Woori Financial Group Inc. Annual Report 2019

Plain-text annual report

Taking the Lead as THE TOP GLOBAL FINANCIAL GROUP W O O R I I F I N A N C A L G R O U P A N N U A L R E P O R T 2 0 1 9 Taking the Lead as THE TOP GLOBAL FINANCIAL GROUP Woori Financial Group Inc. has successfully enrooted the group system, thereby turning into a comprehensive financial group capable of sustainable growth. Based on the newly established foundation of a stable group system and customer trust, Woori Financial Group is making utmost efforts to maximize corporate value by engendering bold changes and innovation. As the WHO declared COVID-19 a pandemic and the global financial market stands on the brink of a crisis, Woori Financial Group is strenuously taking action to prepare for the post- COVID era by preemptively setting up a group-wide crisis management control tower and deploying strategies that audaciously push forward digital transformation. Woori Financial Group will take a step further to faithfully fulfill the social responsibility of finance and catapult itself to become a world-leading financial group that always stands alongside customers as a reliable financial partner. WOORI FINANCIAL GROUP ANNUAL REPORT 2019 Woori Overview 012 014 016 018 022 024 026 028 030 032 034 038 Message from the CEO Board of Directors Corporate Governance 2019 News Highlights Financial Highlights Group Vision & Strategy Synergy Creation Digital Innovation Global Business Risk Management Social Responsibility Special issue: COVID-19 Business Operations 042 072 074 076 077 078 080 081 083 085 087 Woori Bank Woori Card Woori Investment Bank Woori Finance Information System Woori Finance Research Institute Woori Credit Information Woori Fund Service Woori Asset Trust Woori Asset Management Woori Private Equity Asset Management Woori Global Asset Management Financial Review 090 Management’s Discussion and Analysis 120 168 Separate Financial Statements Consolidated Financial Statements 319 Global Network Taking a New Step Forward as a Leading Financial Group Having established a holding company in 2019, Woori Financial Group is now poised to make another leap forward as a comprehensive financial holding company. Standing on the firm ground of the well-established group system, Woori Financial Group will become a financial group that takes the lead in the global financial market by pushing forward aggressive change and innovation under the mission of becoming a “Reliable Financial Group Shaping the Future.” Mission Vision Core Values A Reliable Financial Group Caring About Customers Korea's No. 1 Financial Group, Leading Global Finance Woori Financial Group strives to fulfill social responsibilities as a financial group to help our society grow, and contribute to creating a future where the country, people, and our customers are prosperous and happy. Going beyond the No. 1 financial group with comprehensive services in Korea and representing Asia, Woori Financial Group will take the lead in global financial markets. Customer Happiness Honesty and Trust Pioneering for the future Talent First The First A New Start of Woori In 1899, the Emperor invested 30,000 won from the royal treasury for the foundation of Woori Bank’s predeces- sor, Daehan Cheonil Bank meaning ‘No.1 bank under the sky’. After the government acquired 100% ownership in Woori Financial Group in 2001, the company made strenuous efforts for privatization which finally came to fruition 16 years later. The successful privatization served as a springboard for Woori Financial Group to shed its cocoon and make a new leap forward, fueled by new growth engines. Expansion to Global Markets Based on the largest global network in Korea, Woori Financial Group expanded into foreign financial service markets with a strategic focus on South East Asia market. Woori Financial Group was Re-established on January 11, 2019 V I I S O N I B U S N E S S P O R T F O L I O Taking the Lead as the Top Global Financial Group I I D G T A L I N N O V A T O N I G L O B A L N E T W O R K N O . 1 F I N A N C I A L G R O U P Elevating Woori’s Market Status and Competitive Edge as a Full-service Financial Group Woori Financial Group has solidified its status as a comprehensive financial group through M&As that better completed the holding company structure. Woori Financial Group will endeavor to earn the trust of its customers and will secure competitiveness to provide best- in-class financial services. Woori Financial Group (As of Feb. 28, 2020) 100% 100% 59.83% 100% 100% 100% 100% 51% 73% 100% 100% Woori Bank Woori Card Woori Investment Bank Woori FIS Woori Finance Research Institute Woori Credit Information Woori Fund Service Woori Asset Trust Woori Asset Management Woori Private Equity Asset Management Woori Global Asset Management 0.80% Woori-Hanwha Eureka Private Equity Fund Tutu Finance-WCI Myanmar 100% Korea BTL Infrastructure Fund 99.88% Overseas Subsidiaries Woori America Bank Woori Bank China Limited PT Bank Woori Saudara Indonesia AO Woori Bank (Russia) Banco Woori Bank do Brazil S.A. WB Finance Co., Ltd (Cambodia) Woori Finance Myanmar Woori Wealth Development Bank (Philippines ) Woori Bank Vietnam Limited Woori Bank Europe Gmbh (Germany) Woori Global Markets Asia Limited (Hong Kong) 100% 100% 79.88% 100% 100% 100% 100% 51% 100% 100% 100% WOORI CARD Transferred as Subsidiaries 2019 WOORI INVESTMENT BANK WOORI FUND SERVICES WOORI PRIVATE EQUITY ASSET MANAGEMENT WOORI FINANCE RESEARCH INSTITUTE WOORI CREDIT INFORMATION WOORI BANK WOORI FINANCIAL GROUP WOORI FIS Mergers & Acquisitions 2019 WOORI ASSET TRUST WOORI GLOBAL ASSET MANAGEMENT WOORI ASSET MANAGEMENT I B U S N E S S P O R T F O L I O I I D G T A L I N N O V A T O N I G L O B A L N E T W O R K N O . 1 F I N A N C I A L G R O U P Delivering the Greatest- Possible Customer Value through Digital Innovation Woori Financial Group has declared the new digital vision of “Digital for Better Life,” facing head on the rapidly changing financial trends in this age of the “un-tact.” Furthermore, Woori Financial Group will bolster external cooperation through open innovation strategies and maximize customer value through innovative digital technologies including AI and Big Data. Digital Vision DIGITAL FOR BETTER LIFE Slogan DIGITAL FIRST, CHANGE EVERYTHING Digital Strategy OPEN INNOVATION STRATEGY Open up customer channels to external participants OPEN CUSTOMER OPEN FINANCE I I D G T A L OPEN DATA Explore new services by opening up the financial data maintained by Woori Bank OPEN API Open up Woori Bank’s exclusive products and services to external participants I N N O V A T O N I Ultra- Personalized Services G L O B A L N E T W O R K N O . 1 F I N A N C I A L G R O U P Digital First, Change EverythingBIG DATAAICLOUDBLOCK CHAIN Leading the Global Market Based on a Broader Global Network Woori Financial Group pioneers into the global market through localized sales strategies and differentiated non face-to-face channels. Going forward, Woori Financial Group will reinforce its standing as a world-leading financial group by increasing the share of its overseas revenue to the 40-percent level of total earnings. Vietnam - Five new branches opened - Bancassurance, credit card business launched 01 Glocalization Group Total Networks 476 Overseas Subsidiaries 12 Overseas Branches (including subbranches) 22 Representative Office 5 (As of Mar. 31, 2020) UKChinaHong KongRussiaBahrainU.A.EGermanyIndiaBangladeshMyanmarJapanSingapore Poland Australia Indonesia CambodiaPhilippinesMalaysiaVietnam Vietnam, Cambodia Myanmar, Indonesia - Sales channels secured in regions of promising growth - Qualitative growth of asset portfolio driven by sound assets 02 Level-Up G l o b a l N e t w o r k s S t r a t e g y Cambodia - Merger of Woori Cambodia Finance and WB Finance approved 04 Diversification G L O B A L N E T W O R K N O . 1 F I N A N C I A L G R O U P 03 Digitalization Bangladesh, China Vietnam, Indonesia - QR Pay services launched - Tablet branches expanded - Non face-to-face-only products launched (As of Dec. 31, 2019) Liquidity Ratio Net Profit of Global Business Woori Bank Vietnam 116.1% + 5.6%p KRW224 billion + 15.8% KRW+10billion achieved net profit in just 3 years into incorporation Woori America BankLos AngelesNew YorkBrazil Taking a Step Further to Become the No.1 Financial Group – ‘Woori Together’ Woori Financial Group bolsters core competencies centered on the seven management strategies of 2020 and grows alongside customers by practicing sustainable management in non-financial areas. Woori Financial Group will become the No.1 comprehensive financial group through trust and innovation and will become a reliable financial group that has the unwavering trust of customers. 7 Management Strategies Customer- Centric Business Innovation Risk Management / Internal Controls Innovation Sustainable Growth Engine Reinforcement Business Portfolio Enhancement Digital Innovation Leadership Elevation of Global Business Woori Together Synergy Expansion Business Diversification Digital Innovation M&A Digital Innovation Committee Bolstering the Business Portfolio Bank in Bank (BIB) System Implementing the Main Business Unit System Open API A-D Venture Digital Innovation Lab Global Level Up Woori Together Expanding the Global Network Boosting the Global Digital Competence Creating Synergies with Local Partners Worldwide Regaining Customer Trust through Change and Innovation Environment Society Governance Introducing electric business vehicle and launching electricity- saving campaign to reduce GHG emissions Realizing socially responsible finance through inclusive financial policies Newly establishing the Internal Control Management Committee to reinforce governance N O . 1 F I N A N C I A L G R O U P F u t u r e D i r e c t o n 2020 and Beyond No.1 Financial Group in Korea Benefit from Finance,Warmth from Sharing 012 MESSAGE FROM THE CEO Going Beyond the No.1 Financial Group in Korea We leveled-up our corporate value through successful conversion into a holding company structure after four years of planning. Firstly, allow me to extend my heartfelt gratitude to shareholders and customers for their warm support for Woori Financial Group. The year 2019 was a meaningful year for Woori Financial Group, as we established a holding company and successfully laid the groundwork for the group system. Backed by the strong support of our shareholders and customers, we were able to bring in two asset management companies and one real estate trust company to the Group, which allowed us to quickly become a full-fledged comprehensive financial group. Moreover, despite harsh financial environment both at home and abroad, Woori Financial Group was recognized to have the highest growth potential in the market and to be one of the most competitive financial groups in Korea with the best-ever performance in growth and profitability. WOORI FINANCIAL GROUP ANNUAL REPORT 2019Message from the CEO 013 Strengthening the group's non- banking business and corporate value through M&As. Furthermore, we expanded our global networks to 474 as of the end of 2019 and posted tremendous growth in overseas revenue, further solidifying our position as a global financial group. As such, the unsparing support from our shareholders and customers made 2019 a year of countless proud achievements for Woori Financial Group. In order to boost our credibility among customers based on our stabilized group system in 2020, Woori Financial Group sets its management goal for 2020 as “Becoming the No.1 Financial Group through Customer Trust and Innovation,” thereby maximizing its corporate value and rising up to the level of support from its shareholders. Firstly, we will continue to expand our business portfolio and build upon our firm foundation backed with more robust financial performance and a stable equity ratio, which will pave the way for contin- ued growth as a group. Secondly, in response to the dramatic shift in the financial paradigm, we will forge ahead as a group towards digital transformation and take on challenges in new areas with a mindset that embraces creative agility and innovation, in order to discover new growth engines for the Group. Furthermore, to complete the most important mission of “Becoming the No.1 Financial Group through Customer Trust,” we will level up both our system and our operational competency in risk management and internal controls. We also pledge to continue groundbreaking innovation in all areas, including evaluation, organization and systems, in order to enable the framework for a customer-centric business to truly take hold. Last but not the least, Woori Financial Group will strive to be fully socially responsible in all aspects of financial areas in 2020 by supporting innovative finance, providing microfinance and supporting SMEs. As we move into the second year since the launching of Woori Financial Group, Inc., I ask for your kind encouragement in our journey of greater development and growth. All of us here at Woori Financial Group will continue to make our utmost effort to maximize shareholder value and bring you greater contentment. I wish all our shareholders and customers the best of luck and happiness. Thank you. Son, Tae Seung Chairman & CEO, Woori Financial Group Woori OverviewBusiness OperationsFinancial Review014 BOARD OF DIRECTORS Son, Tae Seung Lee, Won Duk Standing director (Chairman & CEO) Standing director (Deputy President) ‧ (Current) Chairman & CEO, Woori Financial Group ‧ President & CEO, Woori Bank ‧ Head. Global Business Unit, Woori Bank ‧ LLM, Seoul National University ‧ LLB, Sungkyunkwan University ‧ (Current) Deputy President, Strategy Planning Unit, Woori Financial Group ‧ Executive Vice President, Management and Finance Planning Group, Woori Bank ‧ Managing Director, Future Strategy Division, Woori Bank ‧ M.A. in Economics, Seoul National University ‧ B.A. in Agricultural Economics, Seoul National University Ro, Sung Tae Outside director ‧ (Current) Chairman, Samsung Dream Scholarship Foundation ‧ President, Hanwha Life Economic Research Institute ‧ President, Korea Economic Research Institute ‧ M.A. and Ph.D. in Economics, Harvard University, the graduate school of Arts and Sciences ‧ B.A. in Economics, Seoul National University Park, Sang Yong Outside director ‧ (Current) Auditor, Yonsei Foundation ‧ (Current) Professor Emeritus, Yonsei University ‧ Civilian Chair, Public Fund Oversight Committee ‧ Dean, School of Business, Yonsei University ‧ M.A. and Ph.D. in Business Administration, New York University, the graduate school of Arts and sciences ‧ B.A. in Business Administration, Yonsei University WOORI FINANCIAL GROUP ANNUAL REPORT 2019Board of Director 015 Chung, Chan Hyoung Outside director ‧ CEO, POSCO Capital ‧ Vice Chairman, Korea Investment Management ‧ CEO and President, Korea Investment Management ‧ MBA in Finance, Korea University Business School ‧ B.A. in Business Administration, Korea University Dennis Chan Outside director ‧ Vice Chairman, Fubon Bank (China) ‧ CEO, Fubon Bank (China) ‧ Senior Vice President, Strategic Planning, Fubon Financial Holdings ‧ M.A. in Business Administration, Georgetown University, the graduate of Arts and sciences ‧ B.A. in Business Administration, Taipei National University Tian, Zhiping Outside director ‧ (Current) Vice President, Beijing FUPU DAOHE Investment Management Ltd. ‧ Vice President, ICBC Middle East Ltd. & ICBC Londong Ltd. ‧ Vice President, Industrial and Commercial Bank of China, Branch of Sichuan Province ‧ IMBA, University of Hong Kong/ MBA, Southwestern University of Finance and Economics ‧ B.A. in Government Economics Management, Shanxi University of Finance and Economics Chang, Dong Woo Outside director ‧ (Current) CEO, IMM Investment Corp. ‧ Representative Partner, IMM Investment Corp. ‧ ABAS Leader-AKT, Samil Accounting Corp. ‧ Audit Department, Younghwa Accounting Corp. ‧ LLB, Hanyang University Kim, Hong Tae Non-standing director ‧ (Current) Head, Office of Creative Management, KDIC ‧ Deputy General Manager, Department of HR and Administration, KDIC (Korea Deposit Insurance Corporation) ‧ Hana Bank ‧ B.A. in International Economics, Seoul National University Woori OverviewBusiness OperationsFinancial Review016 CORPORATE GOVERNANCE Corporate Governance Policies of Woori Financial Group, Inc In order to protec t the interests of stakeholders, including shareholders and financial consumers and to promote long-term development, Woori Financial Group maintains a stable, efficient and transparent corporate governance structure. A stable corporate governance structure can be established and maintained through the checks and balances of members based on their independence, an efficient corporate governance through expertise and the dedicated operation of the Board of Directors (BOD), and a transparent corporate governance through the disclosure of work handling standards and results. Independence of the BOD Expertise and Diversity To ensure professionalism and the diversity of views, the BOD consists of outside directors from various backgrounds and professional fields. As of the end of March 2020, there is one economic expert, three financial experts, one business administration expert and one accounting expert on the Board. The diversity of outside directors form an eclectic group which includes a university professor, a researcher and a financial company CEO. Woori Financial Group takes into consideration the innate nature of a financial holding company as one that spans the entire financial industry, and it therefore strives to appoint outside directors who have expertise in multiple areas. In fact, its current outside directors have expertise in two or more areas. Moreover, as Woori Financial Group’s global net income accounts for more than 10 percent of the total earnings, it forms its BOD to represent In order for the BOD and its Committees to operate in a stable individuals from diverse national backgrounds so that a more global and sound manner, Woori Financial Group complies with the Act perspective can be reflected into its business management. As of the on Corporate Governance of Financial Companies and relevant end of March 2020, the BOD was comprised of four members from regulations thereof, while incorporating key provisions into internal Korea, one from China and one from Taiwan. In addition, Woori regulations. Woori Financial Group particularly recognizes and Financial Group endeavors to create more gender equity by ensuring endeavors to uphold independence as a critical value that enables female outside directors on the board. It mandates that women make the BOD to responsibly supervise the management. In accordance up at least 10 percent of the outside director candidate pool, and based with Article 35 of the Articles of Association, the Board consists of a on this rule, Woori Financial Group plans to appoint female outside majority of outside directors and pursuant to Article 44, the Chairman directors going forward. of the BOD is appointed from among outside directors. Since its establishment in 2019, Woori Financial Group’s BOD has been chaired Dedicated and Transparent BOD Operation by outside directors. As per its internal regulations on corporate governance, the Officer Candidate Recommendation Committee, Audit Committee, Risk Management Committee, Compensation Committee and Internal Control Management Committee are chaired by outside directors and consist of a majority of outside directors. In particular, outside directors must form two-thirds of a) the Officer Candidate Recommendation Committee that recommends candidates for the positions of President & CEO and outside directors; and b) the Audit Committee that oversees business execution by the management. As of the end of March 2020, these two Committees consist entirely of outside directors. Furthermore, to prevent collusion between outside directors and the management and to ensure that outside directors are replaced sequentially, a term of office policy applies. An outside director may not serve for longer than six years at Woori Financial Group or for nine years of combined time at subsidiaries, etc. A BOD can operate efficiently with the expertise of outside directors who wholeheartedly dedicate themselves to participating on the BOD and Committee meetings. As such, dedication, along with expertise, is the standard by which Woori Financial Group appoints outside directors. In 2019, a total of 14 BOD meetings were convened with a 94-percent of directors attending. The Board discussed a total of 61 agenda items, including the establishment of corporate governance regulations, development of a Woori Financial Group business plan, submission of bidding proposals to asset management companies and the approval of an all-inclusive share swap between Woori Financial Group and Woori Card. To ensure the transparency of work handling standards, procedures and outcomes, Woori Financial Group discloses how the amendment of its internal regulations and other key matters are being handled on its website. Each year on its website and on the website of the Korea Federation of Banks, Woori Financial Group uploads the following: internal regulations including the Articles of Association and BOD Regulations; corporate governance including a run-through of BOD activities; and the Annual Report. This report consists of its internal regulations such as the Articles of Association as well as BOD regulations and activities. All materials disclosed thus far and to be disclosed going forward are and will be available on the following website: http://www.woorifg.com. WOORI FINANCIAL GROUP ANNUAL REPORT 2019Corporate Governance 017 Composition of the BOD and Its Committees As of the end of March 2020, BOD consists of nine directors (six outside company in the market to establish an Internal Control Management directors, one non-standing director and two standing directors), and Committee, which makes suggestions on effective internal control outside directors account for 67 percent of the BOD.Six Committees standards by reviewing the outcomes of the Group’s operational status have been operating under the BOD, including the Audit Committee. inspection. On March 25th 2020, Woori Financial Group became the first financial *Please refer to the attachment for details on BOD composition. Name of Committees Members Key Roles Audit Committee Chung, Chan Hyoung (Chairman) Ro, Sung Tae Chang, Dong Woo Outside director Outside director Outside director • Supervising the work of directors and management • Selecting and requesting the dismissal of independent auditor Risk Management Committee Compensation Committee Park, Sang Yong (Chairman) Dennis Chan Tian, Zhiping Kim, Hong Tae Lee, Won Duk Outside director Outside director Outside director Non-standing director Standing director • Devising basic rules and strategies of risk management • Determining the level of tolerable risk • Approving the risk capital limit and loss limit • Establishing and amending risk management standards Chung, Chan Hyoung (Chairman) Ro, Sung Tae Park, Sang Yong Dennis Chan Tian, Zhiping Chang, Dong Woo Kim, Hong Tae Outside director Outside director Outside director Outside director Outside director Outside director Non-standing director • Evaluating the design and operation of the performance compensation system • Establishing and implementing independent compensation policies • Determining recipients of performance compensation in the management • Evaluating performance of officers and providing compensation • Filing and disclosing Annual Reports, Reporting on the operations of performance compensation • Recommending candidates for the positions of Chairman & CEO, outside directors, and members of the Audit Committee. • Recommending candidates for the position of CEO of subsidiaries Officer Candidate Recommendation Committee Group CEO Candidate Recommendation Committee Chang, Dong Woo (Chairman) Ro, Sung Tae Park, Sang Yong Chung, Chan Hyoung Dennis Chan Tian, Zhiping Outside director Outside director Outside director Outside director Outside director Outside director Son, Tae Seung (Chairman) Ro, Sung Tae Park, Sang Yong Chung, Chan Hyoung Dennis Chan Tian, Zhiping Chang, Dong Woo Standing director Outside director Outside director Outside director Outside director Outside director Outside director Internal Control Management Committee Park, Sang Yong (Chairman) Kim, Hong Tae Son, Tae Seung Outside director Non-standing director Standing director • Matters concerning standards on building and operating the internal control system • Matters concerning outcomes of operational status inspection of the Group’s internal control system Woori OverviewBusiness OperationsFinancial Review018 2019 NEWS HIGHLIGHTS 2 Successful M&As with Non- Banking Companies Enhance the Group’s Business Portfolio Acquired Entities: Tongyang Asset Management (Woori Asset Management), ABL Global Asset Management (Woori Global Asset Management), Kukje Asset Trusts (Woori Asset Trust) Woori Financial Group succeeded in acquiring Tongyang Asset Management and ABL Global Asset Management in August 2019 and Kukje Asset Trusts in December 2019. In its very first year, Woori Financial Group successfully completed a series of non-banking M&As with asset management companies and a real estate trust company. This not only bolstered its foundation for building a comprehensive financial group system, it brought one step closer to becoming the nation’s No. 1 financial group. The asset management companies have already been incorporated into its affiliates, creat ing s y nerg y in mul t iple areas by expanding fund sales through bank channels and providing various specialized products and services to Woori Bank customers. Going forward, it plans to develop these into best- in-class asset management companies by leveraging the brand and networks of Woori Financial Group Meanwhile, Kukje Asset Trusts has been incorporated as a subsidiary in December, 2019. Upon being fully affiliated, Woori Asset Trust will raise the Group’s market presence by performing key roles in real estate development finance. Woori Financial Group will continue to broaden its non-banking business por t folio through M& A s with consumer loan company and savings bank as well as with security firm and insurers, thereby quickly filling in its business portfolio line- up and continuing to reinforce its status and competitiveness as a leading financial group. 