1) Disposal and others (*2) Dividends Change in capital Impair- ment Others (*1) December 31, 2017 For the year ended December 31, 2017 Woori Blackstone Korea Opportunity No.1 Private Equity Fund Kumho Tire Co., Inc. Woori Service Networks Co., Ltd. Korea Credit Bureau Co., Ltd. Korea Finance Security Co., Ltd. Chin Hung International Inc. Poonglim Industrial Co., Ltd. STX Engine Co., Ltd. Samho Co., Ltd. STX Corporation Saman Corporation Woori Growth Partnerships New Technology Private Equity Fund 2016KIF-IMM Woori Bank Technology Venture Fund K BANK Co., Ltd. Smart Private Equity Fund No.2 Woori Bank-Company K Well to Sea No.3 Private Equity Fund Woori Renaissance Holdings Nomura-Rifa Private Real Estate Investment Trust No.17 (7,369) - (3,303) - - - 1,545 (102,842) - - - - - 41,053 - - 175,652 15,289 200,332 (4,617) (102) 108 145 3,313 3,266 5,592 3,376 21 371 197 89,725 43,032 13,916 92,038 7,492 42,215 8,521 - 43,036 19,729 - 8,699 (14,375) (6,733) (1,010) 2,021 (29,788) (733) - - 8,546 - (46,217) (16,354) - - 13,602 13,118 (582) 15,729 (498) 1,800 32,500 1,800 30,442 - (11,381) (68) 5,040 12,892 3,000 3,000 - - (43) 3,000 102,500 - - 54,422 80,894 (622) 102,500 - (508) - - - - - - - - - - (8) (147) (54) - - - - - - - - - - - - (57,109) - - - 1,535 - 4,191 (73) 417 26 (156) - (245) - - (577) - - - - 98,933 - - - 158 5,816 3,519 (26,144) 45,101 - - - - - - - (5,323) - (6,738) 6,733 - - 27,772 - - - 6,947 1,254 - - - - - - - - - 27,611 - 6,840 27 31,735 2,932 - - 2,957 - 3,309 182,309 - 939 - 1,000 592,148 - 439,012 13,389 192,760 (70,946) (60,621) 6,663 (114,903) 11,697 417,051 (61) 1,000 - - - Korea Movie Asset Fund 1,500 (*1) Changes in investments in joint ventures and associates due to debt-equity swap is 51,227 million Won. (*2) The Investments in Associates reclassified as assets held for sale amount to 62,571 million Won, of which 16,354 million Won was disposed of during the current period. 143143 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 144 Woori Blackstone Korea Opportunity Private Equity Fund No.1 Kumho Tire Co., Inc. Woori Service Networks Co., Ltd. Korea Credit Bureau Co., Ltd. Korea Finance Security Co., Ltd. United PF 1st Corporate financial stability Chin Hung International Inc. Poonglim Industrial Co., Ltd. STX Engine Co., Ltd. Samho Co., Ltd. STX Corporation Osung LST Co., Ltd. Saman Corporation K-Growth crowd 2step Fund Woori Growth Partnerships New Technology Private Equity Fund 2016KIF-IMM Woori Bank Technology Venture Fund K BANK Co., Ltd. Woori Renaissance Holdings Woori Columbus First PEF Total - 65 - Acquisiti- on cost January 1, 2016 Share of profits (losses) Acquisi- tion (*1) Disposal and others (*2) Dividends Change in capital Impairment December 31, 2016 For the year ended December 31, 2016 43,917 175,652 56,044 214,050 10,093 (13,172) 108 139 18 3,313 5,291 436 3,266 3,711 (281) 172,441 89,725 13,916 92,038 7,492 42,215 15,405 8,521 800 187,592 43,936 5,313 51,276 14,325 4,251 10,985 8,521 - 3,265 (996) (2,378) (6,665) 5,392 (4,222) (2,903) 252 (13) - - - - - (37,036) (13,812) - - - - - (12) (135) (54) - - - - - - - - 800 (190,857) - - - - - (6,909) - (787) - - - - - - - - - - 13,602 - (640) 13,602 - 1,800 32,500 63,000 1,200 780,911 - - 37,121 1,306 643,861 - 1,800 (1,589) 32,500 - 17,303 - 48,702 3,857 (43) - - - (1,065) (236,654) - - (2) (198) (14,213) - (546) - - - - 92 (2,935) (1,575) 12 (29) - (74) - 156 - (469) - - (5,368) - - - - - - - - - - - (1,173) - - - - - - - (1,173) 15,289 200,332 145 5,592 3,376 - 43,032 - 43,036 19,729 - - 8,699 - 13,118 1,800 30,442 54,422 - 439,012 (*1) The transfers from AFS financial assets to investments in associates to investments in associates amounted to 5,421 million Won during the year ended December 31, 2016. (*2) The transfers from investments in associates to AFS financial assets amounted to 155,220 million Won and the transfers from investments in associates to assets held for sale amounted to 6,909 million Won. 144144 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 145 - 66 - (3) Summary financial information relating to investments in joint ventures and associates accounted for using the equity method of accounting is as follows (Unit: Korean Won in millions): Kumho Tire Co., Inc. Woori Service Networks Co., Ltd. Korea Credit Bureau Co., Ltd. Korea Finance Security Co., Ltd. Chin Hung International Inc. Poonglim Industrial Co., Ltd. STX Corporation Saman Corporation Woori Growth Partnerships New Technology Private Equity Fund 2016KIF-IMM Woori Bank Technology Venture Fund K BANK Co., Ltd. Smart Private Equity Fund No.2 Woori Bank-Company K Korea Movie Asset Fund Well to Sea No.3 Private Equity Fund Nomura-Rifa Private Real Estate Investment Trust December 31, 2017 Assets 5,105,107 4,982 75,504 33,915 341,284 241,063 595,348 98,435 Liabilities 3,928,327 1,780 19,323 10,461 259,454 309,925 543,458 69,929 Operating revenue 2,136,569 14,887 68,750 55,610 513,285 107,360 1,371,272 76,135 120,133 32,815 1,244,270 14,711 11,830 5,068,424 485 380 1,001,121 51 2 4,534,957 1,024 6 19,231 1 16 131,488 Net income (loss) (61,748) 1,003 3,580 1,071 28,698 (29,812) 342,869 (6,096) (3,199) (1,515) (74,403) (340) (172) 162,743 No.17 20,265 16,507 62 (242) Woori Blackstone Korea Opportunity No.1 Private Equity Fund Kumho Tire Co., Inc. Woori Service Networks Co., Ltd. Korea Credit Bureau Co., Ltd. Korea Finance Security Co., Ltd. Chin Hung International Inc. Poonglim Industrial Co., Ltd. STX Engine Co., Ltd. Samho Co., Ltd. STX Corporation Saman Corporation Woori Growth Partnerships New Technology Private Equity Fund 2016KIF-IMM Woori Bank Technology Venture Fund K BANK Co., Ltd. Woori Renaissance Holdings Inc. Woori Columbus 1st Private Equity Fund December 31, 2016 Assets Liabilities Operating revenue Net income (loss) 57,971 5,079,740 4,722 71,245 32,262 421,710 304,718 865,265 740,786 781,622 83,380 427 3,914,306 1,782 17,322 9,759 354,995 323,765 769,481 489,130 1,087,469 47,175 75,084 2,156,667 14,875 59,868 52,657 578,640 156,770 372,295 909,927 1,252,968 72,850 38,226 (53,328) 801 3,517 700 794 (15,135) (22,978) 68,077 (378,782) 2,746 57,339 493 37 (2,177) 9,005 239,806 127,411 811 254 5,633 26,703 506 5 2,927 37,206 3,764 (250) (12,222) 33,508 (450) 145145 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 146 - 67 - (4) The entities that the Group has not applied equity method of accounting although the Group’s ownership interest is more than 20% as of December 31, 2017 and 2016, are as follows: Orient Shipyard Co., Ltd. (*) Saenuel Co., Ltd. (*) E Mirae Tech Co., Ltd. (*) Jehin Trading Co., Ltd. (*) The season Co., Ltd. (*) Yuil PESC Co., Ltd. (*) Youngdong Sea Food Co., Ltd. (*) Sinseong Trading Co., Ltd. (*) CL Tech Co., Ltd. (*) Force TEC Co., Ltd. (*) Protronics Co., Ltd. (*) Instern Co., Ltd. (*) As of December 31, 2017 Number of shares owned Ownership (%) 465,050 3,531 7,696 81,610 18,187 8,642 12,106 2,584 13,759 4,780,907 95,921 14,296 21.4% 37.4% 41.0% 27.3% 30.1% 24.0% 24.0% 27.2% 38.6% 25.8% 48.1% 20.1% (*) Even though the Group’s ownership interest of the entity is more than 20%, the Group does not have significant influence over the entity since it is going through work-out process under receivership, thus it is excluded from the investment in associates. Orient Shipyard Co., Ltd. (*) Saenuel Co., Ltd. (*) E Mirae Tech Co., Ltd. (*) Jehin Trading Co., Ltd. (*) NK Eng Co., Ltd. (*) The season Co., Ltd. (*) Yuil PESC Co., Ltd. (*) Youngdong Sea Food Co., Ltd. (*) Sinseong Trading Co., Ltd. (*) Reading Doctors Co., Ltd. (*) PREXCO Co., Ltd. (*) Hyunwoo International Co., Ltd. (*) As of December 31, 2016 Number of shares owned Ownership (%) 465,050 3,531 7,696 81,610 697,033 18,187 8,642 12,106 2,584 7,398 919,972 59,873 23.0% 37.4% 41.0% 27.3% 23.1% 30.1% 24.0% 24.0% 27.2% 35.4% 28.1% 25.9% (*) Even though the Group’s ownership interest of the entity is more than 20%, the Group does not have significant influence over the entity since it is going through work-out process under receivership, thus it is excluded from the investment in associates. 146146 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 147 - 68 - (5) As of December 31, 2017 and 2016, the reconciliations from the net assets of associates based on the ownership ratio of the Group to its corresponding book value of investment in joint ventures and associates are as follows (Unit: Korean Won in millions except for ownership): Kumho Tire Co., Inc. (*) Woori Service Networks Co., Ltd. Korea Credit Bureau Co., Ltd. Korea Finance Security Co., Ltd. Chin Hung International Inc. (*) Poonglim Industrial Co., Ltd. (*) STX Corporation Saman Corporation Woori Growth Partnerships New Technology Private Equity Fund 2016KIF-IMM Woori Bank Technology Venture Fund K BANK Co., Ltd. Smart Private Equity Fund No.2 Woori Bank-Company K Korea Movie Asset Fund Well to Sea No.3 Private Equity Fund (*) Total net asset 1,065,421 3,202 56,181 23,454 81,686 (168,154) 51,890 28,506 Ownership (%) 14.2 4.9 9.9 15.0 25.3 29.4 19.7 9.2 Net assets of associates (or joint ventures) As of December 31, 2017 Cost-book value differential and others 48,459 - 248 - 24,565 54,542 24,614 5,373 150,767 158 5,568 3,519 20,671 (49,446) 10,232 2,619 - - - - (20,504) (27,904) (6,738) Impairment (102,843) 119,648 23.1 27,611 32,435 243,149 14,660 20.0 13.0 20.0 6,487 31,535 2,932 11,828 25.0 2,957 Intercompany transaction and others 2,549 - - - (136) 15,408 5 - Book value 98,932 158 5,816 3,519 45,100 - 6,947 1,254 - 27,611 353 200 - 6,840 31,735 2,932 - 2,957 (57) 182,309 - 939 - - - - - - - - - - - - - - Nomura-Rifa Private Real Estate Investment Trust No.17 3,758 364,909 50.0 25.0 182,366 939 (*) The net asset amount is after reflecting debt-equity swap and others. Total net asset Ownership (%) As of December 31, 2016 Net assets of associates (or joint ventures) Cost-book value differential and others Intercompany transaction and others Book value Impairment Woori Blackstone Korea Opportunity Private Equity Fund No.1 Kumho Tire Co., Inc. (*) Woori Service Networks Co., Ltd. Korea Credit Bureau Co., Ltd. Korea Finance Security Co., Ltd. Chin Hung International Inc. (*) Poonglim Industrial Co., Ltd. (*) STX Engine Co., Ltd. Samho Co., Ltd. STX Corporation (*) Saman Corporation Woori Growth Partnerships New Technology Private Equity Fund 2016KIF-IMM Woori Bank Technology Venture Fund K BANK Co., Ltd. Woori Renaissance Holdings Woori Columbus 1st Private Equity 57,544 1,055,219 2,940 53,923 22,503 65,387 (111,156) 95,784 251,656 (250,018) 36,205 56,846 8,751 234,173 100,708 Fund 305 26.4 14.2 4.9 9.9 15.0 28.4 31.0 29.2 7.8 9.5 9.2 23.1 20.0 13.0 51.6 2.0 15,191 149,324 145 5,344 3,376 18,593 (34,463) 28,002 19,729 (23,633) 3,326 13,118 1,750 30,442 51,965 6 - 48,459 - 248 - 24,565 54,149 14,954 - 24,614 5,373 - - - - - - - - - - - (21,062) - - (27,904) - - - - (6,441) - 98 2,549 - - - (126) 1,376 80 - 26,923 - 15,289 200,332 145 5,592 3,376 43,032 - 43,036 19,729 - 8,699 - 13,118 50 - 8,898 1,800 30,442 54,422 (6) - (*) The net asset amount is after reflecting preferred stocks and others. 147147 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 148 - 69 - 14. INVESTMENT PROPERTIES (1) Investment properties are as follows (Unit: Korean Won in millions): Acquisition cost Accumulated depreciation Net carrying value December 31, 2017 December 31, 2016 404,741 (33,440) 371,301 387,675 (29,178) 358,497 (2) Changes in investment properties are as follows (Unit: Korean Won in millions): Beginning balance Acquisition Disposal Depreciation Transfer Classified to assets held for sale Foreign currencies translation adjustments Others Ending balance For the year ended December 31, 2017 For the year ended December 31, 2016 358,497 9,872 (458) (3,902) 2,472 (371) (324) 5,515 371,301 351,496 4,428 - (3,762) 6,314 - 21 - 358,497 (3) Fair value of investment properties is amounting to 396,587 million Won and 382,370 million Won as of December 31, 2017 and 2016, respectively. The fair value of investment property, based on the assessment that was independently performed by external appraisal agencies, is classified as level 3 on the fair value hierarchy. (4) Rental fee earned from investment properties is amounting to 4,579 million Won and 5,027 million Won for the year ended December 31, 2017 and 2016, respectively. 148148 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 149 Total - 70 - 15. PREMISES AND EQUIPMENT (1) Details of premises and equipment are as follows (Unit: Korean Won in millions): Acquisition cost Accumulated depreciation Net carrying value Acquisition cost Accumulated depreciation Net carrying value Land 1,487,278 - 1,487,278 Building 867,804 (186,958) 680,846 Land 1,488,745 - 1,488,745 Building 855,332 (163,633) 691,699 Properties for business use 1,024,186 (844,114) 180,072 December 31, 2017 Structures in leased office 429,665 (364,878) 64,787 Construction in progress Structures 64,559 - 64,559 20 3,873,512 (17) (1,395,967) 3 2,477,545 Properties for business use 1,010,141 (820,239) 189,902 December 31, 2016 Structures in leased office 424,562 (355,604) 68,958 Construction in progress Structures Total 18,717 - 18,717 20 3,797,517 (16) (1,339,492) 4 2,458,025 (2) Details of changes in premises and equipment are as follows (Unit: Korean Won in millions): For the year ended December 31, 2017 Beginning balance Acquisition Disposal Depreciation Classified from(to) assets held for sale Transfer Foreign currencies translation adjustment Others Ending balance Beginning balance Acquisition Disposal Depreciation Classified to assets held for sale Transfer Foreign currencies translation adjustment Acquisition through business combination Others Ending balance Properties for business use Land 1,488,745 Building 4,755 (1,840) - 691,699 22,579 (2,593) (26,156) 189,902 59,694 (442) (74,223) (2,693) (196) (1,059) (2,134) 549 5,411 (1,493) - 1,487,278 (1,393) (97) 680,846 (2,023) 1,204 180,072 Structures in leased office 68,958 23,420 (1,231) (31,728) - - (1,315) 6,683 64,787 Construction in progress Structures Total 18,717 51,797 - - - (5,553) (402) - 64,559 4 2,458,025 162,245 - (6,106) - (132,108) (1) - - (3,203) (2,472) (6,626) - - 7,790 3 2,477,545 For the year ended December 31, 2016 Land 1,493,628 - (30) - Building 704,017 15,939 (1,474) (24,887) Properties for business use 193,291 74,336 (233) (82,445) Structures in leased office 79,744 19,615 (2,623) (48,587) 522 21,231 (102) - Construction in progress Structures Total (4,063) (1,415) (251) (1,557) 625 516 - - 307 - - 1,488,745 - (604) 691,699 209 4,437 189,902 - - - (3,087) 376 153 442 19,991 68,958 - - 18,717 4 2,471,206 131,121 - (4,462) - (155,919) - - - - (4,314) (6,059) 1,977 651 - - 23,824 4 2,458,025 149149 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 150 - 71 - 16. INTANGIBLE ASSETS AND GOODWILL (1) Details of intangible assets are as follows (Unit: Korean Won in millions): December 31, 2017 Acquisition cost Accumulated amortization Accumulated impairment losses Net carrying value Acquisition cost Accumulated amortization Accumulated impairment losses Net carrying value Industrial property rights Goodwill Software 108,707 203,418 - (162,746) - 108,707 - 40,672 Development cost 413,296 (182,846) (516,467) (137) Others 634,150 - 230,450 117,546 1,063 (524) - 539 Membership deposit 27,337 - (6,652) 20,685 Total 1,387,971 (862,583) (6,789) 518,599 December 31, 2016 Industrial property rights 714 (401) - 313 Development cost Others 299,031 622,540 (160,335) (458,088) (88) - 138,696 164,364 Membership deposit 26,884 - (6,798) 20,086 Total 1,259,174 (768,549) (6,886) 483,739 Goodwill Software 124,803 185,202 - (149,725) - 124,803 35,477 - (2) Details of changes in intangible assets are as follows (Unit: Korean Won in millions): Beginning balance Acquisition Disposal Amortization (*) Impairment losses Transfer Foreign currencies translation adjustment Others Ending balance For the year ended December 31, 2017 Industrial property rights Development cost 138,696 122,849 - Others 164,364 22,531 (37) (22,534) (60,869) (78) - (7,987) - 313 349 - (123) - - Membership deposit Total 20,086 483,739 1,867 157,423 (981) (944) (99,784) - (237) (159) - - 35,477 9,722 - Goodwill Software 124,803 105 - - - - - 7,987 (16,258) (16,201) - 108,707 (952) 4,696 40,672 - - 539 (483) (91) (2,742) (5,623) 230,450 117,546 (160) (5) (20,538) (1,023) 20,685 518,599 (*) Amortization of other intangible assets amounting to 48,292 million Won is included in other operating expenses. For the year ended December 31, 2016 Industrial property rights Development cost Beginning balance Acquisition Disposal Amortization Impairment losses Foreign currencies translation adjustment Acquisition through business combination Others Ending balance Goodwill Software 38,171 103,525 - 8,708 - - - - - (15,795) 7,338 16 7,857 6,083 124,803 162 4,215 35,477 344 64 - (95) - - - - 313 Others 51,357 201,769 92,969 30,842 - (18,657) - (23) (57,803) 3,230 Membership deposit Total 24,640 419,806 2,306 134,889 (3,808) (3,785) (92,350) - 1,645 (1,585) - 853 50 8,257 - 13,027 - (14,504) 138,696 164,364 8,062 43 (1,583) 7,238 20,086 483,739 150150 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 151 - 72 - 17. ASSETS HELD FOR SALE Assets held for sale are as follows (Unit: Korean Won in millions): December 31, 2017 December 31, 2016 Investments in subsidiaries and associates Premises and equipment Total 46,217 2,407 48,624 - 2,342 2,342 18. ASSETS SUBJECT TO LIEN AND ASSETS ACQUIRED THROUGH FORECLOSURES (1) Assets subjected to lien are as follows (Unit: Korean Won in millions): Loan and receivables Due from banks on time in Collateral given to local currency Due from banks in local currency Due from banks in foreign currencies Financial assets at FVTPL Financial institutions debt securities and others AFS financial assets Corporate bonds Korean treasury and government agencies bonds and others HTM financial assets Korean treasury and government agencies bonds Financial institutions debt securities and others Land and building Premises and equipment December 31, 2017 Amount Reason for collateral Collaterals for issuing letter of guarantee and others Margin deposit for futures 6,629 10,809 or option Foreign margin deposit for 9,136 future or option and others Substitute securities and 501,523 others Related to bonds sold under Bank of China and others Samsung Securities Co., Ltd. and others Korea Investment & Securities Co., Ltd. and others Yuanta Securities Co., Ltd. and others Korea Securities Depository and others 9,998 repurchase agreements (*) The BOK and others Korea Securities Depository 1,570,608 Settlement risk and others Related to bonds sold under 5,436 repurchase agreements (*) The BOK and others Credit Counselling & Recovery Service and others Total 7,605,292 Settlement risk and others 6,186 9,725,617 Leasehold rights and others (*) The Group enters into the repurchase agreements at predetermined price or original sale price added with certain rate of return after the disposal of securities. In this regards, the securities are provided as collaterals, and the purchasers are eligible to dispose or provide them as collateral. Therefore, as such securities have been transferred but have not been derecognized, the Group recognizes the relevant amount as liability (bond sold under repurchase agreements). 151151 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 152 - 73 - Loan and receivables Due from banks in local currency Due from banks in foreign currencies Financial assets at FVTPL Financial institutions debt securities and others AFS financial assets Korean treasury and Collateral given to Samsung Securities Co., Ltd. and others Korea Investment & December 31, 2016 Amount Reason for collateral Margin deposit for futures and options and others 24,589 Securities Co., Ltd. and others Yuanta Securities Co., Foreign margin deposit for 227,249 future or option and others Substitute securities and Ltd. and others Korea Securities 473,476 others Related to bonds sold under government agencies bonds Depository and others 2,546,683 repurchase agreements (*) Financial institutions debt securities and others HTM financial assets Korean treasury and The BOK and others Korea Securities 836,522 Settlement risk and others Related to bonds sold under government agencies bonds Depository and others 7,133 repurchase agreements (*) Korean treasury and government agencies bonds and others Land and Building Premises and equipment The BOK and others Credit Counselling & Recovery Service and others Total 6,185,295 Settlement risk and others 6,310 10,307,257 Leasehold rights and others (*) The Group enters into the repurchase agreements at predetermined price or original sale price added with certain rate of return after the disposal of securities. In this regards, the securities are provided as collaterals, and the purchasers are eligible to dispose or provide them as collateral. Therefore, as such securities have been transferred but have not been derecognized, the Group recognizes the relevant amount as liability (bond sold under repurchase agreements). (2) The carrying amounts of buildings acquired through foreclosure are as follows (Unit: Korean Won in millions): Land Buildings Personal properties not used in business Total December 31, 2017 December 31, 2016 332 44 4,138 1,852 - 376 202 6,192 (3) Securities loaned are as follows (Unit: Korean Won in millions): Financial assets at FVTPL AFS financial assets Korean Equity securities Korean treasury and government agencies bonds and others December 31, 2017 December 31, 2016 - 4,459 Total 170,256 170,256 493,579 498,038 Loaned to Samsung Securities Co., Ltd. and others Korea Securities Finance Corporation and others Securities loaned are lending of specific securities to borrowers who agree to return the same quantity of the same security at the end of lending period. As the Group does not derecognize these securities, there are no liabilities recognized through such transactions relates to securities loaned. 152152 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 153153 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 153 - 74 - (4) Collaterals held that can be disposed and re-subjected to lien regardless of defaults of counterparties Fair values of collaterals held can be disposed and re-subjected to lien regardless of defaults of counterparties as of December 31, 2017 and 2016 are as follows (Unit: Korean Won in millions): December 31, 2017 Securities Securities Fair values of collaterals Fair values of collaterals were disposed or re-subjected to lien - 17,671,490 December 31, 2016 Fair values of collaterals Fair values of collaterals were disposed or re-subjected to lien - 8,746,101 19. OTHER ASSETS Details of other assets are as follows (Unit: Korean Won in millions): Prepaid expenses Advance payments Non-operative assets Others Total December 31, 2017 December 31, 2016 130,245 18,363 376 9,420 158,404 111,445 1,944 6,192 9,265 128,846 20. FINANCIAL LIABILITIES AT FVTPL Financial liabilities at FVTPL are composed of financial liabilities held for trading and financial liabilities designated at FVTPL. (1) Financial liabilities at FVTPL are as follows (Unit: Korean Won in millions): Financial liabilities held for trading Financial liabilities designated at FVTPL Total December 31, 2017 3,176,113 251,796 3,427,909 December 31, 2016 3,036,478 766,880 3,803,358 (2) Financial liabilities held for trading are as follows (Unit: Korean Won in millions): Deposits due to Customers: Gold banking liabilities Derivative liabilities Total December 31, 2017 December 31, 2016 25,964 3,150,149 3,176,113 26,501 3,009,977 3,036,478 (3) Financial liabilities designated at FVTPL are as follows (Unit: Korean Won in millions): December 31, 2017 December 31, 2016 Equity linked securities index: Equity linked securities index in short position Debentures: Debentures in local currency Total 160,057 91,739 251,796 673,906 92,974 766,880 WOORI BANKANNUAL REPORT 2017 154 - 75 - (4) Credit risk adjustments to financial liabilities designated at FVTPL is as follows (Unit: Korean Won in millions): Financial liabilities designated at FVTPL subject to credit risk adjustments Changes in fair value for credit risk adjustments Accumulated changes in fair value for credit risk adjustments For the year ended December 31 2017 2016 251,796 (254) 133 766,880 (8) 349 Credit risk adjustments are applied to reflect the Group’s own credit risk when measuring financial liabilities designated at FVTPL at fair value. The methodology to determine the adjustment incorporates the Group’s credit spread as observed through credit ratings. (5) The differences between financial liabilities at FVTPL’s carrying amount and nominal amount at maturity are as follows (Unit: Korean Won in millions): Carrying amount Nominal amount at maturity Difference 21. DEPOSITS DUE TO CUSTOMERS December 31, 2017 251,796 255,408 (3,612) December 31, 2016 766,880 902,375 (135,495) Details of deposits due to customers by type are as follows (Unit: Korean Won in millions): Deposits in local currency: Deposits on demand Deposits at termination Mutual installment Deposits on notes payables Deposits on CMA Certificate of deposits Other deposits Sub-total Deposits in foreign currencies Present value discount Total December 31, 2017 December 31, 2016 9,349,070 194,292,679 34,055 1,323,679 164,431 4,436,443 1,451,841 211,052,198 23,682,896 (40,010) 234,695,084 9,491,680 183,723,369 37,128 943,446 203,013 3,836,430 1,360,176 199,595,242 21,453,096 (27,927) 221,020,411 154154 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 155155 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 155 - 76 - 22. BORROWINGS AND DEBENTURES (1) Details of borrowings are as follows (Unit: Korean Won in millions): Borrowings in local currency: Borrowings from The BOK Borrowings from government funds Others Sub-total Borrowings in foreign currencies: Borrowings in foreign currencies Offshore borrowings in foreign currencies Sub-total Bills sold Call money Bonds sold under repurchase agreements Present value discount Total December 31, 2017 Lenders Interest rate (%) Amount The BOK Small Enterprise And Market Service and others The Korea Development Bank and others 0.5 ~ 0.8 1,404,087 0.0 ~ 2.9 1,723,340 0.0 ~ 3.2 3,957,421 7,084,848 The Export-Import BOK and others 0.0 ~ 6.8 6,996,551 Commonwealth Bank Others Bank and others Other financial institutions 1.8 0.0 ~ 1.2 1.5 ~ 2.7 0.6 ~ 12.7 28,285 7,024,836 36,953 635,061 3,173 (165) 14,784,706 December 31, 2016 Lenders Interest rate (%) Amount Borrowings in local currency: Borrowings from the BOK Borrowings from government funds The BOK Small and Medium Business Corporation and others Others Seoul Metropolitan Government and others 0.5 ~ 0.8 1,598,553 0.0 ~ 3.5 1,534,807 0.0 ~ 3.8 3,922,878 7,056,238 Sub-total Borrowings in foreign currencies: Borrowings in foreign currencies Offshore borrowings in foreign currencies Sub-total Bills sold Call money Bonds sold under repurchase agreements Present value discount Total The Export-Import BOK and others 0.0 ~ 5.2 7,737,237 Wells Fargo Others Bank and others Other financial institutions 1.4 0.0 ~ 1.6 0.0 ~ 5.1 0.0 ~ 4.5 18,128 7,755,365 26,895 1,926,779 2,004,905 (667) 18,769,515 (2) Details of debentures are as follows (Unit: Korean Won in millions): December 31, 2017 December 31, 2016 Interest rate (%) Amount Interest rate (%) Face value of bond(*): Ordinary bonds Subordinated bonds Other bonds Sub-total Discounts on bond Total 1.5 ~ 5.8 3.4 ~ 12.6 1.6 ~ 17.0 22,468,908 1.5 ~ 11.8 4,781,301 3.0 ~ 12.6 17.0 649,615 27,899,824 (30,173) 27,869,651 Amount 18,268,403 5,327,335 4,006 23,599,744 (34,295) 23,565,449 (*) Included debentures under fair value hedge relationships are 3,102,386 million Won and 3,610,193 million Won as of December 31, 2017 and 2016, respectively. Also, debentures under cash flow hedge amounting to 699,029 million Won are included as of December 31, 2017 WOORI BANKANNUAL REPORT 2017 156 - 77 - 23. PROVISIONS (1) Details of provisions are as follows (Unit: Korean Won in millions): Asset retirement obligation Provision for guarantee (*1) Provisions for unused commitments Provisions for customer reward credits Other provisions (*2) Total December 31, 2017 December 31, 2016 58,076 238,117 87,909 22,093 22,282 428,477 61,872 183,247 66,115 40,445 58,791 410,470 (*1) Provision for guarantee includes provision for financial guarantee of 71,697 million Won and 67,557 million Won as of December 31, 2017 and 2016, respectively. (*2) Other provisions consist of provision for litigation and others. (2) Changes in provisions except for asset retirement obligation are as follows (Unit: Korean Won in millions): Beginning balance Provisions provided Provisions used and others Reversal of unused amount Foreign currencies translation adjustments Transfer(*) Others Ending balance For the year ended December 31, 2017 Provision for guarantees 238,117 4,876 (24,898) (60,300) 9 Provision for unused commitments 87,909 2,028 (68) (23,744) (10) - 25,443 183,247 - - 66,115 Provisions for customer reward credits 22,093 62,593 (84,979) - - 21,808 18,930 40,445 Other provisions 22,282 42,042 (8,014) (77) (249) - 2,807 58,791 Total 370,401 111,539 (117,959) (84,121) (250) 21,808 47,180 348,598 (*) According to contracts with the third parties, the Group ultimately will be reimbursed for which it has paid out on behalf of customers, which has incurred through their customer loyalty programs. Therefore, when such obligation incurs, the Group recognizes it as “transfer”, but there is no impact on the Group’s expense. Beginning balance Provisions provided Provisions used and others Reversal of unused amount Foreign currencies translation adjustments Transfer(*) Others Ending balance For the year ended December 31, 2016 Provision for unused commitments 85,313 8,502 22 (5,409) Provisions for customer reward credits Other provisions Total 5,445 23,525 (8,158) - 22,581 477,480 44,342 8,034 (99,476) (11,323) (69,470) - - - (519) 87,909 - 503 778 22,093 2,990 - - 2,990 503 14,032 22,282 370,401 Provision for guarantees 364,141 4,281 (80,017) (64,061) - - 13,773 238,117 (*) As the credits of the affiliates were transferred to the Group, the allowance for the provisions for customer reward credits increased, for the year ended December 31, 2016. 156156 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 157 - 78 - (3) Changes in asset retirement obligation are as follows (Unit: Korean Won in millions): Beginning balance Provisions provided Provisions used Amortization Reversal of unused amount Increase in asset retirement expense and others Ending balance 24. NET DEFINED BENEFIT LIABILITY(ASSET) For the year ended December 31, 2017 For the year ended December 31, 2016 58,076 2,225 (1,283) 428 (733) 3,159 61,872 39,121 2,034 (1,279) 464 (1) 17,737 58,076 The characteristics of the Group’s defined benefit retirement pension plans characteristics are as follows: Employees and directors with one or more years of service are entitled to receive a payment upon termination of their employment, based on their length of service and rate of pay at the time of termination. The assets of the plans are measured at their fair value at the end of reporting date. The plan liabilities are measured using the projected unit method, which takes account of projected earnings increases, using actuarial assumptions that give the best estimate of the future cash flows that will arise under the plan liabilities. The Group is exposed to various risks through defined benefit retirement pension plan, and the most significant risks are as follows: Volatility of asset The defined benefit obligation was estimated with an interest rate calculated based on blue chip corporate bonds earnings. A deficit may occur if the rate of return of plan assets falls short of the interest rate. Decrease in profitability of blue chip bonds A decrease in profitability of blue chip bonds will be offset by some increase in the value of debt securities that the employee benefit plan owns but will bring an increase in the defined benefit obligation. Risk of inflation Defined benefit obligations are related to inflation rate; the higher the inflation rate is, the higher the level of liabilities. Therefore, deficit occurs in the system if an inflation rate increases. (1) Details of net defined benefit liability (asset) are as follows (Unit: Korean Won in millions): Defined benefit obligation Fair value of plan assets Net defined benefit liability (asset) December 31, 2017 December 31, 2016 1,071,170 (1,027,906) 43,264 984,381 (990,653) (6,272) 157157 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 158 - 79 - (2) Changes in the carrying value of defined benefit obligation are as follows (Unit: Korean Won in millions): Beginning balance Current service cost Interest expense Remeasurements Foreign currencies translation adjustments Retirement benefit paid Curtailment or liquidation Others Ending balance For the year ended December 31, 2017 For the year ended December 31, 2016 984,381 146,750 26,629 (20,389) (279) (55,552) (10,928) 558 1,071,170 901,219 153,660 24,326 (52,402) 80 (34,346) (9,536) 1,380 984,381 (3) Changes in the plan assets are as follows (Unit: Korean Won in millions): Beginning balance Interest income Remeasurements Employer’s contributions Retirement benefit paid Curtailment or liquidation Others Ending balance For the year ended December 31, 2017 For the year ended December 31, 2016 990,653 30,601 (14,125) 43,114 (51,877) (11,052) 40,592 1,027,906 801,528 25,038 (7,304) 226,752 (33,341) (9,198) (12,822) 990,653 (4) Plan assets wholly consist of time deposits as of December 31, 2017 and 2016, respectively. Among plan assets, realized returns on plan assets amount to 16,476 million Won and 17,734 million Won for the year ended December 31, 2017 and 2016, respectively. Meanwhile, the contribution expected to be paid in the subsequent accounting year amounts to 125,818 million Won. (5) Current service cost, net interest income, loss (gain) on the curtailment or liquidation and remeasurements recognized in the consolidated statements of net income and total comprehensive income are as follows (Unit: Korean Won in millions): Current service cost Net interest income Loss (gain) on the curtailment or liquidation Cost recognized in net income For the years ended December 31, 2017 For the years ended December 31, 2016 153,660 (712) (339) 152,609 146,750 (3,972) 124 142,902 Remeasurements(*) Cost recognized in total comprehensive income (6,264) 136,638 (45,098) 107,511 (*) This is an amount before considering the tax effects. Retirement benefit service costs related to defined contribution plans are recognized 3,946 million Won and 3,747 million Won for the years ended December 31, 2017 and 2016, respectively. 