1 Woori Financial Group Successfully Launched and Newly Listed on the Korea Exchange In 2019, the status of Woori Financial Group was expanded to encompass 11 subsidiaries as grew immensely as it became known as a Woori Card and Woori Investment Bank became comprehensive financial group and made subsidiaries and the scope of their non-banking its marvelous debut return as the leader of business portfolio grew considerably. Under finance. The establishment of Woori Financial this new structure, the group is enhancing the Group was approved by the Financial Services financial benefits for the customers and the Commission in November 2018, was officially capacity to provide comprehensive financial launched on January 11th 2019, and was listed services through offering customized one- on the Korea Exchange on February 13th 2019. s top comprehensive asset management As the sole remaining commercial bank in innovations with both it s produc t s and Korea without a holding company structure, service. Furthermore, Woori Financial Group Woori Financial Group had previously faced is promoting transformation in the Korean challenges in prov iding comprehensi ve financial market though digital innovation and financial services aligned with non-banking taking the lead in fulfilling social responsibility affiliates. Now that the conversion into a holding for the financially underprivileged, innovative company structure is complete, the foundation enterprises and SMEs. It started off 2019 with has been laid for intensified competitiveness a revival of sorts as a comprehensive financial as a comprehensive financial group. Initially, group, and in 2020, Woori Financial Group is Woori Financial Group was comprised of six expected to level up its status by truly becoming subsidiaries which included Woori Bank, 16 the nations’ premiere comprehensive financial second-level subsidiaries including Woori group that spearheads global finance. Card and one third-level subsidiary (overseas subsidiary of Woori Card). Later, this structure WOORI FINANCIAL GROUP ANNUAL REPORT 20192019 News Highlights 019 3 5 Launch of Woori WON Banking – a New Smart Banking System Woori Card and Woori Investment Bank Incorporated as Group Subsidiaries, Accelerating Completion of Holding Company Structure In September 2019, Woori Financial Group brought in Woori Card and Woori Investment Bank, previously under Woori Bank, to the holding company. The transfer follows the initial plan of incorporating the largest- sized major affiliates (after Woori Bank) into holding company subsidiaries within the first year of establishing Woori Financial Group in order to quickly stabilize the group system and forge ahead with non-banking sector reinforcement without disruption. With this transfer, all domestic affiliates of the Woori Financial Group have been incorporated as holding company subsidiaries. Woori Card was incorporated as a 100 percent full- subsidiary of the holding company through an all-inclusive share swap. Meanwhile, taking into account that Woori Investment Bank is a stock-listed corporation, the entire 59.83 percent of its stake owned by Woori Bank was purchased in cash. As a result, Woori Financial Group boosted its capital adequacy ratio with new shares issued from the all-inclusive share swap. Woori Card and Woori Investment Bank are expected to raise their profitability by generating inter-subsidiary cooperation. Meanwhile, new shares issued through the all- inclusive share swap were initially owned by Woori Bank in the form of mutual ownership, but were later sold to Taiwan’s Fubon Financial Holding in September 2019 and then to domestic and overseas long-term investors in November 2019. By selling all the shares, Woori Bank relinquished itself from any issues regarding share overhang. Card statement without having to go through a separate process. Last but not least, Woori WON Banking offers tailored recommendations for products based on the transaction patterns and age of the particular user. Products sold on Woori WON Banking have also been realigned to strongly feature major products. Woori WON Banking was developed with the scalability of diverse services in mind in an age led by customers through open API. It is truly the most advanced service that heralds in the new age of open finance. The new smart banking system, “Woori WON Banking” is expected to take hold as a service that leads open banking in the finance sector. Woori Bank launched its new smart banking system, “ Woori WON Banking” on August 16 2019. WON combines the ‘W’ from Woori (meaning ‘us’) with the word, ‘ON’ (meaning ‘to turn on’ and ‘online’). Woori WON Banking is an online bank that provides easy-to-use financial services for its customers to access at any time, in any place. With the aim of providing customer-centric, remote financial services, Woori Bank developed Woori WON Banking with three key values in mind: simple screen conf iguration and menu; timely f inancial information; and individually tailored services. The Woori WON Banking platform is intuitive in that it places the frequently used ‘inquiry and transfer’ functions on the home screen and offers users a choice between card-types and list-type displays. Furthermore, the product subscription process has been simplified to include only five steps and the ‘continue subscription’ feature makes continuing a subscription a seamless task. With Woori WON Banking, users can easily pay their utility bills through Naver AI and even check their Woori 4 The “Standard of Cards” Series by Woori Card Surpasses 5 Million Accounts in Subscription and Wins Brand of the Year Korea 2019 Award The “Standard of Cards” series, a leading product from Woori Card, surpassed 5 million subscriptions in just 20 months since its launching, which makes it the fastest growing single product series in the industry. What makes this achievement even more significant is the fact that Woori Card outcompeted a leading credit card company that had had a far larger margin of members. The key driver behind the success of the series was a “customer-centric mindset” thoroughly reflected throughout all stages of product planning, service composition and design. Advantages such as discounts and point-earning features developed through Big Data analysis and consumer research resonated with consumers. The cards also display the work s of the famous Korean traditional artist, Kim Hyun-Jung, which portray Korean aesthetics in a captivating design. Woori Card also engaged in completely new attempts with its efforts in marketing and branding. In April 2019, new products were introduced at a collaborated exhibition with the painter Kim Hyun-Jung. Woori Card also combined art and advertising, demonstrating a differentiated means of communication through a creative hybrid known as “art-vertising”. These efforts won Woori Card the Financial Sector Award at Brand of the Year 2019 Korea, hosted by the Korea Marketing Association. The “Standard of Cards” series stood out above the rest because it was widely recognized as the brand leader of the market through customer-centric and innovative branding activities Woori OverviewBusiness OperationsFinancial Review020 6 8 Woori Bank, a Digital Powerhouse, Wins Digital Management Grand Woori Bank Becomes First Award at Management Grand Awards 2019 Woori Bank received the Digital Management and organizational operation. In August 2019, Grand Award at the Management Grand the customer-centric mobile banking system A w a r d s 2 0 19 – t h e m o s t p r e s t i g i o u s known as “ WON Banking” was renewed, management awards presented by the Korea building a flagship digital marketing platform Management Association Consulting (KMAC). for Woori Financial Group. Moreover, based on The Management Grand Awards have been multifaceted collaboration and partnerships held since 1988 and honor companies that with ICT companies and fintech firms including have gained great respect and credibility Samsung Electronics, Kakao and Bank Salad, while presenting outstanding innovation- Woori Bank continued to churn out joint driven performance in the rapidly changing products and services, while expanding the global business environment. Woori Bank operation of its Fintech Lab in order to bolster implemented a “BiB (bank-in-bank)” system that the discovery of, as well as collaboration and enables the independent pursuit of business in partnership, with startups. Such exceptional digital finance. Independence and autonomy per formance in leading digital business were guaranteed by providing full budgeting management was recognized and honored by autonomy and authorization over manpower receiving the Grand Award. 7 Woori Financial Namsan Tower Opens Up the Era of Woori Financial Town Woori Bank purchased Woori Financial Namsan that it is facing the head office may also provide Tower located in Sogong-ro in August, creating an additional added benefit for Woori Financial “Woori Financial Town” in the Hoehyeon-dong Group from a PR s tandpoint. Moreover, area in Jung-gu, Seoul where the head office is securing more office space can also help located. On November 1st, the head office of affiliates save on costs in office lease expenses. Woori Investment Bank in Seoul officially moved Woori Financial Namsan Tower consists of two in, marking an important turning point towards basement floors and 22 floors aboveground. becoming the No.1 comprehensive financial A massive remodeling project in 2014 secured group in the nation. Woori Financial Group, after the building and the name, “Woori Financial having been converted into a holding company Namsan Tower” was chosen through a public in 2020, enhanced its business por t folio competition held by Group employees. The through successful non-banking M&As and is Digital Financial Group and Woori Bank’s IT currently reviewing M&As with securities firms Group are presently in the process of moving and insurers, which indicates a higher demand in and with the Woori Investment Bank first for office space at the headquarters. Woori to move, Group affiliates are relocating to the Financial Namsan Tower is just across the street Tower one by one. This seems to be bolstering from the head office. With such exceptional the synergetic effect and forming a basis for a accessibility, the location is considered optimal stable collaborative system. to concentrate the currently dispersed affiliates into one place to generate synergy and the fact Financial Company to Win Presidential Commendation Award at the 54th Invention Day On May 27 2019, Woori B ank recei ved commendations in the Group and Individual categories at the 54th Invention Day Ceremony at Coex, hosted by the Korea Intellectual Property Office (KIPO). The Invention Day Ceremony is a national event hosted by KIPO (Commissioner Park Won Joo) and organized by the Korea Invention Promotion Association (President Koo Ja Yeol), where the Order of Industrial Service Merit, Industrial Service Medal and Presidential Commendation Award are presented to honor those who have made significant contributions to the industrial development of Korea. Six hundred participants including Prime Minister Lee Nak Yeon, heads of invention and patent organizations, inventor s and s tudent s all at tended the ceremony. Woori Bank received the highest honor of “Presidential C o m m e n d a t i o n A w a r d ” i n t h e G r o u p Contribution to Invention category, for making investments in R&D for innovation in digital finance; raising international competitiveness through trademark branding in Korea and abroad; and producing quality intellectual property with its in-house experts. The award raised awareness for intellectual property among employees. Furthermore, by becoming the first financial entity to win this award, Woori bank also proved that intellectual proper t y rights such as patents are not exclusive to manufacturers only. Winning this award is expected to invigorate intellectual property rights in the financial sector and lay a cornerstone for “digital finance,” in fitting in with the fourth industrial revolution. WOORI FINANCIAL GROUP ANNUAL REPORT 20192019 News Highlights 021 10 Woori FIS Succeeds in Building WGSS In-House Woori FIS successfully completed the 15- month project from November 7th 2017 to February 6th 2019 of building the Woori Global Standard System ( WGSS) for the o v er s eas b r an c h e s of Wo o r i B ank (13 networks in 10 nations) and the subsidiaries in Europe and the Philippines. This project was geared towards expanding overseas networks, effectively pursuing local retail businesses and responding to compliance regulations by transitioning the banking systems (account system/information system/ local channels) of overseas branches and the information system of the parent bank from the previous WinFOS system to the new WGSS. In particular, this project was the very first large-scale project by Woori FIS that was developed in-house. The project is all the more meaningful in that Woori FIS took on the entire development process spanning design, analysis, deployment and application, unlike other projects that build new systems for overseas subsidiaries. Based on the capacity it built in operating the overseas branch system, Woori FIS contributed to the overall stable opening and operation of overseas branch systems that were high in quality, level of completion and consistency in post-development operations. Leveraging its success in expanding the new system for overseas branches of Woori Bank, Woori FIS plans to carry out the Group’s global strategy by taking active participation in the planned project to develop new systems for overseas subsidiaries. Furthermore, by utilizing its capacity to operate the best financial IT in Korea, Woori FIS is pushing ahead for the in- house development of the Group’s new IT 9 CSR Fulfilled through Group-Wide Social Contribution Campaign, “Better Together Woori”, Marking the 120th Anniversary of Woori Bank and Inauguration of the Holding Company Celebrating the 120th anniversar y of the of co-grow th bet ween the company and founding of Woori Bank and the launching of local communities. In particular, 14 different the holding company, Woori Financial Group communication channels including interview deployed a Group-wide CSR campaign called, videos, V-log videos and card news items “Better Together Woori” to realize the social were produced about global CSR activities values of finance. Not only domestic branches, and uploaded on the bank’s social channels but 469 global networks in 26 nations, took (Facebook, Instagram, etc.). They received part in this campaign that was carried out positive reviews, recording 250K hits and in two parts: once in the first half of the year 24K likes. In addition, Woori Financial Group ( Jan. to Mar.) and once in the second half engages in a variety of CSR activities throughout (Oct. to Nov.). Domestic branches voluntarily the year, including the “Clean Air” support launched CSR activities tailored to community project for community children’s centers, needs by supporting social welfare centers blood drive campaigns, and Woori Box of Hope and the socially marginalized. Overseas delivery on holidays. Woori Financial Group networks engaged in volunteer activities that also endeavors to support natural disaster best catered to the characteristics of the host recovery by launching a support project for the system. nations including support for Hangul School, recovery from the Gangwon Province forest the Paraplegic team, children with rare and fire, producing disaster relief kits ‘ex-ante’ incurable illness, and returned migrant workers. and inaugurating the Woori Financial Group The campaigns served as a model example Volunteer Corps. Woori OverviewBusiness OperationsFinancial Review022 FINANCIAL HIGHLIGHTS Net Income Attributable to Controlling Interests (Unit: KRW in billions) Interest Income (Unit: KRW in billions) Bank Group 5,894 5,651 5,221 5,019 Group Bank 2019 2018 2017 2016 YoY +4.3 % 1,261 1,512 1,872 2,033 *Consolidated basis *Consolidated basis 2016 2017 2018 2019 NIM & Core Deposit (Unit: KRW in trillions) NIM Core Deposit Bank 1.52% 1.47% 1 7 5 7 1.44% 2 8 1.41% 6 6 2016 2017 2018 2019 Fees and Commission (Unit: KRW in billions) Profitability (ROA & ROE) (Unit: %) ROE ROA Bank Group Bank Group 1,103 1,070 1,070 937 YoY +3.1 % 9.69 7.42 0.48 0.62 6.36 0.41 9.29 0.52 *Consolidated basis *Consolidated basis 2016 2017 2018 2019 2016 2017 2018 2019 WOORI FINANCIAL GROUP ANNUAL REPORT 2019Financial Highlights 023 Cost-to-Income Ratio (Unit: %) Credit Cost Ratio (Unit: %) NPL Ratio (Unit: %) Bank Group Bank Group Bank Group 56.1 49.9 50.8 52.0 0.37 0.34 0.13 0.15 0.99 0.85 0.54 0.45 2016 2017 2018 2019 2016 2017 2018 2019 2016 2017 2018 2019 * Consolidated basis (Excluding ERP Expense) * Consolidated basis *Consolidated basis Loan Portfolio (Unit: %) Large Corp. SME Retail Public & Others Assets (Unit: KRW in trillions) Loans in Won Total Assets (Including AUM) Liabilities (Unit: KRW in trillions) Deposit Total Liabilities YoY 2016 1.7 2017 1.4 2018 1.1 2019 1.0 47.4 32.7 18.2 48.0 34.4 16.2 48.5 34.8 15.6 49.3 36.0 13.7 B a n k G r o u p 2016 2017 2018 2019 +21.8 % 191 343 200 356 211 389 221.7 473.8 2016 2017 2018 2019 B a n k G r o u p *FSS NPL reporting standards *Consolidated basis *Consolidated basis YoY +5.7% 221 290 235 296 249 318 265 336 B a n k G r o u p Dividend Capital Adequacy (Unit: %) BIS Ratio Tier1 Ratio CET1 Ratio Bank Group Bank Group Dividend per Share (KRW) Dividend Yield (%) Dividend Payout Ratio (%) 2016 2017 2018 2019 400 600 650 700 3.0 3.7 4.0 5.8 21.4 26.7 21.5 27 15.3 12.7 10.5 15.4 13.0 11.0 15.7 13.2 11.2 15.4 13.2 11.0 11.9 9.9 8.4 * 2017 : including the interim dividend (KRW 100 per share) 2016 2017 2018 2019 2019 * ~ 2018 (Woori Bank) : IRB Method 2019~ (Woori Financial Group) : Standardized Method (Temporarily applied after FHC conversion / Awaiting approval for IRB approach) Woori OverviewBusiness OperationsFinancial Review 024 GROUP VISION & STRATEGY The controlling company, Woori Financial Group, is a holding Vision and Mission company established in January 2019. Woori Financial Group The mission of Woori Financial Group is to become a ”Reliable Financial oversees business management, which includes imposing busi- Group Caring about Customers.” It aims to become a financial company ness goals upon subsidiaries, approving business plans, deter- that leads the industry by growing and developing alongside its cus- mining matters concerning business performance evaluation tomers, society and members of the Group. To this end, Woori Financial and compensation, deciding on the corporate governance and checking on the status of work and property. Woori Financial Group also carries out subsequent funding, investment and fi- nancing support for subsidiaries. Group has selected the core values of “customer happiness, pioneering for the future, honesty and trust and talent first.” With the highest prior- ity placed on customer happiness, it will pioneer into shaping the future and lead a healthy financial order, fulfilling the role as the finest employ- ees in finance. Management Policy Management Plan and Strategy The management policy of Woori Financial Group is, “Customers First, The Group business goal for 2020 has been selected as, “Becoming Field Management.” Woori Financial Group pledges to become a re- the No.1 Financial Group through Customer Trust and Innovation.” liable companion that stands alongside customers at all times, by ex- To achieve this goal, it selected seven management strategies as fol- panding customer-centric financial services and spreading a field-cen- lows: a) Customer-Centric Business Innovation; b) Risk Management/ tric business culture. The vision of Woori Financial Group is “Korea’s Internal Controls Innovation; c) Sustainable Growth Engine Reinforce- No.1 Financial Group, Leading Global Finance”. It will make unwavering ment; d) Business Portfolio Enhancement; e) Digital Innovation Lead- endeavors under the mid-to-long term goal of leapfrogging into a ership; f) Elevation of Global Business; and g) Woori Together Synergy global leading group and becoming the No.1 comprehensive financial Expansion. group in Korea. Woori Financial Group first-level subsidiary second-level subsidiary 11 14 100% 100% 59.83% 100% 100% 100% 100% 51% 73% 100% 100% Woori Bank Woori Card Woori Investment Bank Woori FIS Woori Finance Research Institute Woori Credit Information Woori Fund Service Woori Asset Trust Woori Asset Management Woori Private Equity Asset Management Woori Global Asset Management Korea BTL Infrastructure Fund Woori America Bank Woori Bank China Limited PT Bank Woori Saudara Indonesia AO Woori Bank (Russia) Banco Woori Bank do Brazil S.A. 99.88% 100% 100% 79.88% 100% 100% WB Finance Co., Ltd (Cambodia) Woori Finance Myanmar Woori Wealth Development Bank (Philippines) Woori Bank Vietnam Limited Woori Bank Europe Gmbh (Germany) Woori Global Markets Asia Limited (Hong Kong) 100% 100% 51% 100% 100% 100% Tutu Finance- WCI Myanmar Woori- Hanwha Eureka Private Equity Fund 100% 0.80% History Nov. 2018 Jan. 2019 Feb. 2019 Aug. 2019 Sep. 2019 Dec. 2019 Acquired the certifi- cate of incorporation of financial holding com- pany from the Financial Services Commission Woori Financial Group is established Woori Financial Group is listed on the Korea Exchange Woori Asset Management Corp. is incorporated as a subsidiary Woori Card Co., Ltd. and Woori Investment Bank Co., Ltd. are incorporated as subsidiaries Woori Global Asset Management Co., Ltd. and Woori Asset Trust Ltd. are incorporated as subsidiaries WOORI FINANCIAL GROUP ANNUAL REPORT 2019Group Vision & Strategy 025 First, “Customer-Centric Business Innovation.” Woori Financial Fourth, “Business Portfolio Enhancement.” Woori Financial Group Group will firmly establish a customer-centric business culture by will expand its business scope in core growth areas that include improving performance evaluation to be conducive to grow with consumer finance and capital market. It will also broaden product customers and stronger consumer protection. In addition, it will im- groups and operational competencies in the asset management plement customer-oriented marketing by boosting customization to business in order to make new subsidiaries more competitive. In maximize customer value and involving a group of outside advisors addition, it will utilize the real estate trust business to build a Group- when developing new products. Furthermore, to establish a culture wide system of collaboration in real estate finance. of consumer protection, it will develop a pool of relevant experts and innovate its organizational culture, thereby solidifying the foundation for financial consumer protection. Fifth, “Digital Innovation Leadership.” Woori Financial Group will advance digital competitiveness by developing platforms in each busi- ness area such as non face-to-face channels and real estate finance, Second, “Risk Management/Internal Controls Innovation.” Woori bolstering data utilization competencies and nurturing digital talents. Financial Group expands the scope of risk management in every di- rection by bolstering a system of cross-checking risks when pursuing new business and reinforcing risk management of customer assets. Furthermore, it will revamp its internal control system by innovating relevant processes and systems. Third, “Sustainable Growth Engine Reinforcement.” In order to gain a competitive edge in newly growing businesses including CIB, pension and asset management, it will bolster synergies among Group affiliates and enhance the competitiveness of its products and services. Woori Financial Group also optimizes its resources for busi- ness management by considering profitability when pursuing busi- ness and intensifying management of costs, with an aim to intensify efficiency-driven business management. Sixth, “Elevation of Global Business.” Woori Financial Group will widen global business scope by expanding channels mainly in re- gions