158158 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 159 - 80 - (6) Key actuarial assumptions used in defined benefit liability(asset) assessment are as follows: Discount rate Future wage growth rate Mortality rate Retirement rate December 31, 2017 3.18% 6.18% Issued by Korea Insurance Development Institute Experience rate for each employment classification December 31, 2016 2.85% 6.05% Issued by Korea Insurance Development Institute Experience rate for each employment classification (7) The sensitivity to actuarial assumptions used in the assessment of defined benefit obligation is as follows (Unit: Korean Won in millions): Discount rate Future wage growth rate Increase by 1% point Decrease by 1% point Increase by 1% point Decrease by 1% point December 31, 2017 December 31, 2016 (107,203) 125,395 124,766 (108,344) (116,405) 137,151 136,707 (117,765) 25. OTHER FINANCIAL LIABILITIES AND OTHER LIABILITIES Other financial liabilities and other liabilities are as follows (Unit: Korean Won in millions): December 31, 2017 December 31, 2016 Other financial liabilities: Accounts payable Accrued expenses Borrowings from trust accounts Agency business revenue Foreign exchange payables Domestic exchange payables Other miscellaneous financial liabilities Present value discount Sub-total Other liabilities: Unearned income Other miscellaneous liabilities Sub-total Total 4,692,320 2,049,861 3,271,817 344,591 590,667 1,309,646 1,635,156 (1,597) 13,892,461 180,664 103,317 283,981 14,176,442 5,626,661 2,055,936 3,329,683 331,159 702,968 8,480,765 1,458,747 (833) 21,985,086 171,050 128,326 299,376 22,284,462 159159 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 160160 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 160 - 81 - 26. DERIVATIVES (1) Derivative assets and derivative liabilities are as follows (Unit: Korean Won in millions): December 31, 2017 For cash flow hedge Assets For fair value hedge For trading For cash flow hedge Liabilities For fair value hedge For trading Nominal amount Interest rate: Futures Swaps Purchase options Written options 75,845 130,197,378 630,000 795,000 Currency: Futures Forwards Swaps Purchase options Written options Equity: Futures Swaps Purchase options Written options Others: 318,217 72,526,956 48,176,306 2,291,154 4,038,237 91,436 15,000 5,060,706 4,504,290 Futures Swaps Purchase options Written options Total - 7,805 - 5,000 268,733,330 - - - - - - - - - - - - - - - - - - - - 59,272 223,935 12,346 - - - - - - - - - 12,103 253,972 - 12,869 - - - - - 1,314,368 - 1,352,924 64,267 - - - - - 55,651 - - - - - 103 - 146,775 - - - - - - - - - 1,375,799 - 1,347,905 - - 58,687 - - - - - - 10 - 99,770 - - - - - 1,056 - - 59,272 3,115,775 - - - - 55,651 - - - - - 1,037 - 100 12,103 3,150,149 December 31, 2016 Assets Liabilities Notional amount For fair value hedge For trading For fair value hedge For trading Interest rate: Futures Swaps Purchase options Written options Currency: Futures Forwards Swaps Purchase options Written options Equity: Futures Swaps Purchase options Written options Others: Futures Swaps Purchase options Written options Total 54,785 118,582,511 860,000 1,035,000 - 139,832 - - - 470,057 21,172 - - 1,265,852 1,022,969 42,126 - - 92 73,261 - - - - - - - - 745 - - - - - 140,577 - 2,645 121 - 2,898,295 - 7,013 - - - 509,686 - 21,863 - - - - - - 1,015,380 1,221,959 - 8,589 - - - 208 - - - - 7,221 - 88 - 228,900 - 2,331 - 1,181 3,009,977 493,733 62,539,094 39,782,049 1,120,949 907,211 926,392 15,000 3,007,969 4,460,233 5,105 7,918 8,307 64,352 233,870,608 WOORI BANKANNUAL REPORT 2017 161161 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 161 - 82 - Derivatives held for trading purpose are classified into financial assets or liabilities at FVTPL (see Notes 7 and 20) and derivatives for hedging are stated as a separate line item in the consolidated statements of financial position. (2) Gains or losses from valuation of financial instruments under hedge accounting are as follows (Unit: Korean Won in millions): Gains from hedged items Losses from hedging instruments For the year ended December 31 2016 2017 110,152 (109,447) 98,827 (98,851) Meanwhile, the maximum period that the Group is exposed to cash flow risk arising from the hedging transaction discussed above will be terminated by February 2021. Among gain (loss) on valuation of derivatives that was included in the accumulated other comprehensive income, the amount has been reclassified to loss is 56,676 million Won, before reduction of income tax effect during the year ended December 31, 2017. 27. DEFERRED DAY 1 PROFITS OR LOSSES Changes in deferred day 1 profits or losses are as follows (Unit: Korean Won in millions): Beginning balance New transactions Amounts recognized in profits or losses Ending balance For the year ended December 31 2016 2017 13,422 500 (6,506) 7,416 28,008 1,337 (15,923) 13,422 In case some variables to measure fair values of financial instruments are not observable or available in the market, valuation techniques are utilized to evaluate such financial instruments. Those financial instruments are recorded at the fair value produced by the valuation techniques as at the time of acquisition, even though there are difference noted between the transaction price and the fair value. The table above presents the difference yet to be realized as profit or losses. 28. CAPITAL STOCK AND CAPITAL SURPLUS (1) The number of authorized shares and others are as follows: December 31, 2017 Authorized shares of common stock Par value Issued shares of common stock Capital stock 5,000,000,000 Shares 5,000 Won 676,000,000 Shares 3,381,392 million Won December 31, 2016 5,000,000,000 Shares 5,000 Won 676,000,000 Shares 3,381,392 million Won (2) There is no change to be disclosed in numbers of issued and outstanding shares of common stock for the year ended December 31, 2017 and 2016. (3) Details of capital surplus are as follows (Unit: Korean Won in millions): Capital in excess of par value Other capital surplus Total December 31, 2017 December 31, 2016 269,533 16,347 285,880 269,533 16,798 286,331 WOORI BANKANNUAL REPORT 2017 162 - 83 - 29. HYBRID SECURITIES The bond-type hybrid securities classified as owner’s equity are as follows (Unit: Korean Won in millions): Issue date June 20, 2008 March 8, 2012 April 25, 2013 November 13, 2013 November 13, 2043 December 12, 2014 December 12, 2044 Maturity June 20, 2038 March 8, 2042 April 25, 2043 June 3, 2015 May 2, 2007 June 10, 2015 September 27, 2016 May 16, 2017 June 3, 2045 May 2, 2037 June 10, 2045 - - Interest rate (%) 7.7 5.8 4.4 5.7 5.2 4.4 6.2 5.0 4.5 5.3 Securities in local currency Securities in foreign currencies Issuance cost Total December 31, 2017 December 31, 2016 255,000 190,000 500,000 200,000 160,000 240,000 930,900 559,650 553,450 - (14,104) 3,017,888 3,574,896 255,000 - 500,000 200,000 160,000 240,000 - 559,650 553,450 562,700 (12,912) The hybrid securities mentioned above are either without a maturity date or its maturity can be extended indefinitely at the maturity date without change of terms. Further, if a resolution is passed not to pay dividends on common stock, interest payments on the hybrid securities may be skipped. 30. OTHER EQUITY (1) Details of other equity are as follows (Unit: Korean Won in millions): Accumulated other comprehensive income: Gain on valuation of available-for-sale financial assets Share of other comprehensive loss of joint ventures and associates Loss on foreign currency translation of foreign operations Remeasurement loss related to defined benefit plan Gain on valuation of cash flow hedges Equity related to non-current assets held for sale Sub-total Treasury shares Other capital adjustments Total December 31, 2017 December 31, 2016 301,930 386,981 (1,251) (1,863) (242,700) (152,624) 777 4,145 (89,723) (34,113) (1,815,438) (1,939,274) (48,353) (163,397) - - 173,368 (34,113) (1,607,280) (1,468,025) 162162 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 163 - 84 - (2) Changes in the accumulated other comprehensive income are as follows (Unit: Korean Won in millions): Gain (loss) on valuation of available-for-sale financial assets Share of other comprehensive income (loss) of joint ventures and associates Loss on foreign currency translation of foreign operations Remeasurement gain (loss) related to defined benefit plan Gain (loss) on valuation of cash flow hedges Transfer to non-current assets held for sale Total For the year ended December 31, 2017 Beginning balance Increase (decrease)(*) Reclassif- ication adjustments(*) Income tax effect Ending balance 386,981 80,997 (164,803) (1,245) 301,930 (1,863) 2,516 (48,353) (193,272) 6,216 1,025 (163,397) - - 173,368 - - - - (1,904) (1,251) (1,075) (242,700) 4,557 (152,624) (248) 777 4,145 (98,373) - (164,803) - 85 4,145 (89,723) (*) For the change in gain (loss) on valuation of AFS financial assets, “increase (decrease)” represents change due to the valuation during the period, and “reclassification adjustments” explains disposal or recognition of impairment losses on AFS financial assets. Gain (loss) on valuation of available-for-sale financial assets Share of other comprehensive income (loss) of joint ventures and associates Gain (loss) on foreign currency translation of foreign operations Remeasurement gain (loss) related to defined benefit plan Gain (loss) on valuation of cash flow hedges Total For the year ended December 31, 2016 Beginning balance Increase (decrease)(*) Reclassif- Ication adjustments(*) Income tax effect Ending balance 374,685 114,617 (101,647) (674) 386,981 6,074 (9,274) (70,789) 30,368 (197,579) 45,096 (10,371) 102,020 10,371 191,178 1,337 (1,863) (7,932) (48,353) (10,914) (163,397) - - - - (101,647) (18,183) - - 173,368 (*) For the change in gain (loss) on valuation of AFS financial assets, “increase (decrease)” represents change due to the valuation during the period, and “reclassification adjustments” explains disposal or recognition of impairment losses on AFS financial assets. 163163 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 164164 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 164 - 85 - 31. RETAINED EARNINGS (1) Details of retained earnings are as follows (Unit: Korean Won in millions): Legal reserve Earned surplus reserve Other legal reserve Voluntary reserve Sub-total Business rationalization reserve Reserve for financial structure improvement Additional reserve Regulatory reserve for credit loss Revaluation reserve Other voluntary reserve Sub-total Retained earnings before appropriation Total i. Earned surplus reserve December 31, 2017 December 31, 2016 1,622,754 44,634 1,667,388 8,000 235,400 7,073,104 2,255,252 753,908 11,700 10,337,364 2,606,814 14,611,566 1,729,754 45,668 1,775,422 8,000 235,400 7,418,806 2,438,191 751,964 11,700 10,864,061 2,980,523 15,620,006 In accordance with the Banking Act, earned surplus reserve are appropriated at least one tenth of the earnings after tax on every dividend declaration, not exceeding the paid in capital. This reserve may not be used other than for offsetting a deficit or transferring to capital. ii. Other legal reserve Other legal reserves were appropriated in the branches located in Japan, Vietnam and Bangladesh according to the banking laws of Japan, Vietnam and Bangladesh, and may be used to offset any deficit incurred in those branches. iii. Business rationalization reserve Pursuant to the Restriction of Special Taxation Act, the Group was previously required to appropriate, as a reserve for business rationalization, amounts equal to tax reductions arising from tax exemptions and tax credits up to December 31, 2001. The requirement was no longer effective from 2002. iv. Reserve for financial structure improvement From 2002 to 2014, the Finance Supervisory Services recommended banks in Korea to appropriate at least 10 percent of net income after accumulated deficit for financial structure improvement, until tangible common equity ratio equals 5.5 percent. But this reserve is not available for payment of cash dividends; however, it can be used to reduce a deficit or be transferred to capital. The reserve and appropriation is an Autonomous judgment matter of the Group since 2015. v. Additional Additional reserve was appropriated for capital adequacy and other management purpose. vi. Regulatory reserve for credit loss In accordance with Article 29 of the Regulation on Supervision of Banking Business (“RSBB”), if provisions for credit loss under K-IFRS for the accounting purpose are lower than provisions under RSBB, the Group discloses such short fall amount as regulatory reserve for credit loss. vii. Revaluation reserve Revaluation reserve is the amount of limited dividends set by the board of directors to be the recognized as complementary capital when the gain or loss occurred in the property revaluation by adopting K-IFRS. WOORI BANKANNUAL REPORT 2017 165 - 86 - (2) Changes in retained earnings are as follows (Unit: Korean Won in millions): Beginning balance Net attributable to owners Dividends on common stock Dividends on hybrid securities Repayment of hybrid securities Ending balance For the year ended December 31 2017 14,611,566 1,512,148 (336,636) (167,072) - 15,620,006 2016 13,726,122 1,261,266 (168,317) (206,515) (990) 14,611,566 32. REGULATORY RESERVE FOR CREDIT LOSS In accordance with Paragraph 1 and 2 of Article 29 of the Regulation on the Supervision of Banking Business (“RSBB”), if the estimated provisions for credit loss under K-IFRS for the accounting purpose are lower than those in accordance with the provisions under the RSBB, the Group shall disclose the difference as the planned regulatory reserve for credit loss. (1) Balance of the planned regulatory reserve for credit loss is as follows (Unit: Korean Won in millions): Beginning balance Planned provision of regulatory reserve for credit loss Ending balance December 31, 2017 2,438,191 December 31, 2016 2,255,252 140,266 2,578,457 182,939 2,438,191 (2) Planned reserves provided, adjusted net income after the planned reserves provided and adjusted earnings per share after the planned reserves provided are as follows (Unit: Korean Won in millions, except for earnings per share amount): Net income Provision of regulatory reserve for credit loss Adjusted net income after the provision of regulatory reserve Adjusted EPS after the provision of regulatory reserve (Unit: Korean Won) For the years ended December 31 2017 2016 1,530,088 140,266 1,389,822 1,817 1,277,533 182,939 1,094,594 1,320 33. DIVIDENDS The Bank’s dividends for the year ended December 31, 2017 and 2016 are 500 Won and 400 Won per share, respectively, and total dividend payments amount to 336,636 million Won and 269,308 million Won, respectively. Dividends for the current period will be brought up as an agenda in the annual shareholders’ meeting scheduled on March 23, 2018. Meanwhile, the Bank paid out 67,328 million Won (100 Won per share) as an interim dividend during the year ended December 31, 2017. 165165 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 166 - 87 - 34. NET INTEREST INCOME (1) Interest income recognized are as follows (Unit: Korean Won in millions): Financial assets at FVTPL AFS financial assets HTM financial assets Loans and receivables: Interest on due from banks Interest on loans Interest of other receivables Sub-total Total For the years ended December 31 2016 2017 53,348 239,030 307,965 83,325 7,835,957 31,062 7,950,344 8,550,687 63,408 339,518 360,054 75,021 7,635,791 38,520 7,749,332 8,512,312 (2) Interest expense recognized are as follows (Unit: Korean Won in millions): Interest on deposits due to customers Interest on borrowings Interest on debentures Other interest expense Total For the years ended December 31 2016 2017 2,380,263 238,212 638,653 72,909 3,330,037 2,547,142 215,240 619,255 111,131 3,492,768 35. NET FEES AND COMMISSIONS INCOME (1) Details of fees and commissions income recognized are as follows (Unit: Korean Won in millions): Fees and commissions received (*) Fees and commissions received for provision of guarantee Fees and commissions received on project financing Fees and commissions received on credit card Fees and commissions received on securities Other fees and commissions received Total For the years ended December 31 2017 2016 673,582 660,556 65,779 13,394 1,072,423 80,872 163,148 2,069,198 66,549 20,213 954,502 70,928 92,722 1,865,470 (*) Fees and commissions received include fees income from agency commission, fees income from electronic finance, fees income related to loan, fees for import letter of credit dealing, commission received on foreign exchange and others. (2) Details of fees and commissions expense incurred are as follows (Unit: Korean Won in millions): Fees and commissions paid Credit card commissions Brokerage commissions Others Total For the years ended December 31 2017 2016 164,834 828,363 558 4,977 998,732 162,170 760,913 739 4,517 928,339 166166 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 167 - 88 - 36. DIVIDEND INCOME Details of dividend income recognized are as follows (Unit: Korean Won in millions): Dividend from financial assets at FVTPL Dividend from AFS financial assets Total For the years ended December 31 2017 446 124,546 124,992 2016 996 183,514 184,510 37. GAINS (LOSSES) ON FINANCIAL INSTRUMENTS AT FVTPL (1) Details of gains or losses related to financial instruments at FVTPL are as follows (Unit: Korean Won in millions): Gains on financial assets held for trading Losses of financial assets designated at FVTPL Total For the years ended December 31 2017 6,123 (110,950) (104,827) 2016 185,786 (71,399) 114,387 (2) Gains (losses) on financial instruments held for trading are as follows (Unit: Korean Won in millions): Financial Securities instruments held for trading Gain on valuation Gain on disposals For the years ended December 31 2017 2,764 2016 9,323 Other financial assets Loss on valuation Loss on disposals Sub-total Gain on valuation Gain on disposals Loss on valuation Loss on disposals Sub-total Total of financial instruments held for trading Derivatives (for trading) Interest rates derivatives Currencies derivatives Equity derivatives Gain on transactions and valuation Loss on transactions and valuation Sub-total Gain on transactions and valuation Loss on transactions and valuation Sub-total Gain on transactions and valuation Loss on transactions and valuation Sub-total 20,528 (13,757) (6,466) 3,069 6,524 2,353 (7,885) (619) 373 24,509 (12,681) (11,524) 9,627 13,628 2,404 (14,033) (1,644) 355 3,442 9,982 1,088,192 1,423,606 (1,043,312) 44,880 (1,401,582) 22,024 7,253,426 5,804,420 (7,408,741) (155,315) (5,683,357) 121,063 511,220 293,657 (397,462) 113,758 (259,280) 34,377 167167 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 168 - 89 - Derivatives (for trading) Other derivatives Gain on transactions and valuation For the years ended December 31 4,056 50,139 Loss on transactions and valuation Sub-total Total of derivatives(for trading) Total (4,698) (642) 2,681 6,123 (51,799) (1,660) 175,804 185,786 (3) Gains (losses) on financial instruments designated at FVTPL are as follows (Unit: Korean Won in millions): Loss on equity-linked securities Loss on disposals of equity-linked securities Loss on valuation of equity-linked securities Sub-total Gain on other securities: Gain on disposals of other securities Gain on valuation of other securities Sub-total Gain on other financial instruments: Gain on valuation of other financial instruments Total For the years ended December 31 2017 2016 (79,965) (32,511) (112,476) - 290 290 1,236 (110,950) (24,165) (52,007) (76,172) 14 882 896 3,877 (71,399) 38. GAINS (LOSSES) ON AFS FINANCIAL ASSETS Gains (losses) on AFS financial assets are as follows (Unit: Korean Won in millions): Gains on redemption of securities Gains on transaction of securities Impairment losses on securities Total For the years ended December 31 2016 2017 47 223,961 (31,300) 192,708 721 47,985 (49,741) (1,035) 39. IMPAIRMENT LOSSES DUE TO CREDIT LOSS Impairment losses on loans and receivables, guarantees and loan commitment recognized for credit loss are as follows (Unit: Korean Won in millions): Impairment losses due to credit loss Reversal of provision on guarantee Reversal of provision on (provision for) loan commitment Total For the years ended December 31 2017 (862,273) 55,424 21,716 (785,133) 2016 (890,763) 59,780 (3,093) (833,076) 168168 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 169169 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 169 - 90 - 40. GENERAL ADMINISTRATIVE EXPENSES AND OTHER NET OPERATING INCOME (EXPENSES) (1) General and administrative expenses recognized are as follows (Unit: Korean Won in millions): Employee benefits Short term employee benefits Retirement benefit service costs Termination Salaries Employee benefits Sub-total Depreciation and amortization Other general and administrative expenses Rent Taxes and dues Service charges Computer and IT related Telephone and communication Operating promotion Advertising Printing Traveling Supplies Insurance premium Reimbursement Maintenance Water, light and heating Vehicle maintenance Others Sub-total Total For the years ended December 31 2017 2016 1,317,826 559,562 146,848 299,562 2,323,798 183,601 313,080 111,248 198,828 70,936 65,015 43,850 68,942 8,633 13,064 6,795 8,548 27,516 16,081 14,165 9,902 46,799 1,023,402 3,530,801 1,323,007 466,585 156,356 179,286 2,125,234 248,269 311,992 102,531 244,543 83,978 63,699 48,115 76,153 9,502 11,681 6,827 8,092 26,846 16,470 15,006 9,987 69,551 1,104,973 3,478,476 (2) Other operating income recognized is as follows (Unit: Korean Won in millions): Gains on transaction of foreign exchange Gains on disposal of loans and receivables Gains related to derivatives Gains on fair value hedged items Others (*) Total For the years ended December 31 2017 2016 3,391,095 205,490 122 53,532 86,159 3,736,398 4,791,772 204,239 130 99,302 112,079 5,207,522 (*) Other income includes such incomes amounting to 29,336 million Won and 74,700 million Won for the year ended December, 2017 and 2016, respectively, that the Group recognized for it is to receive from other creditor financial institutions in accordance with the creditor financial institutions committee agreement. (3) Other operating expenses recognized are as follows (Unit: Korean Won in millions): Losses on transaction of foreign exchange KDIC deposit insurance fees Contribution to miscellaneous funds Losses on disposal of loans and receivables Losses related to derivatives Losses on fair value hedged items Others (*) Total For the years ended December 31 2017 2016 2,886,535 304,055 286,000 9,221 109,569 - 172,331 3,767,711 4,706,055 298,804 295,601 4,265 98,981 475 171,120 5,575,301 (*) For the year ended December 31, 2017 and 2016, other expense includes losses amounting to 5,237 million Won and 109,063 million Won respectively, which are related to the Group’s expected payments to other creditor financial institutions in accordance with the creditor financial institutions committee agreement. In addition, other expense for the year ended December 31, 2017 includes 48,292 million Won of intangible asset amortization expense. WOORI BANKANNUAL REPORT 2017 170 - 91 - 41. OTHER NON-OPERATING INCOME (EXPENSES) (1) Details of gains or losses on valuation of investments in joint ventures and associates are as follows (Unit: Korean Won in millions): Gain on valuation Loss on valuation Impairment loss Total For the years ended December 31 2017 2016 83,506 (70,117) (114,903) (101,514) 36,757 (55,091) (1,173) (19,507) (2) Other non-operating income and expenses recognized are as follows (Unit: Korean Won in millions): Other non-operating income Other non-operating expenses Total For the years ended December 31 2017 2016 84,361 (190,083) (105,722) 132,272 (133,582) (1,310) (3) Other non-operating income recognized are as follows (Unit: Korean Won in millions): Rental fee income Gains on disposal of investment in joint ventures and associates Gains on disposal of premises and equipment and other assets Reversal of impairment loss on premises and equipment and other assets Others Total For the years ended December 31 2017 2016 6,973 39,932 5,028 666 31,762 84,361 7,291 23,457 1,885 3,581 96,058 132,272 (4) Other non-operating expenses recognized are as follows (Unit: Korean Won in millions): Depreciation on investment properties Interest expenses of rent leasehold deposits Losses on disposal of investment in joint ventures and associates Losses on disposal of premises and equipment and other assets Impairment losses on premises and equipment and other assets Donation Others Total For the years ended December 31 2017 2016 3,902 459 38,713 9,994 390 98,132 38,493 190,083 3,762 496 15,060 9,718 1,936 43,939 58,671 133,582 170170 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 171 - 92 - 42. INCOME TAX EXPENSE (1) Income tax expenses are as follows (Unit: Korean Won in millions): Current tax expense Current tax expense in respect of the current year Adjustments recognized in the current period in relation to the current tax of prior periods Sub-total Deferred tax expense Deferred tax benefit relating to the origination and reversal of temporary differences Deferred tax charged directly to equity Sub-total Income tax expense For the years ended December 31 2017 2016 471,669 (5,209) 466,460 (47,464) 422 (47,042) 419,418 332,996 (22,138) 310,858 (18,766) (16,236) (35,002) 275,856 (2) Income tax expense can be reconciled to net income before income tax expense as follows (Unit: Korean Won in millions): Net income before income tax expense Tax calculated at statutory tax rate (*) Adjustments Effect of income that is exempt from taxation Effect of expense not deductible in determining taxable profit Adjustments recognized in the current period in relation to the current tax of prior periods Others Sub-total Income tax expense Effective tax rate For the years ended December 31 2017 1,949,506 471,318 2016 1,553,389 375,458 (55,983) (75,166) 22,254 13,664 (5,209) (12,962) (51,900) 419,418 21.5% (22,138) (15,962) (99,602) 275,856 17.8% (*) The applicable income tax rate; 1) 11% for below 200 million Won, 2) 22% for above 200 million Won and below 20 billion Won, 3) 24.2% for above 20 billion Won. 171171 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 172 - 93 - (3) Deferred tax charged direct to equity is as follows (Unit: Korean Won in millions): For the year ended December 31, 2017 Recognized as other comprehensive income (expense) Recognized as income (expense) Ending balance 72,945 (1,008) 479,065 Beginning balance 407,128 32,859 (43,818) (69,959) (46,811) 53,915 (108,102) 225,045 (226,321) 41,138 32,392 (87,479) 209,987 (6,473) 33,806 8,972 (886) (44,138) (29,218) 54,533 (61,012) (10,536) 12,761 16,289 47,043 (1,904) (248) - - - - 4,656 - - - (1,075) 421 24,482 (10,260) (60,987) (47,697) 9,777 (137,320) 284,234 (287,333) 30,602 45,153 (72,265) 257,451 Gain (loss) on financial assets Gain (loss) on valuation using the equity method of accounting Gain (loss) on valuation of derivatives Accrued income Provision for loan losses Loan and receivables written off Loan origination costs and fees Defined benefit liability Deposits with employee retirement insurance trust Provision for guarantee Other provision Others (*) Net deferred tax assets (*) Among the deferred tax assets and liabilities classified as ‘Others,’ the deferred tax asset arising from accumulated deficit amounts to 15,652 million Won. For the year ended December 31, 2016 Beginning balance Recognized as income (expense) Recognized as other comprehensive income (expense) Ending balance 324,193 (18,467) (666) 305,060 5,106 (39,774) (82,148) (50,504) 54,225 (103,912) 203,423 (187,044) 69,225 27,898 (29,470) 191,218 26,500 (4,079) 12,188 3,693 (310) (4,190) 32,536 (39,277) (28,087) 4,494 50,001 35,002 1,337 - - - - - (10,914) - - - (5,993) (16,236) 32,943 (43,853) (69,960) (46,811) 53,915 (108,102) 225,045 (226,321) 41,138 32,392 14,538 209,984 Gain (loss) on financial assets Gain on valuation using the equity method of accounting Loss on valuation of derivatives Accrued income Provision for loan losses Loan and receivables written off Loan origination costs and fees Defined benefit liability Deposits with employee retirement insurance trust Provision for guarantee Other provision Others Net deferred tax assets 172172 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 173 - 94 - (4) Unrealizable temporary differences are as follows (Unit: Korean Won in millions): Deductible temporary differences Unused tax losses Taxable temporary differences Total December 31, 2017 126,818 96,135 (1,298,586) (1,075,633) December 31, 2016 59,803 192,138 (1,263,200) (1,011,259) (5) Deferred tax charged direct to equity is as follows (Unit: Korean Won in millions): Loss on available-for-sale financial assets Share of other comprehensive gain (loss) of joint ventures and associates Gain on foreign operations translation Remeasurements Loss on valuation of cash flow hedges Total December 31, 2017 (114,169) December 31, 2016 (113,161) (954) 15,855 56,317 (248) (43,199) 950 16,930 51,661 - (43,620) (6) Current tax assets and liabilities are as follows (Unit: Korean Won in millions): December 31, 2017 4,722 232,600 December 31, 2016 6,229 171,192 Current tax assets Current tax liabilities 43. EARNINGS PER SHARE (“EPS”) Basic EPS is calculated by dividing net income by weighted average number of common shares outstanding (Unit: Korean Won in millions, except for EPS and number of shares): For the years ended December 31 2017 2016 Net income attributable to common shareholders Dividends to hybrid securities Net income attributable to common shareholders Weighted average number of common shares outstanding Basic Earnings Per Share (Unit : Korean won) 1,512,148 (167,072) 1,345,076 673 million shares 1,999 1,261,266 (206,515) 1,054,751 673 million shares 1,567 Diluted EPS is equal to basic EPS because there is no dilution effect for the year ended December 31, 2017 and 2016. 173173 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 174174 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 174 - 95 - 44. CONTINGENT LIABILITIES AND COMMITMENTS (1) Details of guarantees are as follows (Unit: Korean Won in millions): Confirmed guarantees Guarantee for loans Acceptances Guarantees in acceptances of imported goods Other confirmed guarantees Total Unconfirmed guarantees Local letter of credit Letter of credit Other unconfirmed guarantees Total Commercial paper purchase commitments and others December 31, 2017 December 31, 2016 157,299 320,519 108,238 6,288,965 6,875,021 383,117 3,637,787 505,689 4,526,593 1,458,101 79,566 504,354 97,606 7,588,661 8,270,187 397,588 3,844,345 859,768 5,101,701 1,389,896 (2) Details of loan commitments and others are as follows (Unit: Korean Won in millions): Loan commitments Other commitments (3) Litigation case December 31, 2017 80,760,325 4,546,090 December 31, 2016 83,795,496 4,840,593 The Group had filed lawsuits as follows (Unit: Korean Won in millions except for number of cases): Number of cases Amount of litigation Provisions for litigations (4) Other December 31, 2017 December 31, 2016 As plaintiff 83 cases 413,267 As defendant As plaintiff 88 cases 308,848 155 cases 244,767 9,277 As defendant 175 cases 246,465 5,946 The Group provides clearance services for payments in Korean Won in order to facilitate trade transactions between Korea and Iran. In connection with these services, the Group is currently being investigated by US government agencies including US prosecutors(United States Attorney’s Office and New York State Attorney General’s Office) as to whether the Group has violated United States laws by participating in prohibited transactions involving countries sanctioned by the US. The Group has decided not to disclose the required disclosures stated in K-IFRS 1037 ‘Provisions, Contingent Liabilities and Contingent Assets’ as such information may adversely affect the current investigation against the Group. 45. RELATED PARTY TRANSACTIONS Related parties of the Group as of December 31, 2017 and its assets and liabilities recognized as of December 31, 2017 and 2016 and major transactions with related parties for the years ended December 31, 2017 and 2016 are as follows: (1) Related parties Associates Related parties Kumho Tires Co., Inc., Woori Service Networks Co., Ltd., Korea Credit Bureau Co., Ltd., Korea Finance Security Co., Ltd., Chin Hung International Inc., Poonglim Industrial Co., Ltd., STX Engine Co., Ltd, STX Corporation, 2016KIF-IMM Woori Bank Technology Venture Fund, K BANK Co., Ltd., Well to Sea No. 3 Private Equity Fund, and Others (Dongwoo C & C Co., Ltd. and other 22 associates) WOORI BANKANNUAL REPORT 2017 175 175175 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner - 96 - (2) Assets and liabilities from transactions with related parties are as follows (Unit: Korean Won in millions): Related party KDIC (*1) Corporation that have significant influence over the Group Associates Kumho Tires Co., Inc. A title of account Loans Other assets Deposits due to customers Other liabilities Loans Allowance for credit loss Deposits due to customers Other liabilities December 31, 2017 December 31, 2016 - - - - 170,917 (156,712) 666 50 9 270,041 1,894,631 15,568 299,523 (715) 45,957 50 Woori Blackstone Korea Opportunity Private Equity Fund No.1 Other assets Other liabilities Woori Service Networks Co., Ltd. Loans Deposits due to customers Other liabilities Korea Credit Bureau Co., Ltd. Loans Associates Korea Finance Security Co., Ltd. Chin Hung International Inc. Deposits due to customers Other liabilities Loans Deposits due to customers Other liabilities Loans Allowance for credit loss Deposits due to customers Other liabilities - - 45 1,311 357 6 5,586 54 56 2,854 7 34 306 29 2,572 393 2 5,069 40 55 2,801 6 408 (22) 46,220 1,658 4,320 (4,287) 14,047 279 Poonglim Industrial Co., Ltd. Deposits due to customers 4 283 STX Engine Co., Ltd. Samho International Co., Ltd.