with promising growth prospective and pushing forward joint entry into overseas markets by Group affiliates. Lastly, “Woori Together Synergy Expansion.” In order to expand synergetic collaboration among different business areas, Woori Financial Group will systematically discover tasks and develop them into businesses in each core area. It will also broaden the achieve- ments of synergetic businesses currently underway and continue to discover new businesses. In 2020, the entire Woori Financial Group will come together in making utmost efforts to achieve the business goal of becoming the No. 1 com- prehensive financial group through customer trust and innovation. Shareholders Meeting Board of Directors CEO Officer Candidate Recommendation Committee Audit Committee Risk Management Committee Compensation Committee Group CEO Candidate Recommendation Committee Internal Control Management Committee Secretary Department Strategy Planning Unit Finance Planning Unit Consumer Protection/ Management Support Unit Business Management Unit Public Relations & Brand Unit IT & Digital Unit Risk Management Unit Compliance Department Strategy Planning Division Finance Planning Division New Business Division Wealth Management Business Division Global Business Division Corporate & Investment Banking Business Division D e p a r t m e n t S t r a t e g y & P l a n n i n g F u t u r e F i n a n c e D e p a r t m e n t D e p a r t m e n t B u s i n e s s G r o w t h S u p p o r t D e p a r t m e n t F i n a n c e & M a n a g e m e n t A c c o u n t i n g D e p a r t m e n t I R D e p a r t m e n t D e p a r t m e n t B u s i n e s s P o r t f o l i o D e p a r t m e n t M a n a g e m e n t S u p p o r t D e p a r t m e n t C o n s u m e r P r o t e c t i o n D e p a r t m e n t B u s i n e s s M a n a g e m e n t P l a n n i n g D e p a r t m e n t W e a l t h M a n a g e m e n t D e p a r t m e n t P e n s i o n P l a n n i n g l G o b a l B u s i n e s s P l a n n i n g D e p a r t m e n t l B u s i n e s s P a n n n g D e p a r t i m e n t C o r p o r a t e & I n v e s t m e n t B a n k i n g D e p a r t m e n t B r a n d S t r a t e g y C o r p o r a t e S o c i a l R e s p o n s i b i l i t y D e p a r t m e n t I C T P l a n n i n g D e p a r t m e n t D e p a r t m e n t I n f o r m a t i o n S e c u r i t y D e p a r t m e n t D g i i t a l I n n o v a t i o n D e p a r t m e n t R i s k M a n a g e m e n t M o d e l V a l i d a t i o n T e a m A u d i t D e p a r t m e n t C o m p l i a n c e D e p a r t m e n t D e p a r t m e n t A n t i - M o n e y L a u n d e r i n g Woori OverviewBusiness OperationsFinancial Review 026 SYNERGY CREATION In January 2019, Woori Financial Group was established and In early 2019, Woori Financial Group newly established the Synergy new subsidiaries were subsequently incorporated under its Team under the Strategy Planning Department of the Strategy Planning jurisdiction, which expanded the base for Group synerg y. Division under the Management Planning Main Business Unit. The Syn- Collaboration among subsidiaries and creation of synergetic businesses are flourishing in business units, under the goal of boosting the competencies of the comprehensive financial group. The holding company and all 11 subsidiaries participate in the Synergy Council, which plans for new business and pur- ergy Team is the matrix facilitator that will be involved in goal setting, planning and evaluation under the seven Main Business Unit schemes that was newly created, along with the inauguration of the holding com- pany. The Synergy Team will hold ground and establish strategies as it directs the synergy of all employees within the Group. sues co-marketing to maximize synergy among Group subsid- This organizational restructuring is not only expected to bolster re- iaries and generate revenue, while simultaneously, seeking to save costs. sponsible business management and efficient decision-making to cre- ate synergy among Group affiliates, but also to establish a collaborative system among Group affiliates in preparation for business portfolio expansion. Based on organic cooperation among group affiliates, new business opportunities will be discovered and systematic, comprehen- sive financial services will be provided to maximize its competencies in 2019 Performance serving customers. Woori Financial Group implemented a Main Business Unit scheme at the Group level, that integrates and systematically manages the four major growth engine businesses of WM, global, CIB and digital sectors that previously operated at each Group affiliate level. The WM Main Business Unit concentrates the competencies of the asset management sector, bolstering competitiveness at the Group level and performing the role of a control tower. The Global Main Busi- ness Unit plans to carry out joint entry into overseas markets through the help of Group affiliates and with the wider collaboration among them. The CIB Main Business Unit will firmly establish the existing CIB collaboration system between Woori Bank and Woori Investment Bank as well as oversee the CIB business at the Group level. The Digital Main Business Unit boosts the digital competency of the Group and focuses on raising non-face-to-face channel competitiveness. This Unit will operate the Dino Lab under the Digital Innovation Department which is a program to support fintech, reinvigorating the nurturing of fintech companies from the Group’s point of view. Meanwhile, the Pension Planning Department has been newly estab- lished to provide an impetus to the retirement pension business and preemptively respond to the paradigm shift directed toward a greater yield for customers. The Main Business Unit scheme will be solidified in advance by preparing for the incorporation of securities and insur- ance segments of the Group, which is planned for expansion, into the retirement pension business. Furthermore, in order to bolster internal controls and the risk management systems of Group affiliates and to ensure consistency in policy implementation through anti-money laun- dering (AML) surveillance, the AML Team was established under the Compliance Support Department. Woori Financial Group signs acquisition agreement with Kukje Asset Trusts 2020 Woori Financial Group Business Strategy Meeting WOORI FINANCIAL GROUP ANNUAL REPORT 2019Synergy Creation 027 2020 Plans The holding company started in 2019, and this is when operational systems for Group alliances were created and synergetic competencies among subsidiaries were bolstered. Eleven subsidiaries discovered and promoted a total of 28 allied businesses, for which they engaged in cross-selling and joint sales efforts that led to both financial and non-fi- nancial achievements. In 2020, Woori Financial Group will enter the second stage of the Group synergy roadmap to pursue “Full-Fledged Synergies (Greater Reve- nue).” Synergy tasks will be systematically managed by: the “Group Syn- ergy Council,” which is a meeting of executives; the “Synergy Working Level Council,” a meeting of working level department heads; and unit meetings, a working level meeting convened when deemed necessary. The “Group Synergy Work Corner” and “Competition of Ideas on Group Synergy” will be prepared to raise the level of interest among employ- ees in creating alliances and to discover new businesses. By operating abovementioned Group synergy systems, it will promote the following core projects to make the leap forward in becoming the No.1 financial group in Korea. Second, Woori Financial Group will bolster non-banking competitive- ness by managing the performance and supporting the growth of newly acquired asset management companies. It will discover and pro- mote joint businesses and marketing collaborations between Woori Asset Management/Woori Global Asset Management and existing subsidiaries. In particular, it will enhance the alliances created by new subsidiaries through efforts such as sales collaboration with Woori Bank. Third, Woori Financial Group will raise the level of interest and partic- ipation of its employees in creating synergy, in order to construct a continuum of joint effort among the three main high-level units and sales organizations. Business tasks derived from the three main units will be segmented into each sales organization to be brought front and center, while promising tasks discovered at sales organizations that re- quire Group endeavors will be transferred up to the three main units to be rolled out Group-wide. This, in turn, will foster the creation of more continuous synergy. Lastly, upon expanding its organization by incorporating new sub- sidiaries through M&As with securities firms, insurers and savings banks, Woori Financial Group will serve as a pivotal player in bolstering First, the three main high-level units of Woori Financial Group (asset collaboration and widening its market share in both the banking and management, global, CIB) that centers around main subsidiaries – non-banking sectors. Woori Bank, Woori Card and Woori Investment Bank – will be the cen- terpiece in maximizing performance with strategies to create synergy and implementation of its businesses. It will also bring its joint busi- nesses to the next level by facilitating communications among subsid- iaries and coordinating their interests. 4 GROWTH ENGINE BUSINESS Woori Financial Group Inc. established the Main Business Unit structure in order to systematically manage the four growth engine businesses at the Group level. It will uncover new business opportunities and provide systematic and comprehensive financial services. Woori Financial Group WM Global CIB Digital Woori OverviewBusiness OperationsFinancial Review028 DIGITAL INNOVATION In the modern world, digital competencies have become a Part 1. Customer-Centric Digital Channel Renewal compelling core element of competitiveness amid the wider In August 2019, Woori Bank revamped its previous “One Touch Retail adoption of government policies in support of financial inno- App” for mobile banking to “Woori WON Banking”, the new name vation and rapid changes in the financing environment driven indicating that Woori Bank (W) will turn on (ON) a new age of mobile by fintech/big tech companies. Woori Financial Group is pre- finance. Woori Financial Group plans to integrate and manage all mo- bile brands throughout the Group under the brand identity of “WON.” Woori WON Banking was developed after four months of customer interviews and ex-ante usability tests, in order to clearly grasp consum- er market demands. The results thereof were applied to the UX/UI of WON Banking, in line with its three core concepts of “Clear”, “Fit” and “Lead” to provide customers with: a simple screen layout and an easy- to-use menu (Clear); customized notifications and simple transaction linkages (Fit); and new financial products recommended by the Bank for each customer (Lead). In step with increasing roles played by non- face-to-face financial channels, Woori Bank will equip WON Banking with greater user convenience and personalization, so as to develop it as a leading marketing platform of Woori Financial Group. emptively responding to changes in the financial environment by developing innovative products and services through open- ness and collaboration with outside parties and by bolstering revenue-making competencies through solidified competitive- ness in the main business of finance. To this end, it will adopt agile processes based on swift decision-making and feedback and expand the budget, workforce and organization necessary to pursue digital business, thereby solidifying status as a lead- ing digital financial company. 2019 Performance In 2019, Woori Financial Group continued to promote the rebalancing of its portfolio efforts that it had worked on in 2018, in order to respond to the economic slowdown. With the global slowdown hampering eco- nomic recovery in Korea, Woori Financial Group reorganized its assets with a focus on promising sectors. Second, It worked on institutional improvements to upgrade its risk management system. With stronger regulations in place, it built new systems on par with global standards, while upgrading existing systems to bolster risk management. In addition, it enhanced contingency plan and nation-by-nation risk man- agement scheme, reinforcing the Bank’s crisis management capacity. Third, it overhauled credit evaluation models to fine-tune credit risk management and acquired approval from the Financial Supervisory Service (FSS). The credit evaluation models are kept current and re- newed regularly every five years. Digital Innovation Committee • Chairman: (CEO) Woori Financial Group • Members: (CEO) Woori Bank / Woori Card / Woori Investment Bank / Woori FIS (Head) Strategy Planning Division / IT&Digital Unit, Woori Financial Group Digital Innovation Unit • Unit Head: (CEO) Woori Bank Innovation Team (Blue Team) Working Group (Organizer) - Head of IT&Digital Unit Woori Financial Group Woori Bank Woori Card Woori Investment Bank Woori FIS IT&Digital Unit Digital Banking Business Group Digital Group Management Support Division IT&Digital Unit Strategy Planning Division Management & Finance Planning Group Management Planning Division Management Planning Division WOORI FINANCIAL GROUP ANNUAL REPORT 2019Digital Innovation 029 Part 2. Reinforcing Digital Marketing and Expanding External Collaboration In 2019, Woori Bank promoted differentiated digital marketing and multi-dimensional collaborations with outside parties, under the goal of bolstering its development and marketing competencies based on open finance. Woori Bank is reinforcing digital direct marketing by working with outside platform companies and payment service provid- ers at home and abroad that have a wide customer base, in response to declining branch traffic. It is also seeking to co-develop affiliated products and services with tech giants and major fintech companies, including Samsung Pay and Bank Salad. 2020 Plans In 2020, customer-centric changes in the financial environment are ex- pected to intensify as government policies for financial innovation such as revitalization of open banking and the amendment of the three parts of data-related legislations become more tangible. In addition, sub- sequent innovative services launched by fintech companies and tech giants are expected to fuel ever-fiercer competition among financial groups as well as between financial groups and fintech/big tech com- panies. Woori Bank plans to implement major digital projects under the goals of: a) reinforcing digitally-driven competitiveness in the main line of business finance, by boosting total revenue through non-face-to- In addition, Woori Bank promoted the development/advancement of face deposits and loans and by expanding non-interest income; and b) open banking services in response to the introduction of open bank- scaling out digitalization throughout all sectors of finance. In particular, ing services by the Korea Financial Telecommunications & Clearings Woori Bank will expand its digital business coverage by taking such ac- Institute in December 2019. Preparing for a full opening of its face-to- tion as promoting the digitalization in the inherent areas of finance that face channels, it also bolstered marketing to revitalize open banking by fintech/large tech companies cannot easily replicate, such as corporate developing specialized products and services. finance and asset management. Furthermore, Woori Bank opened Dinno Lab in April 2019 – a test bed center that provides fintech companies with a development environ- ment and tech coaching services free-of-charge and intensive support for technological development. In June, Woori Bank built an open API platform, thereby creating a collaborative environment to work with outside fintech companies and laying the foundation to develop digital business models with promising companies. Part 3. Supporting Business with New Digital Technologies and Reinforcing Customer Experience In June 2019, Woori Bank introduced RPA (Robotic Process Automation), seeking to improve administrative work within the Bank and boost productivity by revamping the way it works while reducing human error and supporting business activities. A total of 32 RPA tasks were selected in 2019 and are currently under development. In 2020, Woori Bank plans to add more automation tasks, while pressing ahead with quality enhancement by internalizing sophisticated technologies. In addition, Woori Bank adopted an e-document system throughout its branches, which remarkably cut down customer wait times and expe- dited the work handled by employees. Woori Bank also pursued further digital business innovations such as refined marketing endeavors that use models to recommend customized products and innovations that revitalize customer transactions, that were developed from boosted competencies in Big Data analysis. In addition, it will boost digital marketing by raising non-face-to-face accessibility to financial products for customers, developing loan and deposit products exclusively available on non-face-to-face channels and revitalizing F/X and fund sales. Woori Bank will also upgrade mobile banking app services and advance its UX/UI 24/7. Furthermore, Woori Bank will apply AI technologies to main financing businesses including sales/marketing, risk management, customer services and infrastructure, in order to build a genuine AI-powered bank system. To this end, Woori Bank plans to develop services avail- able to customers, branches and head offices alike, based on AI-driven financial market outlooks. Woori Bank will also introduce Reg Tech to customer protection and internal control, which are its strong points. In addition, it will utilize real-time voice recognition to develop intelligent chat-bot services that provide consulting for customers and adopt a service platform based on AI and Big Data by introducing the first in- house comprehensive cloud among Korean banks. In an environment where financial digitalization has been acutely ac- celerated by COVID-19, Woori Financial Group has driven forward the “digital first” strategy by fully realigning its Group vision and business management slogans, while newly establishing a control center dedi- cated to digital strategies. In fact, the vision, “Digital for Better Life”, was just recently declared as the Group’s digital goal going forward and it has established the “Digital Innovation Committee”, led together by Chairman Son, Tae Seung and Woori Bank CEO Kwon, Kwang Seok, to oversee operations. Woori OverviewBusiness OperationsFinancial Review030 GLOBAL BUSINESS In 2019, Woori Bank achieved internally robust growth by ex- Bank realized a net income of USD 192 million, up 9.3 percent panding networks mainly in Southeast Asia – a region of high YoY. Woori Bank also boosted global digital competencies by growth potential and profitability – and by devising local- expanding locally-customized digital financial services and ly-customized business strategies and building differentiated tablet branches in strategic retail branches in regions includ- non-face-to-face channels Woori Bank bolstered local retail ing Bangladesh, China and Vietnam, through collaboration business infrastructure to 451 – the largest among Korean with other industrial sectors such as retail fintech. In step with banks – by scaling out business channels where growth is the global trend of reinforcing compliance, Woori Bank bol- promising: namely, Vietnam, Cambodia, Myanmar, Indonesia, stered internal control system such as AML and its specialized etc. In addition to building a global network, Woori Bank also workforce, building a solid business system for the sustainable continued to pursue the qualitative growth of its asset portfo- growth of global business. lio with a focus on reliably profitable assets. As a result, Woori 2019 in Review Net Profit KRW 224 million (up 15.8% y-o-y) NPL Ratio 0.54% Liquidity Ratio 116.1% (up 5.6% y-o-y) Woori Finance Myanmar Tutu Finance-WCI Myanmar Woori Bank China Limited Main Focus Countries ·Indonesia ·Vietnam ·Philippines ·India ·Bangladesh ·Cambodia ·Myanmar Woori Global Markets Asia Limited (Hong Kong) AO Woori Bank (Russia) Poland London Gurgaon SEOUL Tokyo Bahrain Dubai Dhaka Mumbai Hong Kong Yangon Chennai Kuala Lumpur Singapore Woori Wealth Development Bank (Philippines) Woori America Bank New York Los Angeles Banco Woori Bank do Brazil S.A. Woori Bank Europe Gmbh (Germany) WB Finance Co., Ltd. (Cambodia) PT Bank Woori Saudara Indonesia Sydney Woori Bank Vietnam Limited Group Global Network 476 total networks (As of March 31, 2020) 12 Overseas subsidiaries 14 Overseas branches 8 Overseas subbranches 5 Representative offices WOORI FINANCIAL GROUP ANNUAL REPORT 2019Global Business 031 2019 Performance Expanding the Global Network Woori Bank started to go global by opening its first overseas branch in November 1968 in Tokyo, becoming the first Korean commercial bank to do so. Since then, its interest in international markets has remained active. In 2014, Woori Bank became the 1st Korean bank to acquire a bank listed overseas (in Indonesia), subsequently launching Woori Saudara Bank. In 2016, Woori Bank acquired a local savings bank in Building a Relationship with Global Banks Woori Bank is leading the way in providing financial support for Korean companies with an overseas presence and with local blue chip compa- nies by securing stable credit lines through cooperation with global- ly-renowned banks. Woori Bank is also contributing to the revitalization of export-import transactions among global companies by engaging in various means of trade finance including foreign bills purchase, L/C transactions such as banker’s usance and payment guarantees. the Philippines, and Woori Bank is in the process of expanding synergy Intensifying Compliance and Internal Controls by collaborating with its partner, the Vicsal Group. In June 2018, Woori In line with the stricter compliance requirements of financial authori- Bank acquired WB Finance, a savings bank in Cambodia, expanding ties around the world, Woori Bank upgraded AML/sanctions filtering business coverage throughout Cambodia. It also launched Woori Bank system and realigned its work manual after collaborating with a con- Europe in Germany in November 2018, paving the way for entry into the sulting firm to diagnose current compliance status at its domestic and European market. In 2019, Woori Bank opened five branches in Viet- overseas branches. Woori Bank also boosted competencies in global nam including Ha Nam, Da Nang and Vinh Phuc, accelerating localized compliance by holding weekly ‘Global Compliance Working-Level Com- business. It also continued to seek organic growth in Bangladesh and mittee’ meetings which invited relevant departments from the head Myanmar. Through these efforts, Woori Bank built a global network office to share ideas on improvement suggestions and review support of 451 branches, the largest among Korean banks. In June, it acquired provided by the head office. Woori Bank is also striving to bolster ex- the approval for merging two local subsidiaries in Cambodia – Woori pertise by training compliance personnel with both in-house programs Cambodia Finance and WB Finance – thereby laying a springboard to and those that are outsourced to specialized external institutions. become a local financial leader. These initiatives demonstrate its overall achievement in the qualitative growth of global network. Securing the Drive for Sustainable Growth of the Global Business To secure the drive for the sustainable growth of global business, Woori Bank pursued internally robust growth with a focus on high-yield core assets. To this end, it reinforced business competencies with a two-track strategy based on different economic and financial environments where it has presence: localization in emerging markets and CIB business-driv- en approaches in developed markets. In emerging markets, local sub- sidiaries reinforced market dominance through proactive localization strategies such as introducing special product line-ups for local retail customers. In advanced economies, Woori Bank focused on reinforcing competitiveness in corporate finance such as IB and FX businesses. 