(*2) STX Corporation Loans Allowance for credit loss Deposits due to customers Other liabilities Loans Allowance for credit loss Deposits due to customers Other liabilities Loans Allowance for credit loss Deposits due to customers Other liabilities K BANK Co., Ltd. Loans Other assets Well to Sea No.3 Private Equity Fund (*3) Others (*4) Loans Allowance for credit loss Deposits due to customers Other liabilities Loans Allowance for credit loss Other assets Deposits due to customers Other liabilities 106,176 (88,734) 18,092 29 - - - - 47,711 (31,210) 77,555 80 212 - 73,810 (39) 61 27 499 (471) 1 2,906 73 107,974 (89,531) 13,260 588 37,327 (717) 82,917 216 144,035 (92,643) 14,412 90 - 325 - - - - 619 (253) 8 4,460 60 WOORI BANKANNUAL REPORT 2017 176176 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 176 - 97 - (*1) As its ownership interest in the Group is lower than 20% as of December 31, 2017, it has been excluded from the corporation that have significant influence over the Group. (*2) As the Group sold its entire ownership interest of the entity, it is excluded from the investment in associates during the years ended December 31, 2017. (*3) Due to capital contribution by the Group during the years ended December 31, 2017, the entity was included in the investment in associates. (*4) Others include Saman Corporation, Kyesan Engineering Co., Ltd., Hyunwoo International Co., Ltd., DAEA SNC Co., Ltd. and others as of December 31, 2017 and 2016. (3) Gain or loss from transactions with related parties are as follows (Unit: Korean Won in millions): Related party Corporation that has significant influence over the group KDIC(*1) Associates Kumho Tires Co., Inc. Woori Blackstone Korea Opportunity Private Equity Fund No.1 Woori Service Networks Co., Ltd. A title of account Interest income Interest expenses Interest income Fees income Interest expenses Impairment losses due to credit loss Fees income Other income Interest expenses Fees expenses Other expenses Korea Credit Bureau Co., Ltd. Interest expenses Fees expenses Korea Finance Security Co., Ltd. Interest expenses Fees expenses Chin Hung International Inc. Interest income Poonglim Industrial Co., Ltd. STX Engine Co., Ltd. Samho International Co., Ltd. (*2) Fees income Interest expenses Reversal of impairment losses due to credit loss Interest expenses Reversal of impairment losses due to credit loss Interest income Fees income Interest expenses Impairment losses due to credit loss (reversal) Interest income Fees income Interest expenses Reversal of impairment losses due to credit loss Force TEC Co., Ltd. (*3) Interest income For the years ended December 31 2017 - 15,331 2016 11,778 20,966 2,641 5 1 155,997 2,430 6 68 162 6,225 1,364 30 24 543 507 82 2,079 12 - 364 1 27 29 49 985 222 138 1,915 10 110 240 1 28 (4,265) (481) - - 1,417 28 147 2 (1,557) 1,348 58 97 (797) 63,866 486 5 334 916 5 525 (717) (5,166) - 153 WOORI BANKANNUAL REPORT 2017 177 Related party STX Corporation Associates Osung LST Co., Ltd. (*4) - 98 - A title of account Interest income Fees income Interest expenses Impairment losses due to credit loss (reversal) Interest income Interest expenses Reversal of allowance for credit loss Woori Columbus 1st Private Fees income Equity Fund K BANK Co., Ltd. (*5) Fees income Other income Well to Sea No.3 Private Equity Fund (*6) Others (*7) Interest incomes Interest expenses Impairment losses due to credit loss Interest expenses Impairment losses due to credit loss For the years ended December 31 2017 2016 219 30 4 1,039 75 7 (61,432) 73,457 - - - 272 - 1,051 982 4 39 13 218 170 1 (338) 308 296 1,638 - - - 17 253 (*1) As its ownership interest in the Group is lower than 20% as of December 31, 2017, it has been exclude from the corporation that have significant influence over the Group. (*2) As the Group sold its entire ownership interest of the entity, it is excluded from the investment in associates during the years ended December 31, 2017. (*3) The entity is not in scope for the associates, because the Group does not have significant influence over the entity due to the fact that it is going through workout process under receivership as of December 31, 2017. (*4) As the Group sold its ownership interests in the entities during the year ended December 31, 2016, these entities were excluded from the investment in associates. (*5) Due to capital contribution during the year ended December 31, 2016, the entity has been included in the investment in associates. (*6) Due to capital contribution by the Group during the year ended December 31, 2017, the entity was included in the investment in associates. (*7) Others include Saman Corporation, Kyesan Engineering Co., Ltd., Hyunwoo International Co., Ltd., DAEA SNC Co., Ltd. and others as of December 31, 2017, and Saman Corporation, Kyesan Engineering Co., Ltd., Gachi Staff Co., Ltd., QTS Shipping Co., Ltd., and others were included as of December 31, 2016, respectively. 177177 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 178178 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 178 - 99 - (4) Guarantees provided to the related parties are as follows (Unit: Korean Won in millions): KDIC (*1) Kumho Tires Co., Inc. Korea Finance Security Co., Ltd. Korea Credit Bureau Co., Ltd. Woori Service Networks Co., Ltd. Chin Hung International Inc. STX Engine Co., Ltd. SamHo Co., Ltd. (*2) STX corporation December 31, 2017 December 31, 2016 - 1,500,000 Loan commitment 4,181 636 204 29 155 31,891 68,858 - - 17,557 53 Letter of credit and others 24,187 126,435 Loan commitment 205 Loan commitment 33 Loan commitment 171 Loan commitment 40,904 Loan commitment 63,103 Letter of credit and others 685 Loan commitment 30,083 Loan commitment 24,316 Letter of credit and others 71 Loan commitment Well to Sea No.3 Private Equity Fund (*3) 236,190 - Loan commitment (*1) As its ownership interest in the Group is lower than 20% as of December 31, 2017, it has been exclude from the corporation that have significant influence over the Group. (*2) As the Group sold its entire ownership interest of the entities during the year ended December 31, 2017, they are excluded from the investment in associates. (*3) Due to capital contribution by the Group during the year ended December 31, 2017, the entity was included in the investment in associates. For the guarantee provided to the related parties, the Group recognized provisions for guarantees amounting to 71,459 million Won and 70,587 million Won, as of December 31, 2017 and 2016, respectively. (5) Compensation for key management is as follows (Unit: Korean Won in millions): Short term benefits Severance payments Total For the years ended December 31 2017 2016 12,024 472 12,496 9,523 424 9,947 Key management includes registered executives and non-registered executives. Outstanding assets and liabilities from transactions with key management amount to 2,439 million Won and 6,309 million Won, respectively, as of December 31, 2017. With respect to the assets, the Group has not recognized any allowance, nor provision. 46. TRUST ACCOUNTS (1) Trust accounts of the Group are as follows (Unit: Korean Won in millions): Total assets Operating income Trust accounts December 31, 2017 43,895,511 December 31, 2016 38,807,666 For the year ended December 31, 2017 1,029,501 For the year ended December 31, 2016 751,691 (2) Receivables and payables from the transactions between the Group and trust accounts are as follows (Unit: Korean Won in millions): Receivables Trust fees receivables Payables Deposits due to customers Borrowings from trust accounts Total December 31, 2017 December 31, 2016 25,286 23,667 585,832 2,711,529 3,297,361 1,919,324 2,687,776 4,607,100 WOORI BANKANNUAL REPORT 2017 179 - 100 - (3) Significant transactions between the Group and trust accounts are as follows (Unit: Korean Won in millions): Revenue Trust fees Expense Interest expenses on deposits due to customers Interest expenses on borrowings from trust accounts Total For the years ended December 31 2017 2016 141,999 78,616 17,768 31,956 49,724 47,604 45,012 92,616 (4) Principal guaranteed trusts and principal and fixed rate of return guaranteed trusts 1) As of December 31, 2017 and 2016, the carrying of principal guaranteed trusts and principal and fixed rate of return guaranteed trusts are as follows (Unit: Korean Won in millions): December 31, 2017 December 31, 2016 Principal guaranteed trusts Old-age pension trusts Personal pension trusts Pension trusts Retirement trusts New personal pension trusts New old-age pension trusts Sub-total Principal and fixed rate of return guaranteed trusts Development trusts Unspecified money trusts Sub-total Total 4,058 530,556 791,920 50,035 8,563 2,467 1,387,599 19 801 820 1,388,419 4,513 532,959 741,759 53,773 8,536 2,919 1,344,459 19 787 806 1,345,265 2) As of December 31, 2017 and 2016, the amounts that the Group has to pay by the capital guaranteed contract or the operating results of the principal and return guaranteed trusts are as follows (Unit: Korean Won in millions): Liabilities for the account (subsidy for trust account adjustment) December 31, 2017 December 31, 2016 32 30 179179 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 180180 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 180 Organizational Chart 3 unit 18 Groups 4 Divisions 65 Departments Regional Banking Headquarters Customer Branch Domestic Business unit Global Business unit Retail Banking Business Group Corporate Banking Business Group Small & Medium Corporate Banking Business Group Institutional Banking Business Group Real Estate Finance Business Group Wealth Management Group Trust & Pension Business Group Global Business Group International Trade Business Group Investment Banking Business Group Financial Market Business Group Retail Banking Products & Marketing Department Corporate Banking Products & Marketing Department Small & Medium Corporate Banking Products & Marketing Department Institutional Banking Products & Marketing Department Real Estate Finance Department Wealth Management Strategy Department Trust Department Global Business Strategy Department International Trade Business Department Investment Banking Department Treasury Department Public Fund Sales Department Housing Fund Department Wealth Management Business Department Retirement Pension Business Department Global Business Support Department National Pension Department Wealth Management Advisory Center Custody Agent Department Foreign Customer Banking Business Department International Trade Service Center Project Finance Department Trading Department Settlement Support Department Marketing Promotion Department Card Business Department Customer Center Board of Directors Secretary Department president & CeO WOORI BANKANNUAL REPORT 2017181181 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 181 Corporate Banking Headquarters Business Support unit Human Resources Group Digital Banking Business Group Risk Management Group Operation & Support Group Credit Support Group Management & Finance Planning Group Consumer & Brand Group Next Generation ICT System Building Division Next Generation ICT System Integration Center Next Generation ICT System Acquisition Support Department Next Generation ICT System Analysis Department Next Generation ICT System Change Management Department Human Resources Department Digital Banking Strategy Department Human Resources Development Department Digital Banking Business Department Employee Satisfaction Center Platform Business Department ICT Support Center Compliance Officer Compliance Department Anti-Money Laundering Department Information Security Division Corporate Restructuring Division Future Strategy Division Risk Management Department General Affairs Department Information Security Department Loan Policy Department Corporate Restoration Department Strategy & Control Tower Department Future Strategy Department Consumer Protection Center Loan Review Department Loan Service Center Deposit Service Center Security Control Department Corporate Restructuring Department Finance & Planning Department Management Innovation Department Public Relations Department Investor Relations Department Accounting Department Retail Credit Analysis & Approval Department SME Credit Analysis & Approval Department Large Corporate Credit Analysis & Approval Department Credit Management & Collection Department Innovation Development Center Audit Committee Standing Audit Committee Member/Director Audit Department WOORI BANKANNUAL REPORT 2017182182 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 182 Global Network (as of the end of April, 2018) Head Office 51, Sogong-ro (203, Hoehyeon-dong 1-ga), Jung-gu, Seoul, 100-792, Korea Phone: +82-2-2002-3000 Swift: HVBKKRSE Overseas Branch 1 New York Agency 245, Park Ave. 43rd Floor, New York, NY 10167, USA Phone: 1-212-949-1900 Fax: 1-212-490-7146 Swift: HVBKUS33 2 LA Branch 3360, West Olympic Blvd. Suite 300, LA, CA90019, USA Phone: 1-213-620-0747~8 Fax: 1-213-627-5438 Swift: HVBKUS6L 3 London Branch 9th Floor, 71 Fenchurch Street, London, EC3M 4BR,UK Phone: 44-207-680-0680 Fax: 44-207-481-8044 Swift: HVBKGB2L 4 Tokyo Branch Shiodome City Center 10th Floor 5-2, Higashi- Shimbashi 1-Chome, Minato-ku, Tokyo, 105-7110, Japan Phone: 81-3-6891-5600 Fax: 81-3-6891-2457 5 Hong Kong Branch Suite 1401, Two Pacific Place, 88 Queensway, Hongkong Phone: 85-2-2521-8016 Fax: 85-2-2526-7458 6 Singapore Branch 10 Marina Boulevard #13-05 MBFC Tower 2, Singapore 018983 Singapore Phone: 65-6422-2000 Fax: 65-6422-2001 7 Bahrain Branch P.O. Box 1151, 4th Floor, Entrance 1, Manama Centre Building, Manama, Bahrain Phone: 973-17-223503 Fax: 973-17-224429 8 Dhaka Branch Suvastu Imam Square (1st & 4th Fl.) 65 Gulshan Avenue, Dhaka, Bangladesh Phone: 880-2-881-3270~3 Fax: 880-2-881-3274/3241 9 DEPZ Customer Service Center Dhaka Export Processing Zone(Old Area), Ganakbari, Ssvar, Dhaka-1349, Bangladesh Phone: 880-2778-8030 Fax: 880-2881-3274/3241 10 Woori Bank Chittangong Sub-Branch World Trade Center Chittagon(2nd Floor) Plopt No. 102-103, Agrabad Commercial Area, Chittagong, Bangladesh Phone: 880-931-728221~4 Fax: 880-931-728225 11 Woori Bank Uttara Sub-Branch Paradise Tower(Ground Floor) Plot 11, Sector 3, Uttara Model Town,Uttara, Dhaka 1230, Bangladesh Phone: 880-2896-2125~6 Fax: 880-2896-2129 12 Woori Bank Mirpur Sub-Branch Padma Bhaban(First Floor), 1/9 Mirpur Road Pallabi, Mirpur-12, Dhaka-1216, Bangladesh Phone: 880-2902-1061~2 Fax: 880-2902-1064 13 Woori Bank, Narayanganj Sub-Branch Adamjee Export Processing zone, Shiddhirganj, Narayanganj-1431 Bangladesh Phone: 880-2769-2031~34 Fax: 880-2769-2035 14 Gaeseong Branch Gaesong Industrial District Phase 1, 25-1 Business Support Center, 1st Floor 103 1st Floor, Bongdong-Ri, Gaeseong, Hwanghae-Do, North Korea Phone: 001-8585-2300~2 Fax: 001-8585-2303 15 Chennai Branch 6th Floor, EA Chambers, No. 49 & 50L, Whites Road, Royapettah, Chennai 600 014, India Phone: 91-44-3346-6900 Fax: 91-44-3346-6995 16 Gurgaon Branch 1st Floor, Salcon Platina Building, MG Road, Sector-28, Sikanderpur, Gurgaon-122001,Haryana, India Phone: 91-12-43049700 Fax: 91-12-4304-6730 17 Mumbai Branch Unit 601, 6th floor, Birla Centurion, Century Mills Compound, Pandurang Budhkar Marg, Worli, Mumbai, Maharashtra-400030, India phone: 91-22-6263-8100 Fax: 86-10-8440-0698 18 Sydney Branch Suite 25.03, Level 25, 363 George Street Sydney NSW 2000 Australia Phone: 61-2-8222-2200 Fax: 61-2-8222-2299 19 Dubai Branch 1102A, Level 11, The Gate Building, East Wing, P.O. Box 506760, DIFC, Dubai, United Arab Emirates Phone: 971-4-325-8365 Fax: 971-4-325-8366 Swift: HVBKAEADXXX Subsidiary u.S.A 1 Woori America Bank 330 5th Avenue, 3rd Floor, New York, NY 10001, USA Phone: 1-212-244-3000 Fax: 1-212-736-5929 2 Manhattan Branch 330 5th Avenue, 1st Floor, New York, NY 10001 Phone: 1-212-244-1500 Fax: 1-212-695-5593 3 Flushing Branch 136-88 39th Avenue Flushing New York, NY 11354, USA Phone: 1-718-886-1988 Fax: 1-718-762-6898 4 Fort Lee Branch 2053 Lemoine Avenue Fort Lee, NJ 07024, USA Phone: 1-201-363-9300 Fax: 1-201-302-0452 5 Woodside Branch 43-22 50th St. Woodside, NY 11377, USA Phone: 1-718-429-1900 Fax: 1-718-429-2084 6 Ridgefield Branch 321 Broad Avenue #104 Ridgefield, NJ 07657, USA Phone: 1-201-941-9999 Fax: 1-201-941-4419 7 Palisades Park Branch 225 Broad Avenue Palisades Park, NJ 07650, USA Phone: 1-201-346-0055 Fax: 1-201-346-0075 8 Closter Branch 234 Closter Dock Road Closter, NJ 07624, USA Phone: 1-201-784-7012 Fax: 1-201-784-7013 9 Elkins Park Branch 7300 Old York Rd Elkins Park, PA 19027 Phone: 1-215-782-1100 Fax: 1-215-782-1500 10 Annandale Branch Seoul Plaza 4231 Markeham St, Annandale, VA 22003, USA Phone: 1-703-256-7633 Fax: 1-703-256-7511 11 Bayside Branch 215-10 Northern Blvd. Bayside, NY 11361, USA Phone: 1-718-224-3800 Fax: 1-718-224-3828 12 Ellicott City Branch 100352 Baltimore National Pike Ellicott City, MD 21042, USA Phone: 1-443-973-3690 Fax: 1-410-461-1002 13 Wilshire Branch 3540 Wilshire Blvd. Unit 104, Los Angeles, CA 90010, USA Phone: 1-213-382-8700 Fax: 1-213-382-8787 14 Olympic Branch 3360, West Olympic Blvd. Suite #300, LA, CA90019, USA Phone: 1-213-738-1100 Fax: 1-213-738-1101 15 Fullerton Branch 5731 Beach Blvd., Buena Park, CA 90621, USA Phone: 1-714-521-3100 Fax: 1-714-521-3101 16 Garden Grove Branch 10120 Garden Grove Blvd.,Suite 151Garden Grove, CA 92844, USA Phone: 1-714-534-6300 Fax: 1-714-534-6301 17 Centreville Branch 13830 Braddock Road. Centreville, VA 20121, USA Phone: 1-703-988-9555 Fax: 1-703-988-9554 18 Irvine Branch 14252 Culver Dr. #G, Irvine, CA 92604 Phone: 1-949-885-3760 Fax: 1-949-653-0943 19 Torrance Branch 2390 Crenshaw Boulevard, Units C, Torrance CA 90501 USA Phone: 1-310-974-1880 Fax: 1-310-782-7004 20 Georgia LPO 2472 Pleasant Hill Rd. Duluth, GA30096, USA Phone: 1-404-904-9880 21 San Jose LPO 2328 Walsh Ave, Santa Clara CA 95051 USA Phone: 1-415-652-9476 22 Northern Branch 164-25 Northern Blvd. Flushing NY 11358, USA Phone: 1-929-362-3330 WOORI BANKANNUAL REPORT 2017 (as of the end of April, 2018) 183183 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 183 China 1 Woori Bank (China) Ltd. Floor11-12 Block A Building 13 District 4 Wangjing East Park Chaoyang District Beijing China 100102 Phone: 86-10-8412-3000 Fax: 86-10-8441-7071 2 Woori Bank (China) Ltd. Head office business department Floor1 Block B Building 13 District 4 Wangjing East Park Chaoyang District Beijing China 100102 Phone: 86-10-8441-7771 Fax: 86-10-8446-4631 3 Beijing Branch 1F, West Tower, Twin Towers, B-12 Jianguomenwai Avenue, Chaoyang District, Beijing, 100022, China Phone: 86-10-8453-8880 Fax: 86-10-8453-8881 4 Shanghai Branch Drum Building 1-2F, LJZ -Plaza,1600 Century Avenue, Pudong New Area, Shanghai, 200122, China Phone: 86-21-5081-0707 Fax: 86-21-5081-2484 5 Shenzhen Branch B0105, B0210 Rongchao Landmark, 4028 Jintian Road, Futian District, Shenzhen, 518035 China Phone: 86-755-3338-1234 Fax: 86-755-3338-7227 6 Suzhou Branch 101B, Sovereign Building, #8 Suhua Road Suzhou Industrial Park, Jiangsu, 215021 China Phone: 86-512-6295-0777 Fax: 86-512-6295-2141 7 TianJin Branch No.1 Building, Aocheng Commercial Square, Binshui West Road, Nankai District, Tianjin, 300381, China Phone: 86-22-2338-8008 Fax: 86-22-2392-5905 8 Shanghai Puxi Sub-Branch S115-S119, 1F Maxdo center No.8 Xingyi Rd. Changning District Shanghai, 200336, China Phone: 86-21-5208-1000 Fax: 86-21-6235-1036 9 Beijing Wangjing Sub-Branch 1F, No.10, Furong Street, Chaoyang District, Beijing, 100102, China Phone: 86-10-8471-8866 Fax: 86-10-8471-5245 10 Shanghai Wuzhonglu Sub-Branch 1C, Liaoshen Building, 1068 Wuzhong Rd Minhang District, Shanghai, 201103 China Phone: 86-21-6446-7887 Fax: 86-21-6446-1200 11 Shenzhen Futian Sub-Branch Room 107, 201, Daqing Building, NO.6027, Shen Nan Road, Futian District, Shenzhen, 518040 China Phone: 86-755-8826-9000 Fax: 86-755-8826-9038 12 Shanghai Jinxiujiangnan Sub-Branch 1F, 188 South Jinhui Road, Minhang District, Shanghai, 200237, China Phone: 86-21-3432-1116 Fax: 86-21-3432-1112 13 Beijing Shunyi Sub-Branch 1F,Tower A, AMB Building, 2, Cangshang St, Shunyi District, Beijing 101300, China Phone: 86-10-8945-2220 Fax: 86-10-8949-3560 14 DaLian Branch 2F-218 YOMA IFC, No.128 Jinma Road, Dalian Development Area, Dalian, 116600, China Phone: 86-411-8765-8000 Fax: 86-411-8765-8515 15 Zhangjiagang Sub-Branch B104/B205 Huachang Oriental Plaza, 11 Renmin East Road, Zhangjiagang, Jiangsu 215600, China Phone: 86-512-5636-6696 Fax: 86-512-5636-6697 16 Chengdu Branch 1F-3F, Ping’an Fortune Center, No.1 Renmin South Road, Chengdu, Sichuan, 610044 China Phone: 86-28-6557-2366 Fax: 86-28-6357-2369 Swift: HVBKCNBJ 17 Weihai Branch No.106-1~3, Attached Qingdao Mid-Road, Weihai, Shandong Province, China, 264200 Phone: 86-631-599-6000 Fax: 86-31-597-0030 18 Tianjin Dongmalu Sub-Branch 1-2F, Tower C, Yuding Plaza(Qixiang Street), Dongma Road, Nankai District, Tianjin, 300090, China Phone: 86-22-8776-9000 Fax: 86-22-8776-9901~2 19 Chongqing Branch Unitl, Floor L2-1, Ping An Fortune Center, No.25-2, West Main Street, Jiangbei District, Chongqing 400023, China Phone: 86-23-6152-2222 Fax: 86-23-6152-2220 20 Shanghai Lianyang Sub-Branch No.52, Zendai Thumb Plaza lane 199, FangDian Road, Pudong New District, Shanghai, 200135 China Phone: 86-21-6882-0608 Fax: 86-21-6882-8821 21 Beijing Sanyuanqiao Sub-Branch 1F-05, 2F-09, Tower A, Tianyuangang Center, C2, North Road, East Third Ring Road, Chaoyang District, Beijing 100027. China Phone: 86-10-8440-7177 Fax: 86-10-8441-7761/7790 22 Shenyang Branch 1F, 2F, Lotte North-Station Arcade, 9-8 Beiling Street, Huanggu District, Shenyang City Liaoning Province, China Phone: 86-24-8186-0808 Fax: 86-24-8186-0801 indonesia 1 BankWoorisaudara Head Office Jl. Diponegoro No.28 Bandung/40115 Phone: 62-22-87831900/87831906 Fax: 62-22-87831918 2 Coperate Branch Gd. BEJ Tower 1 Lt. 16 Jl. Jend.Sudirman Kav. 52-53 Jakarta/12190 Phone: 62-21-5151919 Fax: 62-21-5151477 3 Wastukancana Branch Jl. Wastukancana No.79 - Bandung/40116 Phone: 62-22-4209940 Fax: 62-22-4209941 4 Cirebon Branch Jl. DR. Wahidin No.51 - Cirebon/45122 Phone: 62-231-242006 Fax: 62-231-242066 5 Bogor Branch Jl. Pangkalan Raya No.8, Warung Jambu - Bogor/16151 Phone: 62-251-8377887 Fax: 62-251-8377209 6 Surapati Core Branch Jl. PHH. Mustofa No.39, Surapati Core Blok F1 - Bandung/40192 Phone: 62-22-87241326 Fax: 62-22-87241327 7 Surabaya Branch Kompleks Ruko 21, Jl. Raya, Gubeng No.68 E - Surabaya/60281 Phone: 62-31-5041906 Fax: 62-31-5047727 8 Semarang Branch Imam Bonjol Square Kav 4,Jl. Imam Bonjol No.176 - Tasikmalaya/50132 Phone: 62-24-3521906 Fax: 62-24-3521900 9 Tasikmalaya Branch Ruko Plaza Asia Blok A5-A6, Jl. HZ. Mustofa No.326 - Tasikmalaya/46126 Phone: 62-265-2351906 Fax: 62-265-2352206 10 Yogyakarta Branch Jl. Mangkubumi No.45 - Yogyakarta/55232 Phone: 62-274-549280 Fax: 62-274-549285 11 Denpasar Branch 0361-223099 Ruko Griya Alamanda blok 3-4, Jl. Cok Agung Tresna Renon-Denpasar/80235 Phone: 62-361-263755 Fax: 62-361-223099 12 The Gedung Energy Branch Gd The Energy Lot 11 A SCBD, Jl. Jendral Sudirman Kav 52 - 53, Jakarta/12190 Phone: 62-21-29951906 Fax: 62-21-29951904 13 Ampera Branch Jl. Ampera Raya No.20 Gd.Medco III/12560 Phone: 62-21-7821756 Fax: 62-21-7821642 14 Purwokerto Branch Jl. Jenderal gatot Subroto No.78 Purwokerto - Jawa Tengah/53116 Phone: 62-281-622212 Fax: 62-281-631616 15 Malang Branch Jl. Letjen Sutoyo No.27 Malang- Jawa Timur/56141 Phone: 62-341-421906/7601906 Fax: 62-341-408188 16 Solo Branch Jl. Ronggo Warsito No. 53 Kota, Solo - Jawa Tengah/57131 Phone: 62-271-633600 Fax: 62-271-633433 17 Tangerang Branch Tangerang City Business Park Blok F/50 Jl. Jend. Sudirman No.1 Tangerang/15118 Phone: 62-21-29529226 Fax: 62-21-29529227 18 Pelembang Branch Jl. Basuki Rahmat No.886 A - Palembang/30127 Phone: 62-711-315828 Fax: 62-711-315510 WOORI BANKANNUAL REPORT 2017184 19 Sukabumi Branch Jl. Jenderal Sudirman No.31-Sukabumi/43111 Phone: 62-266-6251906 Fax: 62-266-6249717 20 Pekalongan Branch Jl. KH. Mansyur No.64, Perkalongan Phone: 62-285-4460505 Fax: 62-285-4460506 21 Madiun Branch Jl. Diponegoro No.110, Madiun Phone: 62-351-4773000 Fax: 62-351-4773003 22 Jamber Branch Jl. Gajah Made No. Ruko Gajah Mada Square Block A2-3 Phone: 62-331-421648 Fax: 62-331-4350187 23 Kediri Branch Jl. Brawijaya No. 25A Kota Kediri Phone: 62-354-4526726 Fax: 62-3354-4526716 24 Purwakarta Branch Jl. Basuki Rahmat No. 94, Purwakarta/41114 Phone: 62264-8227475 25 Subang Branch JL. Ahmad Yani No. 36/41211 Phone: 62260-421015 26 Karawaci Tangerang Branch Ruko Pinangsia Blok H No. 1 Lippo Karawaci Kel. Cibodas Tangerang/15139 Phone: 6221-5577636 27 Garut Branch Jl. Ahmad Yani No.33/44117 Phone: 62262-544670 28 Buah Batu Sub-Branch Jl. Buah Batu No.58 Bandung/40265 Phone: 62-22-7322150 Fax: 62-22-7319626 29 Kopo Mas Sub-Branch Komp Ruko Mas J-9 Jl. Kopo Cirangrang/40225 Phone: 62-22-5436802 Fax: 62-22-5436803 30 Cimahi Sub-Branch Jl. Raya Cibabat No.310 Cimahi/40213 Phone: 62-22-6634656 Fax: 62-22-6634657 31 Sukajadi Sub-Branch Jl. Sukajadi No.248/40153 Phone: 62-22-2042248 Fax: 62-22-2041213 32 Soekarno Hatta Sub-Branch Jl. Soekarno Hatta No.618 F/40286 Phone: 62-22-7509905 Fax: 62-22-7509902 33 Pemuda Sub-Branch Ruko Graha Mas Blok AA No.3 Taman Berdikari Sentosa Jl.Pemuda/13220 Phone: 62-21-47862070 Fax: 62-21-4711298 34 Sumedang Sub-Branch Jl. Prabu Geusan Ulun No.76/45311 Phone: 62-261-206527 Fax: 62-261-206528 184184 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 35 Serang Sub-Branch Jl. KH. Abdul fatah Hasan No.53 Kel. Cipare Serang/42124 Phone: 62-254-224142 Fax: 62-254-224243 36 Cikarang Sub-Branch Cikarang Commercial Centre Blok A1-2, Jl. Cibarusah KM. 40 No.2 Kampung pasir sari kec. Cikarang Selatan/17550 Phone: 62-21-89835720 Fax: 62-21-89835721 37 Atrium Sub-Branch Jl. KH. Hasyim ashari No.49 Cideng/10410 Phone: 62-21-3451964 Fax: 62-21-3451954 38 Kebon Jeruk Sub-Branch Jl. Kelapa Dua Raya(RayaPanjang) No.2, Rt 008, Rw 002 Kel. Kelapa Dua Kec. Kebon Jeruk/12130 Phone: 62-21-53660160 Fax: 62-21-53660164 39 Diponegoro Sub-Branch Jl. Diponegoro No.28 Bandung/40251 Phone: 62-22-87831928/87831909 Fax: 62-22-87831919 40 Lembang Sub-Branch Jl. Grand Hotel Lembang No.25 Bandung/40391 Phone: 62-22-2784797 Fax: 62-22-2784975 41 Cikarang Sub-Branch Ruko Metro Boulevard Kav. A Jl. Niaga Raya No.10 Kawasan Industri Jabeka/17835 Phone: 62-21-89836020/021-89837020 Fax: 62-21-89835953 42 Majalengka Sub-Branch Jl. KH. Abdul Halim No.447 Majalengka/45411 Phone: 62-233-8285460 Fax: 62-233-8285459 43 Kuningan Sub-Branch Jl. Dewi Sartika No.4/45512 Phone: 62-232-8880938 Fax: 62-232-8880939 44 Indramayu Sub-Branch Jl. DI. Panjaitan No.103/45212 Phone: 62-234-276236 Fax: 62-234-276237 45 Cibubur Sub-Branch Cibubur Times Square Blok B1/1 Jl. Alternatif Cibubur KM 3 Kel. Jatiraya, Kec. Jastisampurna Bekasi/17435 Phone: 62-21-84305050 Fax: 62-21-84305353 46 Cikampek Sub-Branch Jl. Terusan Sudirman No.6B(Sudirman Center)/41373 Phone: 62-264-8385171,72 Fax: 62-264-8385088 47 Depok Sub-Branch Jl. Margonda Raya No.1 Rt 001/011 Kelurahan Depok Kecamatan Pancoran Mas/16431 Phone: 62-21-7522091 Fax: 62-21-7522092 48 Salatiga Sub-Branch Ruko Wijaya Square B5 Jl.Diponegoro No.110 Salatiga/50711 Phone: 62-298-311828 Fax: 62-298-312808 49 Sidoarjo Sub-Branch Jl. KH. Mukmin No.11 Blok B-7 Sidoarjo/60281 Phone: 62-31-8922842 Fax: 62-31-8922841 50 Mojokerto Sub-Branch Jl. Gajah Mada No.85B/60319 Phone: 62-321-383444 Fax: 62-321-383465 51 Cianjur Sub-Branch Jl. Abdulah Bin Nuh No.15/43253 Phone: 62-263-260941, 260943, 260945 Fax: 62-263-280712 52 Pamulang Sub-Branch Jl. Dr. Setiabudi No.71 Kav. 6 Pamulang Timur/15417 Phone: 62-21-7403205, 7443335 Fax: 62-21-7402330 53 Sumber Sub-Branch Jl. Dewi Sartika No.57 Sumber/45611 Phone: 62-231-8330618 Fax: 62-231-8330619 54 Bantul Sub-Branch Jl. Jenderal Sudirman No.130 Kabupaten Bantul/55713 Phone: 62-274-367514 Fax: 62-274-368787 55 Balaraja Sub-Branch Komplek Ruko Balaraja Center Blok A No.2 Jl. Raya 59Serang Km. 24 Talaga Sari Balaraja-tangerang/15610 Phone: 62-21-29015618 Fax: 62-21-29015474 56 Ciledug Sub-Branch Ruko Dian Plaza Jl. Raden Fatah No.8A Kelurahan Sudirman Selatan,Ciledug/15225 Phone: 62-21-7330545 Fax: 62-21-7330706 57 Gunung Sabeulah Sub-Branch JL. Gunung Sabeulah Kel.Tawangsari Kec. Tawang kota Tasikmalaya/46112 Phone: 62-265-326147 Fax: 62-265-331135 58 Magelang Sub-Branch Ruko Metro Square Blok F No.25/56172 Phone: 62-293-326498-99 Fax: 62-293-326356 59 Padalarang Sub-Branch Jl. Raya Padalarang No.463 H/40553 Phone: 62-22-6803940/41 Fax: 62-22-6803935 60 Patrol Sub-Branch Jl. Raya Patrol Anjatan Blok Bunder No.52/45256 Phone: 62-234-5613627 Fax: 62-234-611919 61 Gianyar Sub-Branch Jl. By.Pass Dharma Giri No.99/80511 Phone: 62-361-8958295 Fax: 62-361-8958194 62 Gresik Sub-Branch Ruko KIG Jl. Tri Dharma Kav. A-14/61117 Phone: 62-31-3981758 Fax: 62-31-3981720 63 Karawang Sub-Branch Jl. Tuparev No.499 (Johar) Kab. Karawang Phone: 62-267-8454873-74 Fax: 62-267-8454875 64 Cibinong Sub-Branch Jl. Raya Mayor Oking No.158 V/16918 Phone: 62-21-87904397 Fax: 62-21-87904443 65 Singaparna Sub-Branch Jl. Raya Timur No.45 Singaparna/46416 Phone: 62-265-543111-3 Fax: 62-265-545074 WOORI BANKANNUAL REPORT 2017185185 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 185 66 Ciamis Sub-Branch Jl. Letjen. Samuji Ruko No.35/46211 Phone: 62-265-772221 Fax: 62-265-777860 67 Sleman Sub-Branch Jl. Magelang KM 12.8 No.200/55514 Phone: 62-274-865922 Fax: 62-274-866168 68 Losari Sub-Branch Jl. Soekarno Hatta NO.77 Losari/45192 Phone: 62-231-8832738-39 Fax: 62-231-8832736 69 Bekasi Sub-Branch Jl. Raya Narogong KM 12.5 No.23A/17151 Phone: 62-21-82611045-46 Fax: 62-21-82605356 70 Kudus Sub-Branch Jl. Sunan Kudus No.5 a/509000 Phone: 62-291-4249241 Fax: 62-291-4246497 71 Pamanukan Sub-Branch Jl. Eyang Tirtapraja No.54 Kab. Subang/41254 Phone: 62-260-551773 Fax: 62-260-551774 72 Majalaya Sub-Branch Jl. Alun-alun utara/Jl. Tengah komp ruko permata majalaya Blok C6/40382 Phone: 62-22-85963799 Fax: 62-22-5959826 73 Pangalengan Sub-Branch Jl. Raya Pintu Pangalengan KM-1/40378 Phone: 62-22-5979222 Fax: 62-22-5978690 74 Cilegon Sub-Branch Jl. Jend. A. yani Komp Cilegon green megablok Blok D3 No.17 Cibeber - cilegon/42433 Phone: 62-254-8484772 Fax: 62-254-8484773 75 Rangkasbitung Sub-Branch Jl. Raden Hardiwinangun Blok A No.9/42314 Phone: 62-252-203612 Fax: 62-252-203613 76 Tabanan Sub-Branch Jl. Ngurah Rai No.73 Kediri/82121 Phone: 62-361-814160 Fax: 62-361-814281 77 Surabaya Barat Sub-Branch Surya inti permata II Blok C-6 Jl. HR Muhammad No.175 Surabaya/60266 Phone: 62-31-7381606 Fax: 62-31-7387007 78 Soreang Raya Sub-Branch Jl. Raya Soreang No.412/40900 Phone: 62-22-5896880 Fax: 62-22-5897444 79 Ujung Berung Sub-Branch Komp Ruko Bandung Timur Plaza No. RA Jl. A.H. Nasution Kav. 46A Ujung Berung/40612 Phone: 62-22-7834128 Fax: 62-22-7834153 80 Jemur Sari/Surabaya selatan Sub-Branch Jl. Raya Jemursari No.15C Surabaya/60237 Phone: 62-31-8480454 Fax: 62-31-8480483 81 Luragung Sub-Branch Jl. Siliwangi No.18 Kec Luragung, Kab Kuningan/45581 Phone: 62-232-870016 Fax: 62-232-870020 95 Batu Sub-Branch Jl. Brantas No.49 Batu-Malang/65314 Phone: 62-341-513709 Fax: 62-341-513712 82 Pangandaran Sub-Branch Jl. Parapat, Desa Pangandaran, kec pangandaran kab ciamis/46396 Phone: 62-265-630400, 630010 Fax: 62-265-630800 83 Purwodadi Sub-Branch Jl. Letjend. S. Parman No.13 Kel. Purwodadi Kec. Purwodadi Jawa Tengah/58111 Phone: 62-292-423399 Fax: 62-292-423799 84 Leuwi Liang Sub-Branch Jl. Raya Jasinga 11A Kel. Cibeber, Kec. Leuwiliang Kab Bogor/16640 Phone: 62-251-8640297 Fax: 62-251-8640299 85 Ciawi Sub-Branch Jl. Perjuangan No.80 Kp.Karanganyar Rt. 04 Rw. 05 Desa Pakemitan Kec Ciawi Kab. Tasikmalaya/46156 Phone: 62-265-455163, 455167 Fax: 62-265-455162 86 Cilacap Sub-Branch Jl. Jend. A Yani No.46 Cilacap/53212 Phone: 62-282-537929 Fax: 62-282-535522 87 Jombang Sub-Branch Jl. KH. Wahid Hasyim No.71 Kota Jombang-Jawa Timur/61411 Phone: 62-321-878906, 872906 Fax: 62-321-860904 88 Banjar Sub-Branch Jl. Letjen Soewarto No.92/46321 Phone: 62-265-740557 Fax: 62-265-740558 89 Boyolali Sub-Branch Jl. Pandanaran No.179 B Kab.Boyolali/57313 Phone: 62-276-323655 Fax: 62-276-323650 90 Martadinata Sub-Branch Jl. RE Martadinata Pav 123 Bandung/40114 Phone: 62-22-71070901 Fax: 62-22-7107091 91 Melawai/Radio dalam Sub-Branch JL. Radio dalam raya No.4 Kel. Gandaria Utara Kec. Kebayoran baru Jakarta selatan/12160 Phone: 62-21-7211005 Fax: 62-21-7210970 92 Singaraja Sub-Branch Jl. Ngurah Rai No.16 Singaraja Kelurahan Kendran Kecamatan Buleleng/81112 Phone: 62-362-25098 Fax: 62-362-26605 93 Manonjaya Sub-Branch Jl. RTA. Prawira Adiningrat No.214 A Desa Manonjaya kec. Manonjaya-Tasikmalaya Phone: 62-265-380510 Fax: 62-265-380356 94 Surabaya Utara Sub-Branch Jl. Kertajaya Indah No.9/F-105 Surabaya/60161 Phone: 62-31-3572064 Fax: 62-31-3537005 96 Palimanan Sub-Branch Jl. Otto Iskandardinata No.503 Palimanan Phone: 62-231-343950 Fax: 62-231-343955 97 cibadak Sub-Branch Jl. Raya Suryakencana RT 03 RW 08, Cibadak - Kab. Sukabumi Phone: 6266-531915 Fax: 62266-531917 98 Bekasi Sub-Branch Annex Building Lt. 1 Jl. Afrika No.2 Krakatau Posco Cilegon/42435 Phone: 62-21-82404282 Fax: 62-21-82401878 99 Wates Sub-Branch Jl. Kolonel Sugiyono No.3-Wates Phone: 62-274-6657325 Fax: 62-274-774338 100 Tanjung Priok Sub-Branch Jl. Enggano No.58 C- Tanjung Priok jakarta Utara/14310 Phone: 62-21-4361667 Fax: 62-21-4361668 101 Karangnunggal Sub-Branch Jl. Raya Karangnunggal KP. Karangmekar RT/RW 03/09 Desa Hegarwangi Kec. Bantarkalong Kab. Phone: 62-265-258471~2 Fax: 62-265-2584570 102 Cibatu Sub-Branch Jalan Raya Cibatu - Limbangan Ruko Perum Bunar Indah Blok C-29 No.15-17 Rt 06 Rw 04 Desa Cibunar Kecamatan Cibatu Kabupaten Garut Phone: 62-262-467708 Fax: 62-262-467707 103 Wonogiri Sub-Branch Jalan Ahmad Yani No.66, Wonogiri Phone: 62-271-633600 Fax: 62-271-633433 104 Kawali Sub-Branch Jl. Siliwangi No.262, Desa Kawali mukti Phone: 62-265-791560 Fax: 62-265-791580 105 Kepanjen Sub-Branch Jl. Kawi Ruko B 7, Kepanjen Phone: 62-34-1379840 Fax: 62-34-1379839 106 Pamekasan Sub-Branch Jl. Kabupaten No.114 Phone: 62-324-333905, 333906 Fax: 62-324-333604 107 Kebumen Sub-Branch Jl. Ahmad Yani No.20, Kubumen Phone: 62-281-6222212 Fax: 62-281-631616 108 Mangga Dua Sub-Branch Ruko Harco Mangga Dua Blok L. No.5 Phone: 62-21-6120176 Fax: 62-21-6120179 109 Kelapa Gading Sub-Branch Jl. Boulevard Barat Ruko MOI Blok I No.15 Phone: 62-21-29364053 Fax: 62-21-29364054 WOORI BANKANNUAL REPORT 2017186186 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 186 110 Kayu Agung Sub-Branch Jl. Letnan Muthtar Saleh, Kayuagung, Palembang, South Sumatra Phone: 62-711-315828 Fax: 62-711-315510 111 Klaten Sub-Branch Jl. Pemuda No. 246 Klaten, solo Phone: 62-271-633600 Fax: 62-271-633433 112 Parung Sub-Branch Jl. Rayal Parung RT002/RW006, Kacamatan Parung, Kabupaten Bogor Phone: 62-2151-861-9559 Fax: 62-251-861-5455 113 Pasuruan Sub-Branch Jl. Panglima Sudirman No.45 Ruko I, Pasuruan, Malang Phone: 62-343-561-4700 Fax: 62-343-561-4940 114 Pati Sub-Branch Jl. Ir. Susato No.40 Pati, Jawa Tengah Phone: 62-24-352-1906 Fax: 62-24-352-1900 115 Sumenep Sub-Branch JI. Trunouyo No. 244 Sumenep Phone: 62-328-6762234 Fax: 62-328-6762242 116 Pelabuhan Ratu Sub-Branch Jl. Siliwangi Rt/Rw 02/18, Desa Pelabuhan Ratu Phone: 62-266-6249715 117 Posco Cilegon Sub-branch Annex Building Lt. 1 Jl. Afrika No.2 Krakatau Posco Cilegon/42435 Phone: 62254-369755 118 Union Square Cikarang Sub-branch Ruko Union Square Blok A No.6 Lippo Cikarang, Cikarang Selatan Phone: 6221-89909797 119 