2020 Plans In 2020, the Global Business Group plans to carry out balanced and stable growth through customer-centric marketing and business in- novation. Woori Bank will build a growth model based on partnerships with customers through specialized business, targeting core custom- ers at each branch. Woori Bank will also reinforce localized business by developing a variety of customer-tailored products and services. In the Southeast Asian regions of promising growth potential, Woori Bank will seek internally robust quantitative and qualitative growth of global network through organic growth and strategies to secure core retail hubs by integrating or relocating existing branches. In Cambodia, Woori Bank will maximize synergy by completing the merger of its two subsidiaries and fully launching the integrated business. Woori Bank Boosting the Global Digital Business Infrastructure will elevate digital platform by completing the global mobile banking To respond to changes in the global financial environment and to lead the trend, Woori Bank is continuing to bolster competitiveness in non- face-to-face business channels. It revitalized the ODS business by expanding tablet branches in Indonesia. Woori Bank also enhanced customer convenience by adding payment services such as QR Pay via mobile banking in Vietnam and Cambodia. Furthermore, alliances with other industrial sectors such as local fintech thrived, expanding its local retail business based on non-face-to-face channels that offer exclusive products: Woori Bank aligned with Financial OneConnect in China to offer online auto loans; and for Grab drivers in Cambodia, Woori Bank offered exclusive automobile/motorbike purchasing loans. renewal project in H1, currently underway to reinforce global digital competencies. Based on this project, Woori Bank will hasten digital transformation by expanding business in mobile-only credit loans and deposit products, non-face-to-face international money transfer and payment services. Going forward, Woori Bank will respond to global economic uncertainties with systematic risk management and build an internal control system that meets global standards by meticulously managing work processes, thereby becoming a leading bank in Asia. Woori OverviewBusiness OperationsFinancial Review032 RISK MANAGEMENT The US-China trade conflict that began in 2018 has slowed Portfolio Rebalancing global economic growth and has caused a significant impact Woori Bank has rebalanced its portfolio as part of the strategy to min- on the Korean economy whose trade is heavily reliant on the imize impact from the economic downturn since 2018. With Korea’s two nations. As a result, a trend of low growth in the 2 percent exports in decline, corporate financial soundness is expected to only range per annum continues in Korea. In addition, sluggish do- get worse. As such, Woori Bank applied varied exposure thresholds mestic demand has put sole proprietors in peril and has pushed up loans. Outstanding household loans set a new record each year. If this situation continues, uncollectable debt will surge, which will undermine the asset soundness of banks, pushing up bad debt expenses and bringing down capital adequacy ratios. Woori Financial Group is at the crossroads of a pivotal moment when risk management takes on more importance than ever before. Woori Bank is aware that risk management must take by predicting growth rates in accordance with the industrial outlook, in order to induce its assets to grow in promising sectors. For assets in sectors that are growing too quickly such as in real estate leasing, Woori Bank took restrictive measures to pace that growth. As a result, asset soundness improved to an NPL ratio of 0.4 percent by the end of 2019. Improving the Risk Management System and Institutions Supervisory authorities at home and abroad implement a wide range priority and is bolstering its system in a continuous endeavor of regulations in regard to risk management, affecting a number of sys- to become a steadfast and sustainable financial enterprise, a tems. Whenever regulations are revised, systems need to be upgraded bulwark against external shock. accordingly. In 2019, Woori Bank enhanced its ALM system in line with 2019 Performance IRRBB (interest rate risk in the banking book) and built a derivatives evaluation and verification process in step with stronger regulations on derivatives. Woori Bank also developed a CSA (credit support annex) In 2019, Woori Financial Group continued to promote the rebalancing collateral management system. of its portfolio efforts that it had worked on in 2018, in order to respond In addition, Woori Bank bolstered risk management by developing and to the economic slowdown. With the global slowdown hampering eco- implementing risk management systems or building upon the existing nomic recovery in Korea, it reorganized assets with a focus on promis- ones including the IB yield analysis system, the corporate early-warn- ing sectors. ing system and the BIS ratio calculation system. Second, Woori Financial Group worked on institutional improvements Meanwhile, Big Eye, the first Big Data-based corporate client analysis to upgrade risk management system. With stronger regulations in system developed by a bank in Korea, is utilizing a wider range of data place, Woori Financial Group built new systems on par with global stan- and is expanding its coverage in doing so. Woori Bank is also develop- dards, while upgrading existing systems to bolster risk management. ing a corporate bad debt detection system that will issue warning sig- In addition, Woori Financial Group enhanced contingency plan and na- nals after analyzing the bad debt patterns of companies. tion-by-nation risk management scheme, reinforcing the Bank’s crisis management capacity. Third, Woori Financial Group overhauled credit evaluation models to fine-tune credit risk management and acquired approval from the Fi- NPL Ratio (Group) nancial Supervisory Service (FSS). The credit evaluation models are kept current and renewed regularly every five years. 1.48% 0.99% 0.85% -0.09%p 0.54% 0.45% 2015 2016 2017 2018 2019 WOORI FINANCIAL GROUP ANNUAL REPORT 2019Risk Management 033 On the institutional front, Woori Bank overhauled contingency plan to 2020 Plans prevent any crisis in the financial market from permeating the Bank. Woori Bank resets monitoring indicators and triggers to better per- Woori Bank’s two major projects of 2020. ceive signs of crises, while inspecting and complementing action plan First project is regarding emerging risk management. by level of risk, enabling to respond effectively. In addition, Woori Bank aligned risk levels with those applied to the contingency plan of the holding company, ensuring consistency with the crisis management systems of the holding company and the Bank. Emerging risk refers to an upsurge in a risk that accompanies the dra- matic growth of an asset. For example, as Woori Bank expanded global businesses in a bid to secure new income sources, its global assets and IB Business Group assets grew significantly. In addition, the increasing Lastly, Woori Bank improved nation-by-nation risk management demand for hedging against fluctuations in interest rates and f/x rates scheme. Previously, Banks had only imposed credit ceilings on a nation- has increased derivative transactions, while the growth of non-face- al basis. However, in consideration of the risk that a national crisis could to-face transactions have accelerated the rise in digital and/or remote potentially have on nearby regions, Woori Bank recently established loans. Such fast-growing assets entail fast-growing risks that require credit thresholds at the regional level. intensive management. Enhancing the Credit Evaluation Model Woori Bank operates two credit evaluation models: one for corporate borrowers and another for retail borrowers. The credit evaluation mod- els calculate the expected default rate of the borrower and evaluate their credit ratings. In 2019, Woori Bank enhanced both the retail and corporate models by incorporating the latest data and obtained the FSS approval. In order to reinforce the management of emerging risks, Woori Bank will widen its scope of monitored assets at overseas branches and in the IB Business Group. Woori Bank will conduct inspections on a regular basis and report findings to the management. Thresholds on transactions in derivatives will be managed more intensively and man- agement system of derivatives transaction counterparties will be en- hanced. For non-face-to-face loans, Woori Bank will analyze the inher- ent risks of borrowers and flexibly operate lending approval strategies. The revamped corporate credit evaluation model reflected the charac- teristics of SOHO loans that have recently been growing in Woori Bank’s Next, bolstering credit risk management. portfolio with a lower default rate compared to corporate clients. The With the slowing global economy dampening exports, corporate per- new model also refined credit evaluation by adding sharply defined formance is projected to decline. Global credit rating companies are financial indicators. The retail credit evaluation model enhanced pre- presenting negative outlooks for Korean companies and with no sign cision by segmenting its system of pools, or groups that display similar of an economic recovery, Korean companies may be downgraded en risk characteristics. Woori Bank also newly developed a model dedi- masse. Furthermore, household loans also need to be managed due to cated to micro-financing and another to non-face-to-face channels, in the high delinquency rate of borrowers with mid-to-low credit ratings. response to the growing loans extended to borrowers with mid-to-low credit ratings. Intensive management of the high-risk group is needed to prepare against surging risks involving corporate and household loans. As These improvements to credit evaluation models enabled Woori Bank such, Woori Bank will check on borrowers that are on the performing/ to measure the credit risk of borrowers more meticulously. By imposing non-performing borderline. Woori Bank will also review the criteria for adequate credit ratings and preventing bad debt, the new models are handling loan products. and also devise a separate set of management expected to contribute to greater asset soundness. measures for high-risk borrowers and high delinquency rate products, in order to minimize their impact on soundness. Furthermore, Woori Bank will act preemptively to prevent bad debt by conducting pinpoint loan reviews on sectors or regions showing a growth in risk. Woori OverviewBusiness OperationsFinancial Review034 SOCIAL RESPONSIBILITY Woori Financial Group’s Social Contribution Inclusive Finance Strategies & Characteristics Support for microfinance Woori Financial Group engages local communities in social contribu- Woori Bank provides wide-ranging support for microfinance, in order tion activities to realize the value of the vision, “Benefit from Finance, to continue realizing the social value of finance by lifting the burden of Warmth from Sharing.” Love for People, Pursuit of Happiness and Ful- financial costs for ordinary citizens and to grow alongside them. With fillment of Hope are the three core values it aims to achieve under the its notable microcredit product, “New Hope Spore Loan,” Woori Bank slogan, “Better Together.” Specific activities include fostering the future handled KRW 615.6 billion at the end of 2019. Also, non-face-to-face generation, supporting the underprivileged, spreading the spirit of channels have been opened since April 2019, providing active support philanthropy and protecting the environment. Woori Financial Group to the financially marginalized who find it difficult to visit branches. In will continue to carry out social contribution actives that society truly addition, in September 2019, Woori Bank launched “Sunshine Loan 17” needs, thereby generating social value. as part of the government policies to support microfinancing. “Sun- Vision Benefit from Finance, Warmth from Sharing shine Loan 17” is extended to borrowers who earn an income but are held back by their low credit rating from accessing first-tier financial services. Previously, these borrowers could only resort to going to second-tier financial institutions or loan sharks, but “Sunshine Loan 17” allows them entry into first-tier financial services. As of the end of 2019, KRW 24.1 billion of “Sunshine Loan 17” was extended to around 3,060 financially vulnerable borrowers. Meanwhile, Woori Bank selected Core Value Humanity Happiness Hopefulness branches that demonstrate a high demand for microcredit as “Woori Characteristics Hope Finance Plaza” and presented asset management and debt re- structuring services to ordinary citizens. Furthermore, Woori Bank contributed KRW 1.257 billion in 2019 to the Korea Inclusive Finance Agency, in support of the microfinancing prod- CSR strategies aligned with SDGs, aimed to manage business sustainably and create social value CSR strategies with five key words to be “Better Together” uct, “Sunshine Loans for University Students and Young People.” This contribution is used to provide guarantee when refinancing the loans 1 Inclusive finance Facilitating continuous, inclusive and sustainable economic growth, creating jobs 2 Fostering the future generation Guaranteeing inclusive, equitable and decent education, promoting lifelong learning opportunities 3 Supporting the underprivileged Reducing inequality between and within nations, contributing to social integration 4 Spreading the mecenat spirit of philanthropy Spreading cultural value by sponsoring Korean arts, culture and sports 5 Protecting the environment: Responding to climate change, protecting and restoring a sustainable ecosystem extended to youths and university students to lower interest rates. Support for SMEs and SOHOs Woori Bank became the first financial institution to initiate consulting ser- vices for SMEs (SOHOs) in 2001. Today, experts including certified accoun- tants and tax accountants at the Bank provide SMEs and SOHOs custom- ized consulting services across-the-board, from business management and finance to tax issues. In 2019, with an aim to intensify support for start- ups by small merchants, Woori Bank established Woori Support Centers for Small Merchants in Seoul/Gyeonggi (Jongro, Myeong-dong, Eunpyeo- ng, Pangyo) and provincial areas (Busan), where consulting programs are run for promising start-ups. Woori New Hope Spore Loan (Unit : KRW in trillions) 2017 2018 2019 *Accumulated 2.11 2.63 3.33 WOORI FINANCIAL GROUP ANNUAL REPORT 2019Social Responsibility 035 Fostering the Future Generation Supporting the Underprivileged Woori FIS Project to Foster Future IT Talents Social Contribution Campaigns of Woori Financial Group Woori FIS provides easy and fun programming language education for Woori Financial Group conducted a Group-wide CSR campaign in Feb- marginalized children and youth. In addition, Woori FIS selects 70 un- ruary 2019 with domestic and global subsidiaries and branches in 26 derprivileged students from specialized (vocational) high schools and nations, under the topic, “Good Together!”. provides them with scholarships. In-house IT experts also volunteer for mentoring programs, offering opportunities to students to develop their career and cultivate expertise. 1 Company 1 School Financial Education Since 2015, Woori Bank has been taking part in the “1 Company 1 School” Financial Education campaign as one of the initiatives of the “Top 20 Financial Custom Reform Project” by the Financial Superviso- A total of 22 overseas networks in nations such as the US, China, Cam- bodia, Brazil and India mobilized 317 employees to CSR activities tai- lored to local needs. These needs included initiatives such as the sup- port for the disabled and the marginalized, environmental clean-ups and the improvement of educational facilities. In Korea, 721 employees from 64 branches altruistically helped their neighbors in need and do- nated KRW 115.4 million to social welfare organizations. ry Service, striving to enhance public understanding and raise aware- In October 2019, second-half of CSR campaign was carried out with ness regarding sound financial practices. All nationwide branches of 1,144 employees from 97 branches at home and abroad, providing Woori Bank have agreements with elementary, middle or high schools moral support, hosting cultural sharing events and donating daily ne- and are providing financial education in ways suitable to each region cessities for underprivileged elderly citizens, persons with disabilities and school, including through outreach education, field trips to bank and children at social welfare facilities and community children’s cen- branches and mobile branch education. In 2019, the Bank concluded ters. Furthermore, Woori Financial Group donated KRW 147.874 million agreements with 489 schools and provided 112 sessions of financial ed- to social welfare facilities in vulnerable communities, directly contribut- ucation to a total of 7,464 students. ing to the reduction of inequality among local communities by support- ing daily life, improving welfare and sharing cultural benefits. Woori Financial Group will continue its support projects in 2020, developing alongside communities through proactive CSR activities and sharing with neighbors. Woori FIS Aid for children with cancer and their rehabilitation treatment Woori Bank Support to invite children from rural areas to Seoul Woori Financial Group produced and distributed Woori Hope Boxes (daily necessities) for the underprivileged Woori OverviewBusiness OperationsFinancial Review036 Spreading the Mecenat Activity Protecting the Environment Healing Concert for Youths Woori Bank has been running the “Healing Concert for Youths” project Environmental protection campaign: “Woori Protects the Earth” since 2018, sending an orchestra to perform classical music at schools In order to entrench a culture of eco-friendliness within the Bank and for children who have little opportunity to come across such music. facilitate eco-friendly business management, Woori Bank conducted The Healing Concerts are a part of its culture and arts project to raise a bank-wide environmental protection campaign in July and August awareness of disabilities and inequality among future generation by 2019 entitled, “Woori Protects the Earth.” During the campaign period, presenting collaborative works of disabled and non-disabled perform- 12,893 employees of Woori Bank joined the commitment to green ers. More than 7,000 students in 12 schools attended its concerts in action and refrained from using disposable paper cups, consequently 2019, and from it, became more aware of disabilities and enhanced using 116,000 fewer paper cups than the year before. Employees also their musical appreciation. Woori, Warm Voices saved energy by shutting off the power of their office equipment before going home. In addition, employees collected 342 reusable shopping bags and donated them to traditional markets in a bid to reduce the For visually impaired children placed in the blind spots of culture, Woori use of disposable plastic bags. Also, an AI-driven recyclable resource Bank implemented the “Woori, Warm Voices” campaign. The Bank recovery robot was installed in the head office building of the Bank, produced 340 high-quality audiobook CDs with the participation of spreading the culture of recycling. Through all these efforts, Woori professional voice actors and donated them to schools for the blind and Bank led the way in protecting the environment by engaging in various e-libraries, along with 120 CD/MP3 players that can play the audiobooks, eco-friendly activities as part of daily life. thereby promoting cultural life and learning opportunities for visually impaired children. Woori Bank will continue to undertake projects to “Woori Finance Forest of Life” Project provide cultural and learning support for visually impaired children, in Woori Bank engaged in forestation endeavors to bring back the school order to raise the level of social interest in persons with visual disabilities. forest of Inheung Elementary School in Goseong – one of the areas that fell victim to the wildfire that swept the Gangwon Province. The Bank donated KRW 200 million to the school and carried out a forestation project called, “Woori Finance Forest of Life,” in order to revitalize the natural environment of the community. During the forestation peri- od that spanned six months from June 2019, 130 tall trees and 3,360 shrubs were planted in an area of 700m2 to restore the ecosystem dam- aged by the fire. The newly planted species were mainly indigenous or capable of mitigating wildfires. A resting area and forest playground were also created, turning the lively forest into a harmonious place of education for nature and repose for residents. Healing Concert for Youths Woori, Warm Voices Woori Protects the Earth WOORI FINANCIAL GROUP ANNUAL REPORT 2019Social Responsibility 037 Woori Multicultural Scholarship Foundation and Its Main Project Woori Multicultural Scholarship Foundation Furthermore, the Foundation deploys a number of culture and welfare In 2012, Woori Financial Group contributed KRW 20 billion and estab- support projects for the stable settlement and thriving lives of multicul- lished the Woori Multicultural Scholarship Foundation. As the first of its tural families, including projects to enhance study room environments kind in the financial sector, the Woori Multicultural Scholarship Founda- for multicultural children, supportive programs for the cultural life of tion is leading the way in supporting the healthy growth of multicultural multicultural families and outstanding multicultural programs. children and the stable settlement of multicultural families in Korean society. Scholarship Program for Multicultural Children In 2019, Woori Multicultural Scholarship Foundation selected 400 stu- dents for scholarships of KRW 626 million. In addition, the Foundation provides scholarships for multicultural students with special skills in sports, linguistics, etc., so that they may further enhance their talents. This scholarship is available for receiving education and training, ac- quiring qualifications and covering expenses for participating in com- petitions. The Foundation’s scholarship recipients in universities have formed the “Woori Nuri” supporters group, which meets each month. Scholarship students engage in a variety of programs including volunteer activities and team projects that produce videos about songs they wrote to raise awareness of multiculturalism, novels on related topics and compari- son of different food and cultures. Culture and Welfare Support Projects for Multicultural Families Woori Multicultural Scholarship Foundation hosts a joint wedding cer- emony for multicultural couples who are unable to afford a wedding. In 2019, the Foundation sponsored the entire wedding ceremony, includ- ing the wedding reception and honeymoon, for 10 multicultural cou- ples. This is helping multicultural families to firmly establish themselves as active members in Korean society. During the summer vacation, a group consisting of multicultural chil- dren in middle and high schools, as well as scholarship students from universities, embarked on a trip to experience global culture. The group visited Singapore – one of the most multicultural and multiracial na- tions in the world and experienced its history, culture and ecosystem. The group also visited the Singapore branch of Woori Bank and the Na- tional University of Singapore and communicated cross culturally with local students. Supporting the Scholarship for Children from Multicultural Families Supporting the Culture and Welfare of Multicultural Families Supporting Excellent Programs for Multicultural Families Woori OverviewBusiness OperationsFinancial Review038 S P E C I A L I S S U E Woori Financial Group is doing its best to respond to COVID -19 While COVID-19 has swept the world with devastation and has offi- cially been declared a global pandemic, Korea’s response to the virus has been hailed as an exemplary model throughout the world. As COVID-19 threw the world into a “mobility crisis,” Korea’s efforts to prevent the infection have widely been praised for its success in quickly and methodically calling to arms the power, intellect and resources of an open democracy. Even amid the peak of the outbreak, Korea’s measures never called for the closing of borders, let alone restricting domestic mobility. Such openness and well-devised pre- vention measures have been applauded for their pan-governmental approach, legislative and administrative systems and flexibility in pol- icy flexibility. Woori Financial Group Maintains Solid Fundamentals with Swift Response to COVID-19 After a sober analysis of the economic turmoil and impact that COVID-19 may bring, Woori Financial Group established a Commit- tee for Emergency Measures for Business Management to serve as the control tower of the Group in managing this crisis. The Commit- tee devises measures to respond to the crisis Group-wide, boost cus- tomer support and add momentum to national efforts to overcome the crisis. Furthermore, with volatility in the global financial market growing dramatically more volatile, the Committee quickly inspected Woori Financial Group is making all-out efforts of its own to help con- domestic and overseas fund assets and initiated monitoring efforts tain the spread of COVID-19. Woori Financial Group is offering not only to activate the FX contingency plan if needed. In the post-COVID-19 financial support to SMEs and small merchants, but also various activi- world, the Committee plans to review a host of scenarios to prepare ties to share with local communities. To this end, Woori Financial Group for even the most extreme crisis situations, adjust and manage busi- strives to minimize the economic toll of the virus on customers and to ness goals, actively cooperate with financial authorities and make fulfill social responsibilities as a financial group. policy suggestions and seek various measures to support customers. Relief kits for the vulnerable The Chairman