Sadang Sub-Branch Sadang Terminal Square No.07,08,25 Jl. Raya Sadang Purwakarta/41181 Phone: 62264-8220180 120 Cikajang Sub-branch Jl. Raya Cikajang No. 80 Garut Phone: 6262-576094 121 Cilimus Sub-branch Jalan Raya Cilimus RT 017/04, Desa Cilimus Kecamatan Cilimus, Kabupaten Kuningan Phone: 62232-615411 122 Kendal Sub-branch Jl. Raya Utama No.9 weleri Kendal Phone: 62294-644704 123 Wonosari Sub-branch Jl. KH. Agus Salim No.71A Wonosari - Kab Gunungkidul Phone: 62274-3950673 124 Purbalingga Sub-branch Jl. Ahmad Yani No.42 Purbalingga Phone: 62281-895553 125 Sragen Sub-branch Jl. Sukowati No.156 Sragen Phone: 62271-895015 126 Bintaro Sub-branch Jl Kesehatan No 18B, Jakarta Phone: 6221-7374693 127 KCP PROBOLINGGO 128 KCP PANDEGLANG 129 KCP PASAR ATOM 130 KCP CITRA RAYA 131 KCP CAKUNG 132 KCP PANTAI INDAH KAPUK 133 KCP CENTRAL PARK 134 KCP JEPARA 135 KCP BANJARNEGARA 136 Dalem Kaum Cash-Office Jl. Dalem Kaum No.5 Bandung/40251 Phone: 62-22-4211906 Fax: 62-22-4206837 137 Batujajar Cash-Office Jl. Batujajar No.324 Bandung Phone: 62-22-86861018/17/15 Fax: 62-22-86861016 138 Cimahi Cash-Office Cijerah II blok V No.3 Cimahi Phone: 62-22-86065156 Fax: 62-22-6075579 139 Suci Cash-Office Jl. PHH. Mustofa No.35/40124 Phone: 62-22-7279740 Fax: 62-22-7276361 140 Jatinangor Cash-Office Jl. Raya Jatinangor KM 20.5 KKBI IKOPIN/45363 Phone: 62-22-7781587 Fax: 62-22-7781563 141 Darmaraja Cash-Office Jl. Raya Darmaraja No.253 desa Darmaraja, Kec Darmaraja Kab.Sumedang/45372 Phone: 62-262-429000, 429069, 428478 Fax: 62-262-429070 142 Cililitan Asabri Cash-Office Jl. Mayjen Sutoyo No.11 Gedung PT Asabri (persero) Jl. Cililitan - jakarta Timur/13630 Phone: 62-21-80876494 Fax: 62-21-80876381 143 Jatibarang Cash-Office Jl. Letnan Joni No.178 Kec. Jatibarang - Kab Indramayu/45273 Phone: 62-234-352911 Fax: 62-234-352910 144 Taman Topi Cash-Office Jl. Gedong Sawah I No.1 A Pabaton Bogor/16121 Phone: 62-251-8335714 Fax: 62-251-8335721 145 Juanda/ KK Tajur Cash-Office Jl. Raya Tajur Ruko Galaxy No.59 H Bogo Phone: 62-251-7559203, 8384254 Fax: 62-251-7559205 146 Ungaran Cash-Office Ruko permata hijau No.1 Jl. MT Haryono No.16 Kel Ungaran Kec Ungaran Barat Kab. Semarang/50511 Phone: 62-24-76911017 Fax: 62-24-76911001 147 Serang Cash-Office Jl. Raya Serang- pandeglang KM 11 Lingkungan waru Lor, Desa/kel. Kamanisa Kec Curug Kota serang/42117 Phone: 62-254-222133 Fax: 62-254-8494615 148 Gading Serpong Cash-Office Jl. Boulevard Raya Gading Sepong, Ruko Alexandrite 3, No.21, Kabupaten Tangerang Phone: 62-21-5421-2159 Fax: 62-21-5421-0975 149 Bojonergoro Cash-Office Jl. Untung Suropati Ruko Adipura Block A-11 Phone: 62-353-311271 Fax: 62-353-311270 150 Surya Sumantri Cash-Office Phone: 62-22-2021760 Fax: 62-22-20271073 151 Asabri Cash-Office Jl. Kebonsari Elveka I No.5 - Surabaya Gedung Kantor Phone: 62-31-82517971 152 KK KEMANG 153 KK CIKANDE 154 Dalem Kaum Functional Office JL. Dalem Kaum No.5 Bandung Phone: 62-33-4233810 Fax: 62-22-4206837 Hong Kong Woori Global Markets Asia Limited Rooms 1905-1908, 19/F, Gloucester Tower, The Landmark, 15 Queen’s Road Central, Hong Kong Phone: 852-3763-0888 Fax: 852-3763-0808 Russia 1 AO Woori Bank 8th floor, Lotte Plaza, 8, Novinsky Boulevard, Moscow, 121099, Russia Phone: 7-495-783-9787 Fax: 7-495-783-9788 2 Saint-Petersburg Branch 1st Floor, Atlantic City, 126 Savushkina Street, Saint-Petersburg, 197374, Russia Phone: 7-812-327-9787 Fax: 7-812-327-9789 3 AO Woori Bank vladivostok Representative Office Vladivostok Business-Center Office No.614, 29, Semenovskaya Str. Vladivostok, 690091, Russia Phone: 7-423-240-7014 Fax: 7-423-240-7015 Brazil 1 Woori Bank Brazil Avenida Nacoes Unidas, 14,171, Crystal Tower, Conj.803, Vila Gertrudes, 04794-000, Sao Paulo-SP, Brazil Phone: 55-11-2309-4740 Fax: 55-11-3511-3300 2 Bom Retiro Branch Rua Tres Rios, 261 Andar 2, Bom Retiro, Sao Paulo SP, Brazil Phone: 55-11-3511-3350 WOORI BANKANNUAL REPORT 2017187187 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 187 16 Hinthada I Branch No. 49, U Wisarra St. Pha Tar Gyi Ward, Hinthada Township, Ayeyardady, Myanmar Phone: 95 9 960996099 17 Hlain Branch No. 101, Tha Yet Taw(3) Upper St. Tha Yet Taw Ward, Kyimyindaing Township, Yangon, Myanmar Phone: 95 9 960996089 18 Hinthada II Branch No. 93, Nat Maw St. Panbetan Ward, Hinthada Township, Ayeyarwady, Myanmar Phone: 95 9 961010611 19 Hinthada III Branch No. 93, Nat Maw St. Panbetan Ward, Hinthada Township, Ayeyarwady, Myanmar Phone: 95 9 961010611 20 Twantay Branch No. 49, Bo Kyoke St. Kon Gyan(Middle) Ward, Twantay Township, Yangon, Myanmar Phone: 95 9 961010511 21 Pyapon I Branch No. 18C, 8th St. 9th Ward, Pyapon Township, Ayeyarwady Phone: 95 9 950311093 22 Pyapon II Branch No. 18C, 8th St. 9th Ward, Pyapon Township, Ayeyarwady Phone: 95 9 950311096 23 Pantanaw I Branch No. 1, Sel Myaung St. Myo Kwet Thit 1, Pantanaw Township, Ayeyarwady, Myanmar Phone: 95 9 764433931 24 Pantanaw II Branch No. 1, Sel Myaung St. Myo Kwet Thit 1, Pantanaw Township, Ayeyarwady, Myanmar Phone: 95 9 764433932 25 Gyobingauk I Branch No. 154, Ashay Myopat St. Pan Tin Ward, Gyobingauk Township, Bago, Myanmar Phone: 95 9 764433935 26 Gyobingauk II Branch No. 154, Ashay Myopat St. Pan Tin Ward, Gyobingauk Township, Bago, Myanmar Phone: 95 9 764433936 27 Zigon Branch Hlaing Htate Khaung Tin St. No. 1 Ward, Zigon Township, Bago, Myanmar Phone: 95 9 780 113417 28 Paungde I Branch Plot No. 79, Shwetaung Street, Min Kwet 3, Ward, Paungde Township, Bago, Myanmar Phone: 95 9 780114012 29 Paungde II Branch Plot No. 79, Shwetaung Street, Min Kwet 3, Ward, Paungde Township, Bago, Myanmar Phone: 95 9 780114068 30 Lewe I Branch No. 17 Plot, Min Wine Yat, No. 4 Ward, Lewe Township, Nay Pyi Taw, Myanmar Phone: 95 9 402187901 31 Pyinmana I Branch No. 181, Yarza Htarni St. Aung Thar Yar Ward, Pobbathiri Township, Nay Pyi Taw, Myanmar Phone: 95 9 402187923 Cambodia 1 Woori Finance Cambodia Plc. Building No.119B, Street271, Sangkat Phsar Doem Thkov Khan Chamkarmon, Phnom Penh. Phone: 855-23-999-661 Fax: 855-23-999-663 2 Russey Keo Branch House No.1A, National Road 5, Sangkat Kilomet Lek6 Khan Russey Keo, Phnom Penh. Phone: 855-23-999-664 3 Pursenchey Branch House No.6A, Russian Blvd, Tangoun Village, Sangkat Kakb, Khan Pursenchey, Phnom Penh. Phone: 855-23-999-803 4 Kean svay Branch House No.330, National Road 1, Toul Tuaut village, Korkey Communce, kean Svay district, Kandal province Phone: 855-23-720-632 5 Takhmao Branch Building No.31, Street2, Takhmao village, Takhmao Commune, Takhmao District, Kandal Province, Cambodia Phone: 855-24-998-333 6 PrekPhnov Branch National highway 5, Kandal Village, Prek Phnov commune, Phnom Penh, Cambodia Phone: 855-23-900-945 7 Ang Snoul Branch #109, National road No.4, Village Bek Chan, CommuneBek Chan, District Ang Snuol, Cambodia Phone: 855-023-999-355 8 Phsar Depo Branch #138D, St 215, Sangkat Veal Vong, Khan Prumpei Makara, Phnom Penh, Cambodia Phone: 855-23-900-455 9 AreyKshat Branch #154, National Rd. 21 Preak Khsev Village, Rokar Khpos Commune, S’ang District, Kandal Province, Phnom Penh, Cambodia Phone: 855-2490-1455 10 S’ang Branch #154, National Rd. 21 Preak Khsev Village, Rokar Khpos Commune, S’ang District, Kandal Province, Phnom Penh Phone : 855-2490-1455 11 Steung Meanchey Branch No.19A St, Monireth, Phumdomnak Thom, Sangkat Stoeung Meanchey, Khan Meanchey, Phnom Penh, Cambodia Phone: 855-23-901-345 12 Chom Chao Branch No.4A, St, Veng Sreng, Chrey Koung Village, Sangkat Chom Chao, Phnom Penh, Cambodia Phone: 855-23-901-355 13 Char Ampov Branch #610B, National road No.1, Doem Sleng Village, Sangkat Chabar Ampov, Khan Chbar Ampov, Phnom Penh 14 Toul Kork Branch #1C, St 355, Phum 1, Sangkat Boeung Kok1, Khan Toul Kork, Phnom Penh Chamkar 15 15 15 Chamkar Doung Branch #2039, St 217, Taley Village, Sangkat Dong Kor, Khan Dong Kor, Phnom Penh Kampongspeu Branch 16 Kampongspeu Branch #751, National Highway No 4, Kampongspeu, Cambodia 17 Pshar Dey Huy Branch 18 Kandal Stueng Branch 19 Odongk Branch 20 Mukh Kampul Branch Myanmar 1 Woori Finance Myanmar Plc. 115/A, Pyay Road, Saw Bwar Gyee Kone Ward(10 miles), Insein Township Yangon, Myanmar Phone: 95-01-643798 2 MingladonⅠ Branch 115/A, Pyay Road, Saw Bwar Gyee Kone Ward(10 miles), Insein Township Yangon, Myanmar Phone: 95-01-643798 3 NorthOkkalapa Branch No. M(56), Thiriyadanar Wholesale Market NorthOkkalapa Township, Yangon, Myanmar Phone: 95-99-6889-2300 4 Mingaladon II Branch 4F, 115/A Pyay Road, Saw Bwar Gyee Kone Ward(10miles), lnsein Township, Yangon Myanmar Phone: 95-01-643798 5 Nyaungdon Branch Room No. 103, 1st Street, 5 Quarter, Nyaungdon Township, Ayarwaddy, Myanmar Phone: 95-99-7674-7709 6 Taikkyi Branch Room No.9, Natsinkone Road, Ohtan Ward, Taikkyi Township, Yangon, Myanmar Phone: 95-9-7717-81028 7 Hmawbi I Branch 2F No(26) Tatkyee Kone village, Hmawbi Township, Yangon, Myanmar Phone: 95-9-9-74563586 8 Hmawbi II Branch 1F No(26) Tatkyee Kone village, Hmawbi Township, Yangon, Myanmar Phone: 95-9-97456395 9 Maubin I Branch Plot No(34), No(396), Building 01, Yei Le road, Ward 7, Maubine Township, Ayeyarwaddy, Myanmar (2F) Phone: 95 9 9712 25895 10 Maubin II Branch Plot No(34), No(396), Building 01, Yei Le road, Ward 7, Maubine Township, Ayeyarwaddy, Myanmar (1F) Phone: 95 9 9616 12763 11 Kawhmu Branch No 192/B, Bogyoke St. South Wd Kawhmu Townshop, Yangon Phone: 95 9 9742 91112 12 Insein Branch 115/A, Pyay Road, Saw Bwar Gyee Kone Ward(10 miles), Insein Township Yangon, Myanmar Phone: 95 1 643798 13 Kungyangon Branch No 540, Yadanar Pone 2nd St, Kangyi / Magyi Ward, Kungyangon Township, Yangon, Myanmar Phone: 95 9 975 890019 14 Zalun Branch Bogyok St. Nyaung Pin Zay Ward, Zalun Township, Ayeyarwady, Myanmar Phone: 95 9 960996083 15 Kyimyindaing Branch No. 101, Tha Yet Taw(3) Upper St. Tha Yet Taw Ward, Kyimyindaing Township, Yangon, Myanmar Phone: 95 9 960996092 WOORI BANKANNUAL REPORT 2017188 32 Pyinmana II Branch No. 181, Yarza Htarni St. Aung Thar Yar Ward, Pobbathiri Township, Nay Pyi Taw, Myanmar Phone: 95 9 402187924 33 Lewe II Branch No. 241, Office Street, Min Wine Yat, No. 4 Ward, Lewe Township, Nay Pyi Taw, Myanmar Phone: 95 9 441580466 34 Dekkhinathiri Branch No. Da-2410, Wai Da 10 St. Dekkhinathiri Township, Nay Pyi Taw, Myanmar Phone: 95 9 441580468 35 Lewe Ⅲ Branch No. 241, Office Street, Min Wine Yat, No. 4 Ward, Lewe Township, Nay Pyi Taw, Myanmar 36 Takkon Ⅰ Branch No. (ma-127), Yin Mar Street, Area (3), Mya Waddy Ward, Takkon Township, Nay Pyi Taw philippines 1 Wealth Development Bank Taft Financial Center, Cardinal Rosales Avenue, Cebu Business Park, Cebu City, Cebu 2 Alabang Branch Unit 103, South Center Tower Condominium 2206 Market Street, Madrigal Business Par Alabang, Muntinlupa City, Manila Phone: 63-32-415-5265 Fax: 63-32-415-5266 3 Angeles Marquee Mall Branch Ground Floor , Marquee Mall, Don Bonifacio St., Pulung Maragul Angeles City, Pampanga Phone: 63-45-624-0072 4 Legazpi Pacific Mall Branch G/F Expansion II, Pacific Mall Legazpi, Landco Business Park, F. Imperial Street Cor. Circumferential Road, Legazpi City 4500 Phone: 63-52-480-0038 5 Lucena Pacific Mall Branch Ground Floor L 1-26, Pacific Mall, M.L. Tagarao St. Landco Business Park, Brgy. III , Lucena City, Quezon Phone: 63-42-795-3771 Fax: 63-42-795-3773 6 Taguig Market Market Branch Ground Floor, Play Ground Zone, Metro Market Market Mall, Mckinley Parkway, Fort Bonifacio Global City, Taguig City Phone: 63-02-889-0275 Fax: 63-02-887-4371 7 Cebu Ayala Branch Ground Floor, Taft Financial Center, Cardinal Rosales Avenue, Cebu Business Park, Brgy. Luz, Cebu City Phone: 63-32-415-4888 Fax: 63-32-415-5777 8 Cebu Ramos Branch Ground Floor, Hilario Chu Bldg., No. 148 F. Ramos St. Santa Cruz, Cebu City Phone: 63-32-412-6302 Fax: 63-32-412-6353 9 Cebu Carbon Branch Ground Floor, M.C. Briones & Plaridel Sts., Cebu City Phone: 63-32-416-9077 Fax: 63-32-416-9078 188188 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 10 Cebu Mandaue Branch Ground Floor, G/F Meritz Building, A.C. Cortes Ave. Ibabao, Mandaue City, Cebu Phone: 63-32-343-8144 Fax: 63-32-343-8143 11 Cebu Tabunok Branch Ground Floor, AGSy Bldg., National Hi-Way, Tabunok Talisay City, Cebu Phone: 63-32-272-2955 Fax: 63-32-273-6870 12 Cebu Mandaue Pacific Mall Metro Branch Ground Floor, Mandaue Pacific Mall Metro National Highway corner M.B. Fernan Ave. Estancia, Ibabao, Mandaue City, Metro Cebu Phone: 63-32-239-1072 Fax: 63-32-239-1073 13 Cebu Mambaling Branch G/F Metro Store Mambaling, Cebu, N. Bacalso Avenue corner F. Llamas Street, Basak San Nicolas, Cebu City Phone: 63-32-414-4233 14 Tagbilaran Banking Center Ground Floor, No. 15 JS Torralba St., Poblacion 2, Tagbilaran City, Bohol Phone: 63-38-411-4860 Fax: 63-38-501-9098 15 Iloilo Banking Center Ground Floor, ACCE Bldg., Mabini Ledesma St., Liberation, Iloilo City Phone: 63-33-338-4419 Fax: 63-33-338-4417 Vietnam 1 Woori Bank Vietnam 34F, Keangnam Landmark 72, E6 Pham Hung Road, Tu Liem District. Hanoi, Vietnam Phone: 63-82-225-3318 Fax: 84-04-7300-6806 2 Hanoi Branch 24F, Keangnam Landmark 72, E6 Pham Hung Road, Tu Liem District. Hanoi, Vietnam Phone : 84-4-3831-5281 3 Ho Chi Minh Branch 2 Floor, Kumho Asiana Plaza Saigon, 39 Le Duan St., Dist 1, HCMC, Vietnam Phone : 84-8-3821-9838 4 Bac Ninh Branch 1-2 Floor Halla Bld, Yen Phong Industrial Zone, Yen Trung Commune, Yen Phong District, 5 Bac Ninh Province, Vietnam Overseas Office Malaysia Woori Bank Kuala Lumpur Representative Office Unit 4129/4130, 41/F, Vista Tower, The Intermark 182 Jalan Tun Razak, Kuala Lumpur 50400, Malaysia Phone: 84-04-7300-6802 Fax: 60-3-2163-9288 16 Cagayan De Oro Banking Center Ground Floor, Jammin Lui Bldg., corner A. Velez & Gomez Sts. Poblacion, Cagayan de Oro City, Misamis Oriental Phone: 63-88-856-8974 Fax: 63-88-856-8942 Myanmar Woori Bank Yangon, Myanmar Office No.115(A) First Floor, Pyay Road, 10 Miles, Insein Township, Yangon, Myanmar Phone: 95-01-646951 iran Woori Bank Iran Representative Office 1st Floor, No; 18, J St., Moghadas Ardebili St., Mahmodiyeh, Tehran, Iran Phone: 98-22-04-6975 / 98-90-3826-3169 poland Poland Representative Office Uniwersytecka 13, 40-007, Katowice, Poland Phone : 48-323-076-417 17 Davao Branch Ground Floor, Door 8, 9 & 10 Grand MenSeng Hotel Pichon St., 1-E Poblacion, Davao City, Davao del Sur Phone: 63-82-225-3318 Fax: 63-82-255-3319 18 Tacloban Branch Sukwan Bldg, corner Real and Burgos Streets, Tacloban City Phone : 63-053-832-3435 19 Caloocan Branch Rizal Avenue Extension, East Grace Park, Caloocan 1400, Metro Manila Phone : 63-0917-870-7335 20 Gensan Branch Gaisano mall, Jose Catolico Sr. Avenue, General Santos City, South Cotabato Phone : 63-083-250-1238 21 Dumaguete Branch 1F Jose Building South Road Calindagan, Dumaguete City 22 Bacolod Branch Lacson-Luzuriaga Streets, Bacolod City, Negros Occidental WOORI BANKANNUAL REPORT 2017189 TogeTher for Tomorrow WOORI BaNK aNNUaL RePORT 2017 A LeAding BAnk ShAping the Future WOORI BANK OVERVIEW VISION & CORE VALUES COMPANY HISTORY CORPORATE GOVERNANCE FINANCIAL HIGHLIGHTS GLOBAL NETWORKS DIGITAL STRATEGY PARTNERS & AWARDS 7 1 0 2 K O O B T C A F E T A R O P R O C K N A B I R O O W 189189 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner Woori Bank is shaping the future of Korean financial industry as a leading global bank that grows alongside customers.WOORI BANKANNUAL REPORT 2017 190190 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 190 01 Woori Bank Overview Established nearly 120 years ago with capital from the royal treasury of Emperor Gojong, Woori Bank has been at the forefront of building the framework for modern finance in Korea. The Bank is known for having been a trust-worthy partner to its customers throughout many of the countries historic moments. Woori Bank is shaping the future of the Korean financial industry as a leading global bank that grows alongside customers. Credit Ratings International Ratings Woori Bank Republic of Korea Moody's S&P Fitch A1 A A- Aa2 AA AA- Korea Ratings Domestic Ratings NICE Korea Investors Service AAA AAA AAA (as of the end of 2017) Woori Bank’s Subsidiaries Domestic Subsidiaries Woori Card Woori Investment Bank Woori FIS Woori Finance Research Institute Woori Credit Information Woori Fund Service Co 100% 59.83% 100% 100% 100% 100% Woori Private Equity Asset Management 100% International Subsidiaries Woori America Bank (U.S.A.) Woori Global Markets Asia (Hong Kong) Woori Bank China (China) AO Woori Bank (Russia) Woori Bank Brazil (Brazil) Woori Finance Cambodia (Cambodia) 100% 100% 100% 100% 100% 100% PT Bank Woori Saudara Indonesia (Indonesia) 79.88% Woori Finance Myanmar (Myanmar) Woori Wealth Development Bank (Philippines ) Woori Bank Vietnam (Vietnam) 100% 51% 100% Coporate FaCt BookWOORI BANKANNUAL REPORT 2017191 Woori Bank at a Glance Customers SMe/SOHO Conglomerates Total number of customers Million Total number of SME customers Million 23.0 Domestic Branches 1.48 Global networks BAnK Out of 36 large enterprises Total number of large enterprises where Woori Bank is the major creditor bank 13 employees Countries Branches Total number of domestic branches 876 Assets Overseas networks (Including Korea desk & GRM) Networks 25 301 Loans Employees Total number of employees (Consolidated base) 19,540 Deposits KRW KRW KRW uSD 331.8 bn uSD 207.3 bn uSD 219.1bn Trillion Trillion Trillion Total assets (incl. trust account) 355.5 Total loans 222.1 *Based on exchange rate of KRW1,071.4/USD as of Dec. 29 2017 Total deposits 234.7 191191 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017192 02 Vision & Core Values No.1 Bank of Korea Korea's leading provider of financial services CORe VaLUeS Customer happiness pioneering for the Future honesty and trust putting talent First Woori puts customer happiness first Woori challenges itself to create a better future Woori leads the way in creating a healthy financial order Woori fosters human talent Management Policy Field centered management to put customers first Slogan Woori All Together, All New Woori Beyond Korea’s No.1 Bank, Jump to Become a Global Top Class Bank by 2020 2016 ~ 2017 2018~ 2020 Successful Privatization Reestablishment of Financial Group No. 1 Financial Group ·Half a Step Ahead ·Fulfilling One’s Duties ·Locking the Back Door ·Detail-Focused Business ·Transition to FG Structure ·Expansion of Business Portfolio Global Top Class Bank ·600 Overseas Networks · Leading the 4th Industrial Revolution 192192 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner Coporate FaCt BookWOORI BANKANNUAL REPORT 2017193 aSIa TOP 10 GLOBaL TOP 50 Overseas Networks VISION 2020 Financial Group Digital Banking 193193 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017194 03 119 years of history Woori Bank marked the important moment in history 1 The First emperor Gojong In 1899, the Emperor invested 30,000 won from the royal treasury for the foundation of Woori Bank’s predecessor, Daehan Cheonil Bank. Seoul metropolitan Government Served as the treasury bank for the Seoul Metro politan Government over the past 100 years. 