presides over an emergency meeting with subsidiary CEOs Lunch boxes for medical staff Financial difficulties counseling Global Goods Support (Indonesia - Protective clothing and disinfectants) WOORI FINANCIAL GROUP ANNUAL REPORT 20191Special Issue 039 Anseong Training Center was offered as a COVID-19 daily treatment center Click! Woori Together Cloud Funding for the underprivileged in the face of COVID-19 Woori Financial Group delivers hand- made meal boxes to Daegu healthcare providers swamped by COVID-19 Fulfilling Social Responsibility as a Financial Group and Implementing Support Projects Woori Financial Group has launched wide-ranging support projects since the early stages of the pandemic, standing alongside the people of Korea to overcome the hardship together. In order to surmount this national crisis, Woori Financial Group will not only provide financial support as a financial institution, but fully mobilize all available resources at the Group level to fully carry out social responsibility. Financial Support Non-Financial Support • Distributed Onnuri gift certificates (useable at traditional markets) • Distributed Onnuri gift certificates (useable at traditional markets) to employees as a means to reinvigorate the markets to employees as a means to reinvigorate the markets • Extended consignment guarantee agreement loans under the second government program for small merchants • Provided extension on maturity and grace periods on interest rates for loans secured by a letter of guarantee • Operated counseling windows throughout all branches to assist customers with financial difficulties triggered by COVID-19 • Provided extensions on maturity and grace periods on interest rates for loans to companies impacted by COVID-19 • Extended interest-subsidized loans with ultra-low interest rates for small merchants • Woori Multicultural Scholarship Foundation selected 430 student recipients: For both multicultural minority children in primary and secondary schools and/or for children whose parents’ business suffered profit losses due to COVID-19 • Extended the “Energy Lunch Box” project for healthcare providers in Daegu (until May 14) • Opened up the Anseong Training Center to serve as a daily treatment center • Donated 5,000 hazmat suits to Indonesia • Joined the “Good Landlord Campaign” • Provided grace periods on credit card billing; lowered interest • Provided food items to the underprivileged in the Daegu-Gyeongbuk rates and provided grace periods on the repayment of card loans region • Offered Woori Card emergency livelihood loans • Opened ad hoc market to help farmers impacted by COVID-19 • Lowered or exempted delinquency interests; deleted delinquency • Installed protective acrylic screens at branches to protect records customers from infection • Shortened the deposit cycle for merchant accounts • Utilized the crowd funding platform, “Click! Woori Together” to • Provided grace period on loan repayments and exempted delinquency interests for companies impacted by COVID-19 donate relief funds • Provided masks to a social welfare center in Mapo-gu, Seoul • Provided Personal Protective Equipment (PPE) items to customers • Provided respiratory disease prevention kits to marginalized families • Installed protective acrylic screens at branches to protect custom- ers from infection • Donated Personal Protective Equipment (PPE): 10,000 dental masks, 100 bottles of hand sanitizer Woori OverviewBusiness OperationsFinancial Review23BUSINESS 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 its revenue sources and achieving stable growth. Woori Bank will make sure to repay their trust with bigger profits and enhanced levels of satisfaction. Reliable Financial Services through Balanced Growth (Unit : Thousands Persons) 23,507 Total Customers of Retail Banking 1,032 No. of Foreign Customers 1,660 No. of SOHO & SME Customers Loans in Won (Bank) (Unit : KRW in trillions) +4.3 % 211 220 200 2017 2018 2019 Woori Bank Woori Card Woori Investment Bank 042 072 074 Woori Fund Services Woori Asset Trust Woori Asset Management Woori Finance Information System 076 Woori PE 080 081 083 085 Woori Finance Research Institute Woori Credit Information 077 078 Woori Global Asset Management 087 042 WOORI BANK Digital Innovation Woori Bank has consistently spearheaded bank-wide operations for digital transformation under a strategy that aims to lead digital innovation and conducted digital-focused organizational reshuffling to respond rapidly to the changing market. Moreover, Woori Bank intensified competencies to utilize digital technologies including AI, big data and RPA as core values of a ‘customer-oriented approach’ and ‘enterprise-wide productivity innovation’ and transformed mobile banking services. 7 Consecutive years 'The Asian Banker Transaction Awards' Received the awards for Best Cash Management Bank at the Asian Banker Transaction Awards 2019 451 Footholds In 26 nations, forming the largest global network among Korean commercial banks (As of the end of Dec, 2019) 19 billion Invested in 20 innovative SMEs with the largest growth potential WOORI FINANCIAL GROUP ANNUAL REPORT 2019Retail Banking The Retail Banking Business Group develops marketing plans, provides products and services and establishes channel strategies for its retail customers. The Group constantly strives to efficiently and proactively meet changes in the financial environment and provide value to retail customers. Woori Bank 043 2019 Performance In 2019, Woori Bank provided innovative and differentiated products and services to 23.5 million retail customers. The bank broadened its customer base through partnerships involving contents that are competitive in target demographics. To reach parents with newborns and toddlers, the bank have partnered with the globally popular character, Pinkfong, and to market to the youth, it has secured an e-sports (LCK, League of Legend Championships Korea) sponsorship agreement. To become a primary banking partner for more customers, Woori Bank secured new Prime Power Loan (PPL) agreements for employees of businesses that have prime credit ratings and has also handled the loans related to employee stock ownership plans (ESOP) for companies going pub- lic with initial public offerings (IPO). In the effort to boost customer satisfaction, the bank offers services that enable customers to handle banking transactions without needing to adhere to the constraints of time or place: Tablet Branch provides onsite banking services that enable employees to easily get to the customers; and WiBee Smart Branch allows automated WiBee Smart Kiosks to handle transactions. Senior Plus+, the Very First Financial Brand Targeting Seniors Woori Bank’s Senior Plus+ is the first of its kind in the financial sector and is a specialized brand for seniors that targets the 50-plus population. The term ‘Senior Plus+’, means that it adds (+) satisfac- tion to the four key areas of post-retirement – finance, health, leisure and relationships – to help seniors more fully enjoy their golden years. To live up to its name, the dedicated website for Senior Plus+ provides not only financial services including pre- and post-retirement financial planning but also various other non-financial affiliated services that offer real-life benefits. Moreover, the bank opened senior-only gathering places called ‘Senior Plus Centers’ where it has hosted seminars where it has invited customers, to ensure that the service platform covers both online convenienc- es and personable offline venues. Woori Bank also launched Senior Plus Woori Package – a group of savings and installment savings products that allow customers to freely deposit or withdraw funds, while enjoying preferential interest rates/fees along with various other services. In addition, the bank enhanced public image by holding a public competition on senior plus retirement plans in alliance with a major daily newspaper, Dong-A Ilbo, and raised its brand value by securing partner- ship agreements with relevant organizations to generate jobs for seniors. BI Image Public Competition on Senior Plus Retirement Plan Partnership Services Offered by Senior Plus+ Woori OverviewBusiness OperationsFinancial Review044 Total Customers of Retail Banking (Unit: thousand customers) YoY +448 23,507 2019 23,059 2018 New Product Lineup by Life Stage Brand Strategy, Aiming to Attract New Customers and Make Woori the Primary Banking Partner for Existing Customers Woori Bank offers customized products and services in line with life-cycle brand strategy in order to attract new customers and become the primary banking partner for the existing customers. While offering school banking to support school project marketing that targets youths, the bank revitalized retirement pension business and salary wire transfer services for teachers and school staff. Woori Bank sponsored the first “Pitching Festival” hosted by the Seoul Metropolitan Office of Education aimed at bolstering the capacities of student job seekers from specialized (vocational) high schools by helping them sharpen their self-introduction and content-handling skills. The bank continues to operate a pool of university student publicity ambassadors to enhance the value of its youth brand, Twenty Woori, and opened up a dedicated lounge. Woori Bank launched the First-Salary Woori Bankbook for social beginners, offering preferential fees and enhanced services to retain their business and to become their primary bank. Celebrating the 120th anniversary of the founding of Woori Bank, the bank launched the Woori 120th Customer Companion Deposit product that offers long-term customers a maximum 0.6-percent and 1.1-percent interest rates on Total Loans of Retail Banking savings accounts and installment savings accounts, respectively. (Unit: KRW in trillions) 121.0 115.1 Optimized and Efficient Distribution Channel Networks In step with the shifting financial landscape, Woori Bank quickly entered into markets that called for an increased demand for financial services, including newly developed neighborhoods, central business districts and up-and-coming areas, while merging and relocating branches with de- clining business or overlapping geographical coverage. While 11 new branches opened, 14 were merged, and 16 were relocated; as of the end of 2019, a total of 874 branches were in operation. To boost the competitiveness of its sales organization leveraging a highly effective channel strategy, the bank continues to operate Dedicated Branches for Retail Banking, reinforcing sales compe- tencies in the retail business. Under this distribution system, financial centers can concentrate on YoY +5.1% 2018 2019 corporate business and dedicated branches can focus on retail. In order to raise efficiency in per- Total Deposits of Retail Banking (Unit: KRW in trillions) sonnel management and bolster the competencies of its employees, the bank also run separate windows for corporate banking, total consulting and deposits; a Total Consulting Team as an inte- grated window for corporate and retail banking; and a Deposit Total Consulting Team that brings together retail banking and deposits. 100.5 90.7 2020 Plans YoY +10.8% 2018 2019 The Retail Banking Business Group aims to become a retail leader deeply trusted by its custom- ers. It will continue to provide new products and services that bring true value to the customers through initiatives like the “Woori Customers, Thank You” project. The group will continue to upgrade the life-cycle strategy and pursue partnerships with OTT companies in step with digital trends. Also, high on the list will be to reinforce the competitiveness of core products such as PPL and rebuild the sales process for non-face-to-face credit loans to enlarge prime assets driven by non-face-to-face channels. The group will fulfill its social responsibility by supporting microfinance and providing financial education. Furthermore, it will continue to fulfill the role as the No.1 bank that stands alongside customers by allocating efficient services in the field of microfinance, while, on the channel side, pursuing optimization of branches by type, taking into account the financial scale, characteristics and customer profiles of each region. WOORI FINANCIAL GROUP ANNUAL REPORT 2019Woori Bank 045 Corporate Banking 2019 Performance In 2019, the Corporate Banking Business Group maintained its number one market share in loans as a primary creditor. Woori Bank also hosts the Woori Diamond Club, which is a social gathering of the CEOs from large corporate customers, and serves as an effective channel to anticipate the various financial needs of customers in advance and strengthen customer relations. As corporate social re- sponsibility has become a current focus in today’s society, the bank strives to develop products that will support the mutual growth of companies and to build a culture of cooperation. As of the end of 2019, the Corporate Banking Business Group (including Corporate Finance Centers) is managing a total of KRW 23.9 trillion in assets, with an operating income of KRW 760.5 billion. Strengthening Relationship on a Continual Basis As the corporate customers become major global players, the speed and breath of their financial needs are continually evolving. The Woori Diamond Club that Woori Bank has been operating since 2003 acts as a channel to strengthen customer relationships and understand the specific financial needs of the customers in a timely manner. This enables the bank to provide services that respond to an economic trajectory that is constantly on the move. Supporting ‘Sangsaeng ’(mutual growth) for Large Companies and SMEs Woori Bank offers sangsaeng product packages in which it enters into business agreements with large corporate customers and provide loans with low interest rates to SMEs. In 2008, the bank launched the Sangsaeng Loan for Partners of Large Companies; and as of the end of 2019, it has extended a total of KRW 787.2 billion in loans to 2,549 firms through this product. In 2013, the bank developed the Woori Sangsaeng Partner Loan, a loan package for settlements, and upgraded the relevant system in 2015; and as of the end of 2019, it offered a total of KRW 440.6 billion in loans to 6,157 companies. As the banking partner of the largest pool of conglomerate customers in Korea, Woori Bank contributes to the co-prosperity and growth of large companies and SMEs by reducing financial costs for SMEs with the sansaeng system that operates on the basis of its broad client network. 2020 Plans The Corporate Banking Business Group will establish a stronger basis for corporate finance by establishing a new corporate culture under its business goal of “2020! Creative Revenue Genera- tion! G&CIB Business Expansion!” To this end, the group will first diversify its revenue sources by pioneering new financial products and venturing into new markets, while promoting income-cen- tered business by normalizing interest rates and fees. Second, it will pursue a balanced loan busi- ness by adequately increasing conglomerate assets and managing the risks. Third, the group will further expand “all-in” margin business, based on networks with large companies, by reinvigorat- ing all transactions associated with Woori Bank. Woori Bank is the main creditor bank of 9 large enterprises (2019) (Total number of large enterprises under main creditor bank management: 30) The Corporate Banking Business Group oversees the services for corporate customers including some of the largest Korean conglomerates such as Samsung, LG, and POSCO. As of the end of 2019, Woori Bank has banking partnerships with the largest number of corporate clients among all Korean banks. The two major forces driving the Corporate Banking Business Group are general managers from the corporate banking branch and banking center: the former have driven Woori Bank to become best in class in Korea; and the latter supports affiliates and partner companies while handling the retail banking that targets the officers and employees of corporate customers. These competent managers have served the wide-ranging financial needs of corporate clients at just the right time. The group is very proud to have been the financial service provider of choice for corporate customers who have grown into major global players over the past 121 years, and it strives to offer the expertise it has gained throughout the years to serve a wider customer base. Corporate Banking Total Assets of 2019 KRW 23.9 trillion Total CIB Revenue KRW 56.5 billion YoY 83.2% Woori OverviewBusiness OperationsFinancial Review046 SME Banking The Small and Medium Corporate Banking (SME Banking) Business Group oversees financial services for SOHOs/SMEs/middle market enterprises, handling a total of KRW 89.6 trillion in deposits and KRW 57.3 trillion in loans for 1.66 million clients as of end-2019. The SME Banking Business Group considers customer satisfaction as its top priority and practices “warm-hearted finance,” supporting the sustainable growth of its customers. Even amid trying external conditions marked by low interest rates, falling interest margins and an economic recession, the group reaches beyond mere profit generation to pursue mutually beneficial growth with society and customers. To this end, it provides a total package of financial services including competitive financial products, support for the startup of new businesses and financial consulting. The SME Banking Business Group strives towards the development of the Korean financial industry and maximized corporate value by establishing Support Centers for Small Merchants, engaging in innovative/creative/inclusive finance, running counseling centers on Japan’s export regulation, developing a specialized workforce pool and improving the financial infrastructure. 2019 Performance In 2019, the SME Banking Business Group witnessed both the quantitative and qualitative growth of assets. Year-over-year, the group recorded an increase of KRW 5.3 trillion (up 6.3 percent) in de- posits and KRW 4.3 trillion (up 8.1 percent) in loans while adding 90,000 new corporate customers. Furthermore, prime asset ratio was increased to 84.3 percent (up 1.0 percent YoY), improving asset soundness dramatically. Although the interest margin is expected to decline amid low interest rates and low growth, the group minimized the fall in the interest margin mainly by boosting loans to SMEs. In addition, the group expanded loans to high-potential SMEs and reduced subprime as- sets, bringing down the SME delinquency rate by 0.1 percent YoY to 0.35 percent and reaching 86.5 percent collateralized. Furthermore, It had the largest growth in technology financing among Korean commercial banks by providing KRW 6 trillion to companies with outstanding techno- logical prowess, such as parts/components/equipment companies and those with innovative growth potential. The group plans to provide a further KRW 24 trillion in technology financing over a five-year period from 2019. The group will continue to expand support for companies with excellent technologies by enhancing technology finance evaluation system with a key focus on future growth potential. It will also provide KRW 7 trillion by 2024 in support of companies in the newly growing fields of green/biohealth/fintech sectors, by aligning with policy finance institu- tions. Meanwhile, in step with government policies, the group extended policy loans of KRW 0.8 trillion to small merchants and the financially underprivileged, proactively carrying out inclusive finance and CSR. Technology Finance and Innovation Finance: Quality Up! Based on in-house technology evaluation system and specialists, Woori Bank boosted technology finance by KRW 6 trillion in 2019 alone, by issuing systematic and swift technology evaluation re- ports on innovative SMEs equipped with outstanding technologies that lead the fourth industrial revolution. Woori Bank also operates a variety of support programs, including indirect/direct investment and investment combined with lending, to discover and nurture companies with out- standing technologies. A direct investment of KRW 1 billion each is provided to 20 companies per year through two public competitions and an indirect investment of KRW 2.1 trillion will be raised over the next five years by investing in funds managed by policy-based investment organizations or by managing its own funds. Woori Bank continues to develop and discover outstanding financial experts by conducting specialized training in technology finance throughout its branches each year and by providing training on acquiring technology credit appraiser qualifications, which is fol- lowed up by in-house training on regulation updates. Revitalizing Policy Finance and Guaranteed Loans in Step with Government Policy Woori Bank provided the largest amount of policy funding support among commercial banks in Korea last year, with KRW 846 billion of policy loans extended to small merchants in line with gov- ernment policy. The bank made special contributions amounting to KRW 46.9 billion last year to the Korea Credit Guarantee Fund/foundations/central-local government pacts and extended KRW 500 billion in guaranteed loans, boosting asset soundness. In addition, Woori Bank actively par- ticipated in revitalizing policy funding based on competitive interest rates by utilizing on-lending arrangements with the Korea Development Bank and the Export-Import Bank of Korea, along with C1/C2 funds from the Bank of Korea. WOORI FINANCIAL GROUP ANNUAL REPORT 2019Woori Bank 047 No. of Corporate Clients (Unit: persons) 1.66 million Total SME loans in Won (Unit: KRW in trillions) 82.1 76.6 72.4 YoY +7.2% 2017 2018 2019 Greater Support for Cooperative Growth and Inclusive Financing! In order to provide intensive support to small merchants making inroads into the start-up market, Woori Bank provides not only operational funds to small merchants, new business owners and self-employed businessmen who find it difficult to finance their business, but customized consult- ing on business management, finance, tax and accounting as well as the success stories of start- ups. The bank operates six Woori Comprehensive Support Centers for Small Merchants in major regions where it provides customer-tailored total financial solutions. For the self-employed, the bank operates a finance academy program for which it develops and provides various educational contents. Moreover, Woori Bank selected “Revitalization of Social Economy” as a core task and laid the foundation to create an ecosystem for social economy to grow. The bank is driving forward inclusive finance and cooperative growth by entering into an agreement to provide specialized support for social enterprises, offering preferred interest rates, lower rates of guarantee fees and exemptions on various financial fees. Practicing Corporate Social Responsibility! Woori Bank provided around KRW 3 trillion of funding liquidity through the following measures: special business stabilization loans extended to SMEs and small merchants undergoing temporary difficulties brought on by illness or natural disasters at home and abroad; partnership agreements with financial institutions under the government; and special contributions. The bank also carried out social responsibility as a financial company by resolving the financial difficulties of and provid- ing customized financial support to SMEs through counseling centers on Japan’s export regula- tion, and these centers were installed throughout its branches. Prime Asset Ratio(SMEs) 2020 Plans (Unit: %) 80.2 84.3 83.3 YoY +1.0%p 2017 2018 2019 In 2020, Woori Bank will bolster agreements with government financial institutions and continue to boost profitability/growth potential/soundness by providing financial support to SMEs at each level of their growth. The bank will also expand financial support to innovative companies with outstanding technologies and fully implement all the steps of assistance for start-ups and new ventures from kick-start support to ex-post management. The bank will also upgrade its inter- nal system in order to design customer-centric and customer-first financial schemes, boost the operational capabilities of SME-dedicated personnel and discover best practices to disseminate throughout the organization. In addition, Woori Bank will leap forward to become the No.1 bank by building the best-in-class customer-centric asset management system and conducting a total analysis of “Voice of Customers”. Woori OverviewBusiness OperationsFinancial Review048 Investment Banking Woori Bank’s Investment Banking Business Group consists of three departments: the Investment Finance Department, the Project Finance Department and the Global IB Finance Department. It also contains 12 teams: the CIB Team, M&A Teams 1 and 2, the Equity Investment Team and Innovative Growth and Finance Team under the Investment Finance Department; the Infrastructure Finance Team, the Structured Finance Team, the Power and Energy Team and the Real Estate Finance Team under the Project Finance Department; the Aircraft and Ship Financing Team, the Global Syndication Team and the Global PF Team under the Global IB Finance Department. With increasing importance placed on the IB business of banks, Woori Bank has expanded its core IB business also in the fields of blue chip equity investments, and M&A acquisition finance/power generation/ infrastructure arrangements, while broadening the business scope through its global networks and IB desks. In October 2006, Woori Bank opened Woori Global Markets Asia Ltd. in Hong Kong, becoming Korea’s first financial institution to establish a business unit with a key focus on overseas IB. Since June 2017, global IB desks have been up and running in New York, London, Singapore, Sydney, Vietnam, India, Dubai and Germany, where the bank continues to generate opportunities for overseas IB business. 