2 achieving Win-win Growth National Debt Repayment movement Managed funds raised for the National Debt Repayment Movement. The Supporter of Korea economy Served as the driving force behind economic growth by serving as a lender for promising exporters. Established Daehan Cheonil Bank Became The Commercial Bank of Korea Merged into Hanvit Bank Gwangtonggwan was built in 1909 as a head office of Daehan Chonil Bank. The oldest continuously operating banking building in Korea. (Currently Jongno Branch) Became Hanil Bank Established Chosun Trust Company The 1st Korean Bank listed on the Korea Stock Exchange Korea Deposit Insurance Corporation 1899 1932 1956 1968 1999 Emperor Gojong invested capital from the royal treasury for the foundation of Woori Bank’s predecessor, Daehan Cheonil Bank in 1899 Opened Tokyo Branch The 1st Korean commercial bank to open an overseas network 194194 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner Coporate FaCt BookWOORI BANKANNUAL REPORT 2017195195 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 195 3 Leaping Forward 4 Taking the Lead Overcoming Crisis During the Asian Financial Crisis, coordinated the merger between two key players in corporate finance, Commercial Bank of Korea and Hanil Bank. Turning circumstances around A new leap forward as Korea's No.1 bank by working together to overcome the Asian Financial Crisis. Successful Privatization MOU between KDIC and Woori Bank is terminated. WiBee Bank WiBee Bank was launched as Korea's 1st mobile-only bank. WiBee Talk WiBee Talk was launched as the 1st mobile messenger in the financial sector. Global Network 300 The 1st Korean bank to open 300 global networks. Changed Name to Woori Bank Merged Woori Financial Group and Woori bank Successful Privatization Woori Financial Group Listed on NYSE Main Service Provider For National Pension Service 2001 2002 2003 2014 2016 2017 Established Woori FG The 1st Financial Holding Company in Korea [Change in KDIC Stake] % 51.1 % 29.7 % 21.4 Oligopolistic Shareholders KDIC WOORI BANKANNUAL REPORT 2017196 04 Corporate Governance New governance structure after privatization will enable us to enhance our corporate value further. 2016 Successful Privatization KDIC finalized sale of 29.7% stake in Woori Bank Termination of MOU between KDIC and Woori Bank 2017 New Governance Structure new Governance Structure based on oligopolistic shareholders establishment of New Governance Structure Shareholders (as of the end of 2017) Oligopolistic Shareholders % IMM 27.22 Tongyang Life Korea I&S Kiwoom Securities Hanwha Life Mirae Asset* Eugene Asset* * Investors who chose not to exercise BOD recommendation rights % KDIC 18.43 % NPS 9.29 ESOA 5.36 % Others 39.7 % BOD (8 Members) CEO Standing Auditor recommended by Outside Directors oligopolistic shareholders recommended by KDIC Non-standing Director (Korea Deposit Insurance Corporation) BOD’s Active Participation in Major Management Decisions “enhancing Corporate Value” with post-privatization governance structure 196196 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner Coporate FaCt BookWOORI BANKANNUAL REPORT 2017197 Board of Directors & management president & Chief executive Officer Outside director Sohn, Tae Seung Standing director Oh, Jung Sik non-Standing director Bae, Chang Sik Ro, Sung Tae Shin, Sang Hoon Park, Sang Yong Tian, Zhiping Chang, Dong Woo Governance Award Best Company in Governance (Board of Directors) The Maeil Business Newspaper, Daishin Economic Research Institute Shareholder Composition (4% and above, as of the end of 2017) NPS (National Pension Service) 9.29% KDIC (Korea Deposit Insurance Corporation) 18.43% ESOA (Employee Stock Ownership Association) 5.36% Others 44.92% 6.00% 4.00% 4.00% 4.00% IMM PE Korea Investment & Securuties Tongyang Life Insurance Kiwoom Securities Hanwha Life Insurance * The total stake of Oligopolistic shareholders : 27.22% 4.00% 197197 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017198 05 Financial highlights [ Wbn, U$mn in ( ) ] Net Income 2015 1,059 (988) 2016 1,261 (1,177) 2017 1,512 (1,411) [ Wbn, U$mn in ( ) ] Interest Income [ Wbn, U$mn in ( ) ] Non Interest Income 5,019 (4,685) 5,221 (4,873) 1,252 (1,169) 4,762 (4,445) 4,493 (4,194) + 4.0% + 5.4% + 6.0% 2014 2015 2016 2017 706(659) 867(809) + 44.4% 461(430) + 53.1% 2014 + 22.8% 2015 2016 2017 * Consolidated Basis, Based on exchange rate of KRW1,071.4/USD as of Dec. 29 2017 Net Income(Continuing Operations) attributable to owners [ Wtn, U$bn in ( ) ] Assets Loan in Local Currency total Assets 7 1 0 2 6 1 0 2 5 1 0 2 4 1 0 2 (187) 200 (178) 191 (272) 185 (156) 167 (332) 356 (320) 343 (297) 318 7 1 0 2 6 1 0 2 5 1 0 2 4 1 0 2 (272) * Consolidated Basis, Total Assets include Trust Account Based on exchange rate of KRW1,071.4/USD as of Dec. 29 2017 297 [ Wtn, U$bn in ( ) ] Funding deposit total Funding (219) 235 (206) 221 (195) 209 (176) 189 (276) 296 (271) 290 (255) 273 (235) 252 198198 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner Coporate FaCt BookWOORI BANKANNUAL REPORT 2017199199 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 199 [ Unit : % ] Dividend [ Unit : % ] Profitability(ROA & ROE) ROA ROE 5.69 7.42 6.36 3.55 0.37 0.41 0.48 2014 2015 2015 2016 2016 2017 2017 0.21 2014 * Consolidated basis *2014: excluding one-off factors related to the sale and the spin-off subsidiaries 2016 2017 400 600 * 2017 : including the interim dividend 21.35 26.71 (KRW) Dividend per Share (%) Payout Ratio 100(KRW) [ Unit : % ] [ Unit : % ] Asset Quality (NPL Ratio) NPL Ratio (Bank) NPL Ratio (excl. 4 shipbuilders*) Capital Adequacy BIS Ratio Tier1 Ratio CET1 Ratio 2.10 1.62 1.47 1.24 2014 2015 0.98 0.91 2016 0.83 0.80 2017 13.66 10.43 8.47 2015 15.29 12.68 10.50 15.40 13.03 10.95 2016 2017 * 4 Shipbuilders : Sungdong, SPP, Daesun, STX Credit Cost Ratio [ Unit : % ] [ Unit : % ] Credit-to-Income-Ratio Cost-to-Income Ratio Cost-to-Income Ratio(excluding ERP Expense) 0.52 0.45 0.37 0.34 2014 2015 2016 2017 57.6 53.9 2015 59.1 56.1 2016 54.6 2017 49.9 * Consolidated basis Credit Cost Ratio = Credit cost/average Total Credit balance * Cost-to-income ratio = SG&A expense / (Interest Income + Non-Interest Income) WOORI BANKANNUAL REPORT 2017 200200 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 200 06 Global Networks Woori Bank has a strong global presence at 301 overseas networks located in 25 countries around the globe. poland London Woori Bank Russia germany Woori Bank China turkey iran tokyo Bahrain Qatar Mumbai dhaka dubai gurgaon Woori Global Markets Asia hong kong Woori Bank Vietnam india Regional Headquarters Chennai Woori Finance Myanmar Yangon Woori Finance Cambodia Wealth Development Bank philippines kuala Lumpur Singapore Bank Woori Saudara indonesia South Africa Sydney Growing Our Financial Services through a Global Network network to be opened (2018) korean desk Total networks Overseas Branches 301 Representative Office 19 Overseas Subsidiaries new York Woori America Bank Los Angeles Mexico Woori Bank China Woori Bank Russia 21 Woori Bank Vietnam 3 India Regional Headquarters 3 Wealth Development Bank Philippines 21 Woori Finance Myanmar 3 Woori Bank Brazil Bank Woori Saudara Indonesia 33 Woori Finance Cambodia 153 Woori America Bank 20 Woori Bank Brazil 21 2 (278) 4 10 Coporate FaCt BookWOORI BANKANNUAL REPORT 2017 201 Global Business history 1968.11.11 Tokyo 2006.02.13 Ho Chi Minh 2008.01.09 Woori Bank Russia 2012.09.25 Woori Bank Brazil 2016.11.07 Woori Bank Vietnam Global Business 1976.04.08 New York 2007.11.12 Woori Bank China 2012.04.05 Chennai 2014.07.29 Woori Finance Cambodia Overseas Branches 1968.11.11 1976.04.08 1978.01.16 1978.05.26 1980.03.14 1980.10.28 1983.10.01 Branch Subsidiary representative Office Tokyo New York LA London Hong Kong Singapore Bahrain 1984.01.27 1996.09.21 1997.09.26 2006.02.13 2006.10.03 2007.11.12 2008.01.09 Woori America Bank Dhaka Hanoi Ho Chi Minh Woori Global Markets Asia (Hong Kong) Woori Bank China Woori Bank Russia 2009.02.27 2012.04.05 2012.09.25 2012.10.25 2013.02.19 2014.05.19 2014.07.29 Kuala Lumpur Chennai Woori Bank Brazil Yangon (Myanmar) Sydney Dubai Woori Finance Cambodia 2014.12.30 2015.11.26 2016.10.28 2016.11.07 2017.01.16 2017. 02.03 2017.07.31 Bank Woori Saudara Woori Finance Myanmar Wealthbank (Philippines) Woori Bank Vietnam Gurgaon Poland Mumbai 201201 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017202 07 Global Networks Strategy Vietnam, Philippines, India 〮 Convert existing branches to subsidiaries 〮 Expand through M&A Cambodia, Myanmar 〮 Launch new businesses ( i.e. Microfinance and Savings Bank) adapting to local environments ocaliz a ti o n L Diver s if i c a t i o n L e v e l- U p h e N e w m arket wit a t e gic Valu r t S China, USA, Indonesia 〮 Leverage existing subsidiaries to further expand Woori Bank presence in the region Germany, Poland, Mexico 〮 Enter new markets with core strategic values 〮 Establish financial belts connecting regions 202202 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner Coporate FaCt BookWOORI BANKANNUAL REPORT 2017203203 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 203 Overseas expansion 〮 Woori Bank has a strong global presence at 301 overseas networks located in 25 countries around the globe. 〮 We are actively expanding overseas operations by establishing financial belts on every continent . 〮 We aim to become one of Asia's top 10, and one of the World's Top 50 banks in the near future. Largest Overseas Network among Korean Banks - 301 networks in 25 nations Worldwide (as of dec. 2017) Woori Bank Russia Woori Bank China London poland tehran Bahrain Woori Finance Myanmar gurgaon dubai dhaka Yangon Chennai Woori Global Markets Asia Ltd HK Woori Bank Vietnam tokyo SeOuL hong kong Woori America Bank Los Angeles new York Woori Finance Cambodia kuala Lumpur Singapore Wealth Development Bank p.T. Bank Woori Saudara indonesia Sydney Main Focus Countries Woori Bank Brazil (Brazil) indonesia Vietnam philippines india Cambodia Myanmar 600 Overseas Networks by 2020 (Expand Networks and pursue M&As) Head Office Overseas Branch 19 Overseas Subsidiary Overseas Representative Office 10 4 〮 Number of branches under overseas subsidiaries 278 WOORI BANKANNUAL REPORT 2017 204 08 Digital Strategy We are taking the lead in the Digital Banking business in Korea, as the 1st Korean bank that launched a comprehensive mobile financial platform. WiBee Bank WiBee Talk WiBee Members WiBee Market Korea’s 1st mobile-only banking service 1st mobile messenger from a Korean financial institution Customer- oriented open membership service mobile-based open market- type shopping mall May 2015 Jan. 2016 Jul. 2016 Aug. 2016 Digital financial Platform Feb. Mar. May Sep. Oct. 2017 WiBee Talk SORi Real-time translation service in 16+ languages AI banking service with voice recognition function Woori Robo-alpha AI-based financial adviser, providing financial consultation to customers Wibee Bot Pepper Chatbot service First humanoid robot used in financial services 204204 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner Coporate FaCt BookWOORI BANKANNUAL REPORT 2017205 Combined with Global Strategy Global Digital Platform will be utilized to expand local operations in Southeast Asia India Myanmar Vietnam Philippines Indonesia Leading the 4th Industrial Revolution Big Data + AI + Block-chain 205205 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017206 09 a Trust-worthy Partner A reliable partner for major Government Institutions and Large Enterprises. Public Institutions national pension Service Acting as a custodial bank for equity investment assets In 2017, Woori Bank was selected as the primary banking partner by the National Pension Service, the world’s third largest pension fund in size, and will be managing a total of KRW 600 trillion of funds for three years starting in March 2018. national Housing urban Fund Acting as the managing custodian bank Korea Land & Housing Corporation Acting as the primary bank for funds Primary Banking Relationship Partners Number of Large enterprises that utilize Woori Bank as a major Creditor Bank (as of 2017) major Universities & hospitals Since 1969 Since 1963 Since 1971 Since 1933 Since 1952 Woori Bank 13 h Bank 5 S Bank 4 k Bank 3 206206 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner Coporate FaCt BookWOORI BANKANNUAL REPORT 2017207 awards the Bank of the Year 2017 Asia-pacific the Banker Best transaction Bank Award, the Future of Finance Summit Asian Banker Best Cash Management Bank, the Future of Finance Summit Asian Banker 2017 presidential Commendation for Services in Social enterprise incubation Ministry of employment and Labor Best Bank in preventing Voice phishing damages, 2017 First half Financial Supervisory Service 11th national Sustainable Management Award Ministry of Strategy and Finance Consumer’s Choice Star Brand grand prize in integrated Financial Membership Minister’s prize in Service, the 4th korea Big data Awards Maekyung Media group Maeil Business newspaper, Ministry of Science and iCt governance Award, Best Company in governance (Board of directors) the Maeil Business newspaper, daishin economic research institute excellence in Banking Sector, the 4th korea retirement pension Award Mercer korea Commendation by Minister of trade, industry and energy (for promotion of expert) Ministry of trade, industry and energy grand prize, korea’s Best Banker the Seoul economic daily 2017 Business Supporting the employment of Multicultural Families Seoul Metropolitan government Best Bank in Cutting edge Banking, 2017 Asia today Financial grand prize Asia today grand prize, 2017 risk Manager Awards (FSS [Financial Supervisory Service] Chairman’s Award, awarded to one company out of all categories) Money today thebell Chairman’s Award of the korea Commission for Corporate partnership, the 4th CSV Awards the korean Academic Society of Business Administration excellence prize, hk Wow tV global Financial grand prize hk Wow tV 2017 Customer Satisfaction + Awards (hall of Fame in Banking) the korean economic daily Chief information Security Officer(CiSO) of the Year korea Forum of Chief information Officers, the Federation of korean information industries 207207 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner WOORI BANKANNUAL REPORT 2017 208 208208 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner A LeAding BAnk ShAping the Future 51, Sogong-ro(203, Hoehyeon-dong 1-ga), Jung-gu, Seoul, 04632, KoreaTel. +82-2-1599-2288 / +82-2-2002-3000www.wooribank.comCoporate FaCt BookWOORI BANKANNUAL REPORT 2017209209 Woori Overview Message from the CEO Board of Directors Corporate Governance Company Structure Woori Bank Awards 2017 News Highlights Financial Highlights Business Operations Retail Banking Wealth Management Trust & Pension Business Corporate Banking SME Banking Institutional Banking Real Estate Finance Global Business International Trade Business Financial Market Business Investment Banking Digital Banking Risk Management Corporate Social Responsibility Ethical Management Consumer Protection Employee Satisfaction Social Contribution Activities Woori Smile Microcredit Financial Review Management's Discussion and Analysis Independent Auditors' Report Organizational Chart Global Network Coporate Fact Book Woori Bank overview Vision & Core Values 119 Years of History Corporate Governance Financial Highlights Global Networks Global Networks Strategy Digital Strategy A Trust-worthy Partner 209 Directed by Woori Bank investor Relations Dept. IR officer. Kim, So Hee ︱ banker.ksh@wooribank.com ︱ Tel +82-2-2125-2316 ︱ www.wooribank.com Designed by Reddotbranding ︱ Tel +82-2-584-0418 WOORI BANKANNUAL REPORT 201751, Sogong-ro(203, Hoehyeon-dong 1-ga), Jung-gu, Seoul, 04632, Korea Tel. +82-2-1599-2288 / +82-2-2002-3000 www.wooribank.com 

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