2019 Performance In 2019, the IB Group has increased its non-interest income by intensifying financial arrangements and making aggressive principal investments involving power generation/infrastructure projects as well as M&A finance. The IB Group has also expanded its overseas business by adding new global IB counters. In particular, the group recorded outstanding growth in global IB assets and profits by managing the largest number of global IB counters among commercial banks in Korea, enabling the IB Group to generate a sales-related income reaching KRW 300 billion in 2019. It also expanded high-yield investments through close ties with global top-tier asset management com- panies, provided aircraft financing, participated in overseas infrastructure/power generation proj- ects, broadened structured finance and issued FRNs aligned with Woori Global Markets Asia Ltd. in Hong Kong, maximizing short-term profits while making preemptive investments for the future growth. Since launching the first Innovative Growth and Finance Team among Korean commercial banks at the end of 2018, the group has been creating a financial ecosystem for innovative growth initiatives of the government and investing in companies with innovative growth potential. The IB Group also hosted four public competitions up until the end of 2019, executing a total of 36 direct investments in innovative growth companies. 2020 Plans In 2020, the IB Group will take a step forward as one of the main pillars of the holding company that creates synergetic effects. With the business goal of “Leapfrogging into a Global IB Group by Building an Innovative Profit Structure”, the group plans to push forward efficient business, taking into account the BIS ratio, with a focus on “Securing Financial Leadership”, “Diversifying Blue Chip Assets” and “Achieving Qualitative Growth for Global IB. Much of its focus and endeavors will be geared towards building a quicker and more efficient asset management process and system as a response to greater variability in the global capital market this year. Lastly, as asset management companies and a trust company were newly acquired in 2019, the group will continue to make an effort to create synergy with affiliates in the holding company structure by solidifying cooperative relations. In addition, the group is reinforcing CIB business based on collaboration with large shareholders in the fields of securities, insurance and asset management as well as with other business groups within the bank, while making great effort to elevate synergy at the at the level of the soon-to-be-completed holding company. Total Assets of Investment Banking Operations in 2019 (Unit: KRW in trillions) 7.2 (48%) Off-balance Sheet Assets 6.8 (46%) Loan Commitments 0.4(3%) Payment Guarantees Total Assets 14.8(100%) 7.7(52%) Balance Sheet Assets Loans 3.6 (25%) Securities 4 .0 (27%) Others 0 (0%) WOORI FINANCIAL GROUP ANNUAL REPORT 2019Woori Bank 049 Financial Market Business 2019 Performance In charge of major funding and capital management for Woori Bank, the Financial Market Business Group focused on improving profitability in 2019 by maintaining stable liquidity and raising effi- ciency in funding and management. The group contributed to enhancing the Bank’s profitability by maintaining an optimal loan-to-deposit ratio (LDR), diversifying financing, and downsizing short-term assets. It also promoted its capital adequacy and stability in financing by issuing per- petual foreign currency-denominated contingent convertible bonds (Co-Cos) and won-denomi- nated CoCos. Consequently, the group continued to comply with Korean regulatory guidelines in 2019 in terms of liquidity coverage ratio (LCR, minimum 100 percent), foreign currency LCR (minimum 80%), NSFR (minimum 100 percent) and the mid and long-term foreign currency financing ratio (mini- mum 100%), boosting the bank-wide BIS ratio by 0.59 percentage points. The group strengthened its competitiveness in F/X and derivatives trading by diversifying trading currencies and aggressively managing positions. It also runs night-time equity derivative desks that are available during all global trading hours so that its customers can be prepared at all times for market risks. Stable Management of Liquidity Successfully Responding to the New LDR Rule In preparation for a new LDR rule in 2020 that applies different weights to loans by borrowers, the group preemptively increased deposits and restructured its financing by issuing marketable CDs and covered bonds. As a result, Woori Bank stood fully ready for the new regulation with LDR at 98 percent as of December 2019. Issuing CoCos in Korean Won and Foreign Currencies The Financial Market Business Group established preemptive financing plans and launched active IR efforts based on improved business performance, thereby issuing the largest-ever CoCos in foreign currencies amounting to USD 550 million at the lowest-ever interest rates among Korean commercial banks. The group also successfully issued KRW 300 billion in subordinated bonds at a solid interest rate, raising the bank-wide BIS ratio by 0.59 percentage points and laying a stable foundation for bank-wide business. Fulfilling Social Responsibility by Issuing Sustainability Bonds Leveraging the growing investment demand at home and abroad for sustainability bonds where the proceeds are used to serve environmental or social purposes, the group successfully issued Korea’s first sustainability bonds in KRW and USD simultaneously through a single sustainable bond framework (KRW 200 billion, USD 450 million), boosting the image of Woori Bank and con- tributing to reducing financing costs. In particular, the USD-denominated Formosa bonds, which were the first sustainability Formosa bonds issued in Korea, were honored by The Asset, a global financial magazine, as the Best Formosa Bond in Korea for 2019. The Financial Market Business Group consists of the Treasury Department, which manages Woori Bank’s liquidity; the Trading Department, which handles F/X trading, marketable securities, and financial derivatives; and the Settlement Support Department, which performs back office duties. In particular, Woori Bank is the most competitive of all Korean commercial banks in trading derivatives, where it leads the market in handling forwards, swaps and options based on a wide range of underlying assets including interest rates, foreign exchange, equities, and commodities. Issued Korea’s First Sustainability Bonds in KRW and USD simultaneously through a single sustainable bond framework KRW 200 billion USD 450 million USD-Denominated Formosa Bonds honored by The Asset as the Best Formosa Bond in Korea 2019 FX Market Share Leading market maker in Korea USD/KRW 8.29% CNY/KRW 12.67% Woori OverviewBusiness OperationsFinancial Review050 LDR (Loan-to-Deposit Ratio) (Unit: %) 96.6 96.9 95.0 94.1 Complying with Korean Regulatory Guidelines In 2019, through preemptive financing and stable management of liquidity, the group complied with Korean regulatory guidelines at a level well above minimum requirements, by maintaining an average LCR of 107 percent, an NSFR of 109 percent, a foreign currency LCR of 108 percent and a mid-to-long term foreign currency financing ratio of 170 percent. Strengthening Competitiveness in the FX and Derivatives Business In 2019, the Financial Market Business Group endeavored to stand ready to respond to the grow- ing volatility in the financial market and boost its business competencies through measures that included profit generation from new sources. 1Q19 2Q19 3Q19 4Q19 F/X Trading LCR (Liquidity Coverage Ratio) KRW (Unit: %) 108.1 107.3 105.4 105.6 19.1Q 19.2Q 19.3Q 19.4Q In F/X trading, the group bolstered currency forecast capabilities for both domestic and interna- tional markets and realized outstanding trading profits by taking anticipatory and proactive action in response to the fluctuations in the international financial market. In 2019, it accounted for a high market share (8.29 percent in USD/KRW, 12.67 percent in CNY/KRW) in the Seoul F/X market, per- forming the role of a leading market maker in Korea. Derivatives In the derivatives market, the group predicted the trend of market variables such as those related to Korean and international financial policies and fluctuations in supply and demand. This helped it to manage positions ahead of time and establish a secure foundation for derivatives trading. The group also offers FX/interest rate risk management consulting services and customized one-on- one solutions for SMEs who, due to insufficient experience or skills, struggle with risk management. Securities In securities, the group analyzed domestic and international monetary policies and bond markets and efficiently managed bonds, increasing both interest and non-interest income. It also diversi- fied its sources of non-interest income by varying and enlarging bond lending transactions that LCR (Liquidity Coverage Ratio) Foreign Currency receive risk-free charges. (Unit: %) 109.5 108.6 105.1 110.5 2020 Plans In 2020, the Financial Market Business Group plans to secure liquidity preemptively in order to prepare itself for liquidity regulations such as the new LDR rule, LCR and NSFR and for increased volatility in the financial market, both at home and abroad. The group will boost retail deposits, issue CDs and covered bonds and secure committed lines to manage bank-wide liquidity in a sta- ble manner, while raising profitability through the reinforced control of funding and management portfolio. In trading, the group will broaden both its F/X and derivatives income by diversifying strategies such as arbitrage in FX/derivatives and foreign currency/interest rate hedging. As growing global volatility is expected to drive up the demand for risk hedging, the group will continue to broaden FX/derivatives trading by offering the right product at the right time for all customers. Also, its ded- icated sales team of specialists for securities firms, insurers, government agencies and other finan- cial and public institutions will attract new, high-yield customers and boost non-interest income. 19.1Q 19.2Q 19.3Q 19.4Q WOORI FINANCIAL GROUP ANNUAL REPORT 2019Woori Bank 051 Institutional Banking The Institutional Banking Business Group consists of the Institutional & Public Fund Customer Department which caters to the needs of the central government, local governments, courts and public institutions, in addition to the National Pension Department, the primary bank for the National Pension Service (NPS), which is one of the three largest pension funds in the world. 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 2019, its institutional customers include the Ministry of Land, Infrastructure and Transport (MOLIT), the Korea Post, NPS, the Korea Land & Housing Corporation (LH) and the Korea Railroad Corporation (KORAIL), along with several others. The group is also a coffer manager bank for the Seoul Metropolitan City and 20 District Offices in Seoul. Its clientele list positions us as the primary bank for the largest number of public institutions in Korea. 2019 Performance The Institutional Banking Business Group is built on the robust foundation of Woori Bank’s 104- year history of managing the treasury of the Seoul Metropolitan Government.. Based on such a long-running management expertise, the group is broadening transactions with government institutions, local governments, and major public agencies. It reaches out earnestly to the local communities of client institutions through various corporate social responsibility programs and it has built a solid reputation as a financial institution that stands by its local communities. Since March 2018, Woori Bank has been managing a total of KRW 600 trillion in funds as the pri- mary banking partner for the NPS – the world’s third largest pension fund. In 2019, Woori Bank provided institutional banking services as the primary bank for 105 out of 338 Korean public insti- tutions designated by the Ministry of Economy and Finance. As of the end of 2019, the Institutional Banking Business Group is managing a total of KRW 31.7 trillion in deposits and KRW 0.6 trillion in loans, maintaining banking relationships with around 5,000 institutions. Providing Optimal Financial Solutions for Project Execution by the Government and Public Institutions Woori Bank manages a specialized workforce for systems under the Institutional Public Fund & Customer Department to effectively support the policies and projects of the government and policy institutions, through which it provides optimal financial solutions for the execution of public projects. Selected as the primary banking partner for the Institute for Basic Science (IBS), the Korea Foundation for the Advancement of Science and Creativity (KOFAC) and the National Fusion Research Institute (NFRI) in 2019, the group has been supporting the technology-cen- tered new growth policies of the government. In addition, based on differentiated collection and management systems, the group contributes to making financial transactions more user-friendly for institutions and citizens as the selected payment bank of seized property sales for the Korea Asset Management Corporation (KAMCO) and for traffic fines for the Korea National Police Agency (KNPA). Maximizing Synergy within the Bank through Transactions by Institutional Customers The Institutional Banking Business Group not only provides direct financial services to institutional customers but also explores and provides opportunities for business alignment to SMEs and indi- viduals related to institutional projects. Designated as one of the exclusive banks for the research fund management system (Ezbaro) of the Ministry of Science and ICT, the group provides compre- hensive financial services for companies that have been successful in R&D, while managing and ex- ecuting R&D funds, including those for system operations. Working with major local governments, it also developed a mobile simple payment solution called, “Woori Zero Pay,” laying the foundation for both lessening the burden of payment fees and attracting new customers for small merchants. Woori OverviewBusiness OperationsFinancial Review052 Total Deposits (Unit: KRW in trillions) 31.7 31.2 27.5 YoY +1.6% 2017 2018 2019 2020 Plans In 2020, the group intends to provide a system for effective cash management for government and public agencies and develop partnership services related to various budget activities so that it can provide upgraded financial services on a higher level as a preferred banking partner for institu- tional customers. Furthermore, as the primary bank for the largest number of institutions in Korea, the group will seek to broaden the range of financial services so that more employees of public agencies can do business with Woori Bank. MAJOR LOCAL GOVERNMENT PARTNERS MAJOR MINISTRY/ PUBLIC INSTITUTION PARTNERS Seoul Metropolitan City and 20 District Offices in Seoul, Gwangmyeong City Ministry of Land, Infrastructure and Transport, Korea Post, National Pension Service, National Health Insurance Service, Korea Housing Finance Corporation, Korea Land & Housing Corporation, Korea Housing & Urban Guarantee Corporation, Seoul Housing and Communities Corporation, Korea Railroad Corporation, Korea Exchange, Korea Securities Depository, Korea Public Finance Information Service, Korea Institute of Startup & Entrepreneurship Development, Korea Inclusive Finance Agency, Agency for Defense Development WOORI FINANCIAL GROUP ANNUAL REPORT 2019Woori Bank 053 Real Estate Finance For the systematic management of real estate financing in 2013, Woori 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 the general treasury) bank. To satisfy diverse customer needs, the group provides not only products that complement Woori Bank accounts, but also NHUF products that are available for low-income individuals and families. 2019 Performance In 2019, the Real Estate Finance Business Group ranked No.2 in terms of the quantity of mortgage loan market shares it held. The group alleviated the repayment burden of certain underprivileged groups by actively assisting them with financial support as per government policies. It also took the lead in the Korean housing finance market. Woori Bank has also been the managing custodian bank of the NHUF for the past decade, and a wide range of housing finance products have show- cased the Bank’s distinguished business performance. As evidence of such endeavors, Woori Bank was selected as the No.1 NHUF custodian bank once again in 2019. Widening the Customer Base as the Managing Custodian (Formerly the General Treasury) Bank of NHUF The NHUF business is crucial to the progress of broadening the financing options to fulfill the de- mand for housing finance, which includes that of bridging the divide for low-income individuals and families. As the managing custodian bank, Woori Bank is in charge of financing and dispersing funds. Even after its reselection as the managing custodian bank for the NHUF in 2018, Woori bank provided a diverse range of housing finance products, accounting for a market share of 38.1 per- cent in loans to the demand-side and 24.7 percent in housing subscription savings plans. In 2019 alone, 930,000 new customers joined housing subscription savings plan in hopes of someday owning their own houses. 2020 Plans The Real Estate Finance Business Group will fully participate in government measures to provide support in the form of housing funds for non-speculative homebuyers and to establish asset port- folios that ensure balanced asset growth with optimal profitability and minimum risk. To this end, the group will expand its mortgage loans by KRW 4.6 trillion and provide a robust foundation for the assets of Woori Bank customers. The group intends to maintain its number one position in NHUF market share and develop diverse non-face-to-face channels, bringing greater benefits to its customers as the managing custodian bank of NHUF. The group will focus on loan plans for the demand-side, which has shown a recent increase, including Jeonse (Key Money) Deposits, Monthly Rental Loan Plans and the Beotimmok (Support) Jeonse Deposit Loan Plans, as well as new housing subscription savings plans. Further- more, the group will leverage its experience in financing and operating funds and refine IT system to support housing welfare projects for ordinary citizens and take initiatives to revitalize the health and stability of Korea’s national housing market. No.1 Custodian Bank Selected by the Ministry of Land, Infrastructure and Transport National Housing and Urban Fund Demand-side Loans (Unit: no. of loans) Housing Subscription Savings Plans (Unit: no. of plans) Performance 404,281 Performance 5,858,945 No.1(38.1%) Market Share No.1(24.7%) Market Share Woori OverviewBusiness OperationsFinancial Review 054 Trust & Pension The Trust and Pension Business Group is leading the market with successful business models that continually meet customer asset management needs, keeping pace with the rapidly changing market environment. As the sales of specified money trust products have continued to grow, the Trust and Pension Business Group has been playing a leading role in driving the bank’s overall non-interest income. The group offers differentiated and customized services through comprehensive consulting on retirement pensions, from the early stages of introducing retirement pension schemes at companies and on. It employes experienced investment experts utilizing advanced methods at Woori Bank to manage customized products that are optimal for the investment tendencies of customers as part of total financial services platform, thereby leading the retirement pension market. The group broadened its range of business with diverse clientele that consists of 120 entities, including institutional clients such as the National Pension Service (NPS), which is the largest customer in Korea’s securities custody services market, and the Ministry of Land, Infrastructure and Transport (MOLIT) as well as asset management companies. Leveraging its experience in the custody agent business with institutional clients, the group aims to provide custodian asset management services that would preemptively act accordingly in the face of sudden market shifts. 2019 Performance Trust Department The Trust Department of Woori Bank grew considerably through customized strategies under the business goal of “Boosting Internal Robustness and Generating Profits in the Trust Business,” as it concentrated on elevating specialized competencies. As a result, and with the assistance of com- prehensive asset management specialists, it was able to launch a stable line of customized speci- fied money trust products that meet both the demands of the market and the needs of customers. Despite growing market volatility, the department achieved a solid return on investment for cus- tomers and robust profits, primarily through ELT and ETF products. Furthermore, it advanced trust asset management system to regain credibility with customer base and ensure complete sales, while improving processes and building a new IT system. Retirement Pension Business Department Ever since retirement pension schemes were first introduced to the market, the Retirement Pen- sion Business Department has implemented a customer-centric strategy to help customers plan and enjoy a stable retirement, while also addressing the rapid aging issue within Korean society. The department issues a monthly ‘Happy Life Retirement Pension Newsletter’ for corporate and individual clients which covers major retirement pension issues, recent trends, asset management information, and simple life tips. It also provides online information on retirement savings and as- set management performance or mobile banking via the Happy Life Retirement Pension Lifetime Account, enabling customers to easily manage their retirement savings. It also streamlined wire transfer services for pension savings, which made the IRP subscription process easier, and focused on raising customer yield rates by expanding lineup of TDFs. In addi- tion, the department maximized customer satisfaction by launching the Retirement Pension Asset Management Center. As a result, by the end of 2019, assets under custody was KRW 19.6 trillion, net amount of KRW 2.5 trillion and 14.7% increase YoY. Trust and Custody Department Qualitative Growth Driven by Profitability through Enhanced Growth Capacities in Each Asset Segment Woori Bank is quickly dominating the fiduciary management market for public and private funds by establishing a cooperative system with asset management companies based on years of ex- perience in custody business for large pension funds affiliated with the NPS, MOLIT, and others. In 2019, the Trustee and Custody Department were able to put their exceptional business skills to use by taking on more assets under custody from the NPS (KRW 10.5 trillion), insurance companies (KRW 3.1 trillion) and REITs (KRW 2.3 trillion). By diversifying assets under custody as such and so- lidifying customer base with a focus on reliably profitable assets, the Trustee and Custody Depart- ment raised the total volume of assets under custody by 15 percent YoY. WOORI FINANCIAL GROUP ANNUAL REPORT 2019 Customer satisfaction boosted by operating the Retirement Pension Asset Management Center Woori Bank 055 2020 Plans Trust Department Under the 2020 business goal of “Firmly Establishing a Culture of Complete Sales of Trust Prod- ucts,” it plans to generate profits through the total care of customer assets and through new prod- ucts by improving system in all its aspects. This in turn, will serve to reinforce customer relation- ships and boost package sales - and it will be accomplished through building a total management system for customer assets, not by the mere sale of products. Major products, namely ELT, ETF, MMT and bond products, will be segmented by risk and investment periods to prevent over-con- centrated subscriptions into any single type of product. It will also grow in tandem with customers through presenting products with diverse portfolio combinations suitable to their investment ten- dencies and periods of investment. Retirement Pension Business Department Mindful of the growing importance of the retirement market, Woori Bank has selected retirement pensions as a core growth business and has been carrying out active marketing campaigns In 2020, the Retirement Pension Department will engage in differentiated marketing to secure a foundation for growth, boost customer yield rates through bolstered product management ca- pabilities and focus on raising efficiency in its sales channels. Going forward, the department will continue leadership in the retirement pension market, and rich pool of experienced personnel, its comprehensive training support system, and diverse products and specialized asset management will make this all possible. Trust and Custody Department Woori Bank will maintain the No.1 market share in the custody business for institutional clients by winning the bids it has won before to become the custody bank for large pension funds affiliated with the NPS and MOLIT. The department will rebuild a preemptive next-generation asset custody system to provide beneficiary-based services, in order to secure custody competitiveness. It will also expand its marketing efforts to target those with low-risk assets to move into the public REITs and real estate fund markets early on. In addition, it will lead the domestic asset custody market by aggressively targeting the niche market of overseas funds through marketing endeavors geared towards clients with assets overseas, including institutional clients and insurance companies. Trust and Custody Department Retirement Pension Business Department Dominant Fiduciary Manager for Public and Private Funds Assets Under Custody (Unit: KRW in trillions) YoY +14.7% 19.5 2019 17 2018 Woori OverviewBusiness OperationsFinancial Review056 Consumer Protection 2019 Performance At Woori Financial Group, main subsidiaries including Woori Bank and Woori Card are leading the way in bolstering activities to protect financial consumers. Woori Bank ensures consumer protec- tion throughout the entire business process from development to the sale of financial products by undertaking various institutional improvements including a closer monitoring of incomplete sales prevention activities under the leadership of the Chief Consumer Office. Woori Card promoted company-wide financial consumer protection activities that were led by the management. To en- able swift decision-making and gain impetus in protecting consumers, the Woori Card CEO himself presides over a financial consumer protection council. Empowering Financial Consumer Protection and Boosting Competencies In order to make financial services more accessible for persons with disabilities and who are mar- ginalized from the financial market, Woori Financial Group holds round table meetings with the Korea Differently Able Federation and the Korea Federation of Organizations of the Disabled to discover new ideas and reflect them into business management. Woori Financial Group also con- ducted capacity building training on consumer protection by establishing a training roadmap for a systematic education and by utilizing various channels including on-site in-person instruction, on- line video training and collective training, in order to make the education package more effective and to elicit greater participation from its employees. Furthermore, the group produced and disseminated the Woori Customer Satisfaction (CS) Standard, which includes basic skills on interacting with customers, a service-providing mindset and global business etiquette in order to standardize customer satisfaction management throughout the glob- al network that has expanded to 477 in 26 nations (two collective trainings per year, included). Preventing Financial Fraud In addition to building a monitoring system for financial fraud using Big Data, the group advanced relevant systems including AI-based monitoring, put up outdoor signboards and played fraud prevention videos at distribution channels as part of PR efforts to prevent customers from falling victim to such financial scams. Moreover, as a first among banks, Woori Bank hosted a public com- petition on anti-voice phishing UCCs for university students and displayed selected works on non- face-to-face channels including the Bank website and Youtube. As a result, Woori Bank saved 40.6 percent (KRW 44.3 billion saved) YoY by preventing such financial fraud. The Bank also contributed in the arrest of more than 520 fraud suspects. As such, it engaged in aggressive activities to pre- vent financial scams and protect customer property. In February 2020, Woori Financial Group became the first financial holding company in Korea to establish a Financial Consumer Protection Unit to perform the role of a control tower that oversees financial consumer protection. The Financial Consumer Protection Unit will pursue consistent and systematic policies at the Group level to reinforce the entire Group’s competencies to protect financial consumers. This will help it to become a reliable financial group that truly stands beside its customers. Woori Bank Customer Satisfaction Management Awards 2020 Korea Economic Daily Woori CS Standard Developed and disseminated Woori CS Standard for a globally standardized customer satisfaction management WOORI FINANCIAL GROUP ANNUAL REPORT 2019Woori Bank 057 2020 Plans The Financial Consumer Protection Unit aims to build a monitoring system for the Group’s con- sumer protection and establish a customer-centric culture in 2020. Under this goal, the unit will systematically inspect the Group’s status of consumer protection, implement consumer protec- tion reflecting the latest trends and solidify cooperation with Group affiliates. The unit will build the Group’s monitoring system on financial consumer protection, incorporating consumer protection policies of the Financial Services Commission and the Financial Supervisory Service. With this system, it will fully implement the policies of financial authorities and monitor consumer protection activities at all times throughout the process of development and sale of fi- nancial products. Furthermore, the Financial Consumer Protection Unit will hold Group consumer protection round- tables and gather views from sales sites, so that consumer perception and market changes are reflected into activities in a timely manner. The unit will make main financial products and channels more user-friendly in a way that is keenly sensed by the end users themselves. Considering the continued growth of non-face-to-face transactions, it will regularly review whether essential infor- mation is provided faithfully on non-face-to-face channels such as information on financial prod- ucts (interest rates applied, fees, benefits, etc.) sold on those channels and information on the right to request interest cuts. Furthermore, the unit will operate a Financial Consumer Protection Conference attended by ex- ecutive officers of the Group in charge of consumer protection to discover common tasks for the Group and make improvements. It will also include indicators on financial consumer protection activities in the evaluation of Group executives. Financial Consumer Protection Committee Customers Consumer Protection Forum of Branch CS Managers Head Office Consumer Protection Officers Financial Consumer Protection Center Chief Consumer Officer (CCO) CEO Financial Consumer Protection Committee ‧ Highest decision making body in financial consumer protection ‧ Chaired by the CCO (CCO: Chief Consumer Officer) Woori Bank’s Prevention Education for Financial Consumers Woori Bank runs diverse financial education programs aimed at empowering financial consumers and preventing them from falling victim to illegitimate transactions Woori Bank Measures to Bolster Consumer Protection and Customer Trust Heads-of-department-or-above executives to contribute part of their salaries to form consumer protection fund “Code of Ethics for Asset Management Sales” to be declared to protect consumers KPI overhaul excluding non- interest income, etc. Woori OverviewBusiness OperationsFinancial Review058 Compliance Management Woori Bank's employees can easily refer to the Woori Code of Ethics and the Woori Code of Conduct to understand the importance of corporate social responsibility and ethical management as they perform their day-to-day responsibilities. By practicing the Woori Code of Ethics, the people of Woori Bank fulfill their social responsibilities for all stakeholders, which include customers, shareholders, employees, the nation and society. Through “compliance management,” Woori Bank ensures compliance with laws and principles, respects the spirit of fair competition and protects its employees, while contributing to the establishment of a fair and wholesome corporate culture that is based on mutual trust and a mindset of compliance. 2019 Performance Reinforcing Ethics and Compliance Training In 2019, Woori Bank launched various ethics and compliance training programs so that all its em- ployees are able to understand and put the ideals of ethical management and compliance man- agement into practice. First, Woori Bank newly implemented the Woori Bank Code of Conduct and Guidelines for Con- duct, and hosted an Ethics and Compliance Pledging Ceremony with all the employees. Second, the bank implemented the bimonthly “Ethics/Compliance Self-Check Test” and “We-Check Day” cy- ber self-pact, engaging all employees so that they can develop a clear understanding of the Code of Ethics and examine the behavioral standards applicable to each job ranking. Third, it utilized the ‘Ethics and Compliance at Work’ section on the bank intranet to publish training materials on ethics, internal control and compliance online, which the employees can access for their monthly compliance training and in their line of field work. Lastly, Woori Bank conducts face-to-face com- pliance training on banking-related laws and regulations for branch compliance officers, aimed at preventing any violations in branch business. Action Programs for Ethical Management Woori Bank offers many programs to promote ethical management and compliance. The first being the Woori Hotline, a channel through which best practices and violations of the Code of Ethics can be commended and reported by employees. In other words, the Woori Hotline is a channel for employees, partners, and other stakeholders to report on compliance with ethical management standards, aimed at encouraging 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 con- cept of ethical management and the practice of compliance. The Council holds meetings every biannually, chaired by the Compliance Officer, to discuss and decide on specific policies related to ethical management, including measures for employees to practice the Code of Ethics and ways to improve ethical management. Lastly, Woori Bank has a “Clean Contract System” with all its partners participating in contracts and purchases with it to encourage transparent and honorable bidding, contract signing and contract implementation. On-Site Legal Services Woori Bank provides prompt legal services by operating a pool of lawyers exclusively for branches with the aim of providing contingent legal counseling at business sites. In addition, the bank pro- vides onsite support by shortening the time required for legal reviews with case-specific standard agreements uploaded on the legal portal system. Furthermore, the bank promotes better un- derstanding among bank employees of legal cases by providing a ‘Handbook on Legal FAQs’ with the most frequently asked legal questions at branches, and posting the information on the portal system by job type. WOORI FINANCIAL GROUP ANNUAL REPORT 2019Woori Bank 059 2020 Plans In 2020, Woori Bank aims to “bolster customer trust by complying with laws and regulations through an innovation of the internal controls mindset.” To this end, the Bank will reinforce internal controls and management at the head office and at its branches, establish a sales culture based on the compliance of laws and regulations, intensify its monitoring on unsound business practices and incomplete sales and build an internal control system that utilizes Reg-Tech. To reinforce the internal controls and management at the head office and at its branches, an internal control grading system will be adopted for the heads of business groups and banking headquarters. In addition, unscheduled monitoring will be bolstered and results thereof will be reflected into the internal control grading. Training materials for head office employees will include not only the strong points of products, but examples of incomplete sales and notes of caution, thereby training the employees on internal controls to contribute to establishing a sales culture based on compliance. Last but not least, Woori Bank will utilize Reg-Tech and improve searches on domestic and interna- tional legislations and regulations as well as implement real-time legal Q&As to increase compli- ance awareness among employees. Ethical Management Practice Program ETHICAL MANAGEMENT SUPPORT COUNCIL A working-level council established for the purposes of decision making and communication on the Code of Ethics programs of practice for employees FIT & PROPER (ELIGIBILITY REVIEW) SYSTEM CORPORATE ETHICAL MANAGEMENT INDEX FOR CREDIT EVALUATION CLEAN CONTRACT SYSTEM CLEAN-CENTER (REPORTING AND COUNSELING) Aimed at promoting the eligibility, ethical mindset and compliance of employees as financial professionals, this system categorizes items for additional/subtractive points based on the Code of Conduct that employees are required to comply with and presents specific criteria for evaluation. Accordingly, model practitioners receive preferential treatment and violators are met with guidance or restrictive action. This program of practice aims at disseminating and inducing CSR and ethical manage- ment. The corporate ethical management index is reflected into the evaluation items for loan review, so that ethical management by transacting counterparties is reflected into the decision in extending loans to them and determining applicable interest rates Woori Bank has a “Clean Contract System” with all partners participating in contracts and purchases with us to encourage transparent and honorable bidding, contract signing and contract implementation. Furthermore, this system is a declaration of Woori Bank’s com- mitment to ethical management and aims at disseminating ethical management among partners. Best practices of Code of Ethics, misconducts and unethical behaviors can be reported to the Clean-Center, which also offers counseling on ethical matters. These measures are aimed at making the bank stronger and cleaner and establishing healthy financial cus- toms. Woori OverviewBusiness OperationsFinancial Review060 Information Security Woori Bank makes every endeavor to prevent any breach of customer information by enhancing its level of administrative and technical security. 2019 Performance Bolstered Information Security Organization The Head of the Information Security Group bears the responsibilities of Chief Information Secu- rity Officer (CISO) and Chief Privacy Officer (CPO), managing all teams dedicated to privacy (credit information) protection. Woori Bank holds regular Information Security Committee meetings, chaired by CISO and attended by 15 department heads at Woori Bank who handle information se- curity, IT operations and development, customer information and other relevant areas. The Com- mittee discusses agenda items that cover IT security issues as well as internal control and overall institutional improvements for privacy protection. Woori Bank also have an ICT security diagnosis team consisting of former “white hat hackers” serving as information security experts. This team analyzes and evaluates vulnerabilities, conducts mock cyber attacks and performs internal security reviews for newly launched services to ensure their safety and security. Administrative Protection Measures To prevent the potential abuse or misuse of customer information, Woori Bank allows its employ- ees to access only the minimal amount of customer data required to perform their job duties. The bank has also reinforced the internal controls for both the head office and the branches through the regular monitoring of unauthorized personal information queries deemed irrelevant to work duties, along with inspections of how it is managing its customer information. In addition, all em- ployees are mandated to attend an information security training at least twice a year. Woori Bank also makes onsite visits to promote privacy awareness and prevent security breaches. When a situation deems it necessary for the bank to consign customer information for business purposes, it discloses the scope of responsibilities and the consignee information on the web- site. The bank conducts a regular inspection of how customer information is handled on the part of consignees and provide information protection training. Management and supervision of consignees are always thorough to ensure that customer information is not lost, stolen, leaked, forged, falsified or damaged. Employee campaign launched, aiming to enroot a culture of information security WOORI FINANCIAL GROUP ANNUAL REPORT 2019Woori Bank 061 Technical Security Measures In order to inspect information security risks preemptively, Woori Bank adopted the ‘Cyber Red Team’ which detects vulnerabilities at all times from the viewpoint of attackers. Woori Bank also established a cloud-based defense system to guard against large-scale DDoS attacks with the Financial Security Institute. Woori Bank became the first financial institution in Korea to adopt a Fraud Detection System (FDS) that analyzes non-face-to-face transaction logs based on Big Data, in an effort to better respond to new or novel security threats and cyber risks. The bank also applied a solution to the smart banking system that can detect malicious or remotely controlled apps, thereby taking the lead in protecting consumers from financial scams such as voice phishing. 2020 Plans The Information Security Department will advance its SIEM to bolster the real-time integration, analysis and response system against cyber security threats in and out of the company, while adopting specialized solutions to diversify security drills for employees in step with the rising num- ber of malicious e-mail attacks. Furthermore, it will become the first financial institution to acquire the international ISO 27701 and the domestic ISMS-P certifications, thereby enhancing privacy protection, and ultimately become an even more trustworthy and reliable bank for its customers. Information Security Bolstered Information Security Organization Administrative Protection Measures Technical Security Measures Acquired ISO27701 certification, the international standard on personal information management system "How Smart Seniors Can Use Smart Phones Safely" - an anti-fraud education for seniors Woori OverviewBusiness OperationsFinancial Review062 Anti-Money Laundering As financial companies are required to establish preventive policies against international money laundering and terrorism financing, Woori Bank operates the Anti-Money Laundering Center. The Center established the AML Planning Team in addition to the existing Domestic AML Team, Overseas AML Team and Sanctions Management Team, hiring a large pool of AML specialists and expanding the organization. Furthermore, it bolstered internal control to prevent money laundering and terrorism financing by becoming the first Korean bank to adopt a three- tiered Know-Your-Customer (KYC) system on par with defense systems of global financial companies. In a bid to boost the global competitiveness and credibility of Woori Bank, the bank hired AML/BSA specialists from the Office of Foreign Assets Control (OFAC), reinforcing internal controls at the AML/ Sanctions Department of its American branches. Woori Bank is also upgrading its AML/Sanctions systems throughout overseas branches and subsidiaries to be commensurate with those of global financial companies. First AML Internal Controls System in Korea Know Your Customer (KYC) system established and piloted at 460 branches of Woori Bank 2019 Performance Building a Global-Level KYC System Woori Bank built a KYC system with three lines of defense: customer identification, inspection by the Anti-Money Laundering Center and independent audit by the Inspection Office. The bank also enhanced its specialized workforce, relevant regulations, guidelines and systems to defend against money laundering and terrorism financing, in order to faithfully carry out policies of the Financial Action Task Force (FATF) and the Korea Financial Intelligence Unit (KoFIU). Boosting a System of Compliance at Overseas Branches Woori Bank bolstered the anti-money laundering system of its global network in order to preemp- tively boost compliance at its overseas branches. The bank aligned with a global consulting firm to check on the status of anti-money laundering at overseas branches and upgraded its AML system to meet the global standard. Woori Bank also engaged in various activities in order to satisfy the high standards of compliance programs required by US financial authorities, which led to remark- able improvements including the positive inspection results of its American branches by local su- pervisory authorities. Woori Bank was also able to mitigate money laundering risks at its overseas branches by conducting sophisticated risk assessments on all overseas branches and reflecting FATF recommendations. Bolstering the Sanctions Compliance Program In 2019, Woori Bank launched wide-ranging control activities to bolster and deepen its sanctions compliance program. First, the bank reinforced internal controls by extending the sanctions list of its SWIFT filtering system applied to branches at home and abroad. By adding additional names to the existing official sanctions list, it enabled itself to preemptively manage sanctions-related risks. Sec- ond, Woori Bank reinforced the Bank’s internal controls by conducting a sanctions risk assessment on domestic and overseas branches. The bank was able to identify the Bank’s inherent risks related to sanctions, assess the adequacy of internal control activities and close any existing vulnerabilities. Third, the bank bolstered awareness of sanctions compliance by providing sanctions training for its employees and through quickly disseminating the latest trends. Woori Bank also conducted training for executive officers by inviting outside specialists to instruct them. It also provided customized training to employees in charge of internal control at branches, new heads of branches, employees assigned to overseas branches, employees handling transactions with high-risk clients and to its client companies. Woori Bank also quickly notified employees of changes taking place in international sanctions, thereby continuously reinforcing its sanctions compliance program. 2020 Plans Woori Bank continues to enhance the level of its AML operations by bolstering ML/TF risk assess- ments and KYC systems as well as improving the transaction monitoring system. In addition, its aim is to further solidify a fundamental culture of anti-money laundering by developing a pool of specialists and reinforcing AML training programs for employees. At overseas branches, the bank continues to upgrade its AML/Sanctions systems and verify its sanctions compliance program on AML Experts a regular basis in order to manage and control sanctions risks preemptively. At subsidiaries, the 110 bank is building an anti-money laundering system that meets the standards of international and local supervisory authorities by aligning with a global consulting firm to diagnose the status of the AML system. WOORI FINANCIAL GROUP ANNUAL REPORT 2019Woori Bank 063 Wealth Management The Wealth Management (WM) Group oversees serves not only Private Banking (PB) customers but also the bank-wide asset management business including services for corporate customers. The WM Group consists of 12 teams under three departments (the WM Strategy Department, the PB Customer Department, and the Affiliate Products Department). The WM Strategy Department manages bank-wide assets, oversees business strategies for PB customers, and suggests bank-wide recommendations, while establishing non-face-to-face channel asset management strategies and runs the required systems. The PB Customer Department devises business strategies for PB customers and nurtures, operates and manages a specialized workforce and channel for asset management. It also provides tax consulting, real estate advisory services and other specialized services for high- net-worth (HNW) customers of Woori Bank. The Affiliate Products Department selects fund and bancassurance products, forms marketing strategies, develops investment products, selects affiliate products and conducts follow- up management. As of the end of 2019, Woori Bank has a total of 737 WM distribution channels. It has 747 private bankers (PBs) and financial advisors (FAs) who, as asset management experts, deliver best-in- class comprehensive asset management services to HNW customers through a specialized PB brand called “Two Chairs”. 2019 Performance Performance of Affiliate Products (Funds and Bancassurance) In 2019, profits reached KRW 90.2 billion in funds, driven by wide-ranging marketing efforts in- cluding the launch of 120th anniversary products and collaborations with SME relationship man- agers (RMs). Meanwhile, on the bancassurance front, Woori Bank ranked No.1 in market share (34.2 percent) among four major commercial banks in Korea and posted profits of KRW 86.5 billion by diversifying portfolio through the launch of new products and reinforced non-face-to- face line-up. Developing a Specialized Workforce and Strengthening Competencies in Asset Management Woori Bank provides significant support and investments to foster a specialized workforce for asset management. The bank provides customized PB/FA training based on straightforward CDP and nurture next-generation personnel early on through public competitions. In particular, in 2019, it came together with external specialized institutions for high-quality training on not only PBs and FAs but next-generation personnel, in order to boost the competitiveness of its special- ized workforce. To foster a pool of specialized asset managers, Woori Bank bolstered its competen- cies by operating separate intensive development courses on real estate, inheritances and gifts. Expanding the Customer Base At the core of the WM business is base of PB customers. In 2019, Woori Bank attracted 19,000 new PB customers, which is the highest increase rate (9.8 percent) among Korean commercial banks. This was the result of the targeted marketing of CEOs through collaboration between PBs/FAs and SME RMs as well as wide-ranging business support for new PB customers. Expanding the Asset Management Business Base Woori Bank expanded business base for PB customers by adding four new TC Premium Centers dedicated to HNW customers, where it provided specialized consulting in tax and real estate as well as comprehensive asset management services. Furthermore, it held global investment sem- inars in collaboration with Bank Woori Saudara Indonesia and Woori Bank China. Here, the bank expanded its global business base by providing locally-tailored investment seminars and one-on- one consulting services for Korean expats, businessmen and resident workers. Wealth Management Group Customer Care Center Wealth Management Strategy Department Private Banking Customer Department Affiliation Product Department Woori OverviewBusiness OperationsFinancial Review064 Bancassurance M/S No.1(34.2%) Bancassurance takes up No.1 market share among the nation’s top four commercial banks with launch of new products and rein- forced non-face-to-face line-up, posting profits of KRW 86.5 billion WM Distribution Channels 737 Channels Asset Management Experts 747 PBs/FAs 2020 Plans Woori Bank will leap into becoming a more reputable asset management company that places its highest priority on its internal robustness and its customers, by improving business fundamentals through innovation across the board that encompasses asset management business, system and consumer protection. Business System Innovation The Chair of the Asset Management Product Committee in charge of selecting products was promoted from the head of the department level to the head of the group level and the commit- tee members were also promoted from team leaders to division leaders. In addition, outside specialist members were appointed to boost expertise. Product and marketing organizations will be separated to provide customer-centric products and recommendations will be derived at the holding company level to present a unified direction on investments. At the product sales stage, its personnel will be given different clearance levels to sell investment products depending on their risk. A PB workforce verification scheme will be newly introduced to bolster internal the qualifica- tions criteria. Moreover, the asset management capacity index will be developed and measured to foster PBs that can represent Woori Bank. The thresholds and return on sales of each product and management company will be reviewed on a regular basis to reinforce risk management. For ex- post management, a dedicated organization directly under the Head of the WM Group was newly established in order to ensure complete sales and customer interest protection (Customer Care Center). Furthermore, ex-post management schemes for funds including ‘happy calls’, tape-re- cording schemes and customer deliberation schemes are undergoing improvement. Infrastructure Innovation Woori Bank is in the process of rebuilding the asset management system that supports high rates of return and risk management. The bank also enacted and distributed the Code of Ethics for Asset Management that places customer interests the No.1 value. For overall customer demographics, Woori Bank will adopt a life-cycle asset management system to provide optimized portfolios. Business Culture Innovation Woori Bank overhauled the KPIs of distribution channels and PBs/FAs with a customer-centric ap- proach. Moreover, the bank adopted a business management certification scheme, under which evaluation of executive officers reflect protection of financial consumers, so that evaluation by cus- tomers can be directly incorporated into the performance evaluation of officers. * Distribution channel KPIs: Customer’s Rate of Return 20 points (H2 2019) Customer Care 50 points (2020) Customer’s Rate of Return 50 points, → Private Asset Management Brand Private Banking Brand of Woori Bank One-on-one tailored financial consulting services by asset management experts Private banking services dedicated to each customer offered in a fittingly refined setting WOORI FINANCIAL GROUP ANNUAL REPORT 2019Woori Bank 065 Employee Satisfaction Woori Bank believes that a workplace where its employees are happy is a necessary foundation for providing the best services to its customers. This led to the creation of the Employee Satisfaction Center in 2007, and since then, the Center has been developing and implementing diverse programs. Woori Bank is expanding its leisure and travel programs to improve employee satisfaction with the hopes they will feel a stronger sense of ownership. 2019 Performance Woori Bank Wibee took home the 11th championship title in the 2019-2020 WKBL Regular League. Driven by the enthusiastic cheers of employees, the excellent tactics of head coach Wie Sung-Woo and the tireless spirit of the athletes, Wibee broke its own record and made history once again with the first-ever V11 in the WKBL. Now, Wibee has its eyes set on another monumental achievement in the V12 next season. Implementing Programs for Greater Employee Satisfaction Woori Bank offers original and interesting programs to boost employee satisfaction. In 2019, the bank offered the “Woori Family Together Camping” program for its employees and their families. Woori Bank also provided Special Lectures on Culture to meet the cultural needs of its employees and help them build networks. Among its existing programs, the bank continues to offer the family getaway initiative, “Oh! Happy Woori,” and a psychological counseling program to help employees deal with feelings of insecurity or family issues. Woori Bank is doing its utmost to put into practice Woori Bank’s core belief that stipulates that the happiness of its 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 and is based on the idea that happy families are the very source of employee satisfaction. Employees and their families can participate in the seasonal experience programs to spend time together and refresh themselves physically and mentally. Last year’s programs included “Understanding Constellations”, “Visiting Pocheon Herb Island”, “Visiting Korea Job World”, “Visiting My Mother’s Family” and “Strawberry Picking and Smelt Fishing”. In particular, the “Companion Program with Spouses” reinforced the corporate culture that all happiness starts with family. This program has become the most preferred and sought after of all the offerings, allowing its employees an opportunity to spend quality time with their families and remind themselves of how important family is. 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 its employees for its spaciousness, the ample amount of time allowed for the ceremony, and its refined atmosphere. The venue features a V11 in the Women’s Korean Basketball League (WKBL) 2019-2020 Season Woori Wedding Day: A joint wedding ceremony for multicultural couples Woori OverviewBusiness OperationsFinancial Review066 'Oh! Happy Woori' A family getaway program that began in July 2011 and also the leading family care program based on the idea that happy families are the very source of employee satisfaction Prevention Training and Psychological Treatment Woori Bank has provided prevention training and psychological treatment since 2017 for employees who interact directly with customers, to protect them from verbal and physical violence as well as sexual harassment. gorgeous bridal room, a separate room for performing the traditional Korean wedding ceremony known as pyebaek, and a banquet hall for the wedding reception. The CEO’s official vehicle is also made available as the wedding getaway car, which is particularly applauded by the employees. A total of 873 couples walked down the aisle in this auditorium between 2012 and 2017. Its popularity continued in 2018 and 2019, with an additional 150 and 160 couples marrying there in each year re- spectively. The benefit of this free wedding venue offer is twofold: it not only helps its employees save on wedding costs but also boosts the sense of pride its employees feel in Woori Bank. 2019 Programs to Protect Employees Who Interact Directly Customers Woori Bank has provided prevention training and psychological treatment since 2017 for employ- ees who interact directly with customers, to protect them from verbal and physical violence as well as sexual harassment. In accordance with the Occupational Safety and Health Act, the bank has produced the “Promotional Materials to Protect Direct Interactors” since October 18th 2018, in order to protect employees from verbal abuse and sexual harassment by customers. Woori Bank has dis- tributed them to all branch offices in 2019. It also conduct training to prevent physiological or physical harm to its employees. To reinvigorate the organization and to better engage its employees in their work, the bank make reservations and provide funding for therapy sessions and legal counseling for its employees and their families. Woori Bank offers in-house professional counseling in addition to the externally run Employee Assistance Program (EAP), offering on-site counseling and small lectures at the branch level through TFT business support. In addition, the bank present employ- ees with opportunities to manage their stress and relax with Tok-Tok Concerts and Office Training Programs. Woori Bank also lead the way in improving its organizational culture with preventive training for sexual harassment in the workplace and wide-ranging campaigns to prevent conflicts among employees. Woori Daycare Center As part of the government’s policy to address the country’s low birth rate and actively support work- ing parents, Woori Bank runs corporate daycare centers in Seoul in 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, the bank opened the fourth cen- ter in Bundang, Gyeonggi Province (Saesol Center). Woori Bank will continue to open new daycare centers to promote a corporate culture that encourages a stable family life and do the best to help working parents cope with childcare challenges. Woori Bank strives to ensure that each and all of its employees are happy and that happy employees, in turn, will make its customers happy. Woori Bank Programs to Protect Employees Who Interact Directly Customers – “On-Site Roundtable with Direct Interactors” Woori Daycare Centers installed and operated to provide corporate support for working mothers WOORI FINANCIAL GROUP ANNUAL REPORT 2019'A Day When Woori Meets Culture' A support program to encourage employees and their families to take part in enriching cultural activities Smart Health Check-Up Service Introduced to enable quick and easy application for check-ups Woori Bank 067 Experiencing Other Cultures The program that assists its employees to take overseas trips is gaining huge support. Woori Bank has travel agencies set up a dedicated website for its employees where they can choose from a variety of travel programs. As part of a virtuous cycle of providing welfare that inspires employees and customers and brings them satisfaction, the Woori Bank Employee Satisfaction Center runs refined and wide-ranging programs that can truly serve its employees. A Day When Woori Meets Culture This is a support program to encourage its employees and their families to take part in enriching cultural activities. First launched in 2012, the program made group ticket purchases in 2019 for musical performances including the Flashdance, Jekyll & Hyde, Mama Mia and Aida. Employees feel a sense of belonging and pride as the bank rents out the entire theater for the day to allow employ- ees to choose their own showtimes and present an exclusive show just for Woori families. Improving “PC-Off” Policies for Work-Life Balance The Banking industry has characteristically imposed a work environment that entailed overtime work into the night. To improve such conditions, Woori Bank introduced a work-life balance policy in 2013, which then became established as part of corporate culture at Woori Bank, as most offices and branches came to comply well with the policy. The so-called ‘PC-Off’ deadline is at 19:00 to ensure employees have time for leisure activities and family life and to help them return to work with greater efficiency and focus. In July 2019, Woori Bank took the initiative in striking the work-life balance of its employees by firmly establishing the 52-hour work week system and flexible work hours. Building a Healthy and Vibrant Work Culture Woori Bank offers annual medical check-ups and blood tests in order to continually and systemat- ically manage the health of its employees. If any symptoms are identified from the check-ups, the bank supports affected employees with its group accident insurance and the Bank’s medical fee sub- sidy plan to create a healthy and active work culture. In addition, Woori Bank also adopted the “Smart Health Check-Up Service” that is more convenient and allows for a faster application for check-ups. This service allows employees to check on their reservations, changes, and results in real-time via an app. It is built in a way that allows the health status and check-up results to be systematically cumu- lated and managed. Furthermore, its employees and their families are entitled to book and use the shared condominiums Woori Bank owns all over the country. These facilities are now made available to employees for much longer periods, allowing longer stays for more employees. These benefits help its employees refresh themselves and build a vibrant work culture. "Special Lectures on Culture" meeting cultural needs of employees and supporting networking Healthy Woori Program to create a vibrant work- place and promote the health of employees Woori OverviewBusiness OperationsFinancial Review068 Social Contribution Activities Woori Bank’s roots are embedded in Daehan Cheonil Bank, which was established in 1899 with funds from the imperial family by Emperor Gojong who envisioned to protect Korean commerce. For 121 long years, Woori Bank fulfilled its role to contribute to national development, driven by the pride of being the bank of Korean capital. Particularly in today’s world, where the emphasis is on the social roles and responsibilities of finance, the bank continues to practice sharing in order to prosper together with local communities to realize the three values of Humanity, Happiness and Hopefulness, and carry out diverse social contribution activities including support for small merchants and microfinance in order to fulfill responsibilities as a major financial institution. 2019 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, Woori Bank has been engaged in a number of social contribution activities through its nationwide branch network. The Woori [We] Love Sharing Program is signature CSR program for all bank employees to take part in social con- tribution activities. It involves welfare facilities that have established sisterhood agreements with 34 regional business headquarters. The bank encourages employees to volunteer and provide sponsorship on a regular basis for the socially marginalized, including struggling youngsters, elderly citizens, and the disabled. Woori Bank also runs a social contribution campaign in the first and second half of the year, giving out awards to high-performing branches in the area of social contribution to encourage voluntary participation by employees. The donations for social welfare centers raised during the campaign period are used to support the underprivileged. In February 2019, as part of the Woori G-CSR Festival 2019, Woori Bank deployed a bank-wide social contri- bution campaign with the participation of subsidiaries and branches from 26 nations across the globe as well as domestic branches. From its global network, 317 employees in 22 subsidiaries and branches of Woori Financial Group from the US, China, Cambodia, Brazil and India took part, while domestically, 721 employees from 64 branches came together to help neighbors in need. Donations amounting to KRW 115.4 million were delivered to social welfare facilities to support the socially marginalized. “Blood Drive” with Greater Compassion Woori Bank has been conducting a ‘blood drive’ campaign since 2006. The campaign, carried out during July and August when the need for blood is greatest, is one of Woori Bank’s longest running social contribution activities where employees from branches nationwide voluntarily visit nearby blood donation centers to donate blood and receive donation certificates. In 2019, the bank re- ceived a total of 1,078 blood donation certificates after the blood donations from Woori Financial Group employees were delivered to the Catholic University Eunpyeong at St. Mary’s Hospital for patients fighting incurable illnesses, including leukemia and pediatric cancer. Woori Bank will continue the blood drive consistently, so that voluntary blood donations by its employees can help save lives. “Good Together” – A global CSR campaign launched by Woori Financial Group Blood Drive Campaign for underprivileged patients fighting incurable illnesses including leukemia and pediatric cancer WOORI FINANCIAL GROUP ANNUAL REPORT 2019Woori Care Fund Project 5,760 employees KRW 395 million In 2019, an average of 5,760 employees voluntarily took part each month and raised a total of KRW 395 million Woori Bank 069 Sharing Daily Necessities for the Underprivileged Woori Bank continues to engage in the act of sharing with the underprivileged during traditional holidays and the winter season. This January, the Woori Bank head office marked the beginning of the Better Together Campaign as the CEO joined 196 new recruits in distributing 2,300 Woori Hope Boxes consisting of meal kits for the New Year holidays. These kits went out to 2,300 house- holds in Seoul, including to elderly individuals living alone and to low-income families. For the Chu- seok holidays, KRW 100 million’s worth of meal kits consisting of essential staples such as seasonal fruit and meat were delivered to 120 facilities in Seoul that house children, the elderly, persons with disabilities and the homeless, in an effort to reach out to the socially marginalized who live within the blind spots of welfare assistance. Happiness: Pursuing Happiness through Sharing Woori People’s Culture of Donation: “Woori Care Fund” Woori Bank runs the “Woori Care Fund” where employees voluntarily donate a certain percentage of their monthly pay to help fund social initiatives. Woori Care Fund was launched in 2003 for CSR purposes with the voluntary participation of employees. As of 2019, an average of 5,760 employ- ees participated each month and raised a total of KRW 395 million. The Fund finances the “Woori Care Fund Public Competition Project” where outstanding social welfare programs are submitted by non-profit corporations and groups across the nation in the first and second half of the year to receive on-on-one matching donations from Woori Bank in a bid to support the socially marginal- ized. Woori Bank is now twelve years into the project since its start in 2009 and it has supported ex- cellent social welfare programs that target marginalized children and elderly citizens who fall with- in the blind spots of social welfare. This project does a great deal in supporting the independence of the socially vulnerable, and provides cultural support for the marginalized. In 2019, Woori Bank donated KRW 300 million to 20 social welfare organizations and 20 community children’s centers. In particular, the bank utilized leading donation platforms in Korea such as Happy Bean of Naver Co. and Together with Kakao of Daum Kakao Corp. to maximize customer donation in support of outstanding social welfare programs in the community. Woori Hope Box delivery ceremony to wish happy New Year holidays for underprivileged neighbors in the community Social welfare programs for the underprivileged Woori OverviewBusiness OperationsFinancial Review070 Employee Volunteers 42,636 persons Total Expenditures on Social Contribution (Unit: KRW in 100 millions) 1,494 1,065 Projects to Support Future Leaders Woori Bank engages in diverse social contribution programs to lend a hand to future generations. Last year, the bank operated an education program that invited community children’s centers to visit museums and provided 40 sessions of financial education to socially marginalized children. In addition, a total of 1,262 children learned about the Bank’s history and the basics of finance through customized education program that offered diversified hands-on financial experience. Woori Bank offers Woori Together Scholarships for Youth to well-performing students at the com- munity children’s centers that have established sisterhood ties with the Bank. In 2019, 74 children received scholarships totaling KRW 35 million. Woori Bank also hosts the Special Event for Children from Remote Islands and Areas program for children from rural or fishing villages where social and cultural resources may be relatively scarce. The event offers diverse excursion programs including visits to Gyeongbok Palace and museums. Hopefulness: Inspiring Hope through Communication and Mutual Prosperity “Global Volunteering” to deliver hopes To address social issues in the global community through the bank’s global networks, Woori Bank YoY +40.3% conducts a variety of CSR activities and fulfills its social responsibilities as a global financial firm. In February 2019, its Global Volunteer Corps of 45 Woori Financial Group employees were dispatched to the YANKIN Children’s Hospital in Yangon, Myanmar. They engaged in various meaningful 2018 2019 activities: facility maintenance and repair for children to receive medical services in a clean envi- ronment; teaching activities involving fine arts or physical education; and entertaining cultural performances to bring cheer to children exhausted from lengthy medical treatments. In July, the bank launched the Kind-Hearted Shoe-Making Campaign for children suffering from poverty all around the world. Shoes were handmade by employees and their families and donated along with monetary donations to NGOs that used them to help children living in poverty in Indonesia. Mecenat Activities to Support the Underprivileged Woori Bank has been running the “Healing Concert for Youths” project since 2018, sending an orchestra to perform classical music at schools for children who have little opportunity to come across such music. The Healing Concerts are a part of its culture and arts project to raise aware- ness of disabilities and inequality among future generation by presenting collaborative works of disabled and non-disabled performers. More than 7,000 students in 12 schools attended its Learning about the economic role of banks and importance of saving, visiting exhibition rooms full of relics and films Fulfilling CSR by launching global activities for the underprivi- leged in nations where Woori Financial Group has presence WOORI FINANCIAL GROUP ANNUAL REPORT 2019Healing Concert for Youths 12 schools 7,000 students Raising awareness of disabilities and inequality among students by presenting collaborative works of disabled and non-disabled performers Woori Bank 071 concert in 2019. On the Day of Persons with Physical Disabilities on November 11 2019, Woori Bank sponsored Yoo Soo-Young, a promising badminton player with physical disabilities, presenting him with a tailored sports wheelchair and funds for training. Woori Bank also supported repairs for wheelchairs by visiting welfare halls for the disabled across the nation. 2020 Plans Benefit from Finance, Warmth from Sharing Building a Unique Woori Culture of Sharing with Employees, Families and Customers In 2020, Woori Bank will conduct locally tailored CSR activities with its sister organizations includ- ing Woori Love Sharing Program and continue employee campaigns in the first and second half the year. Woori Bank will conduct the Do Good! Campaign aligned with Naver Co.’s Happy Bean that will encourage family participation and host public competitions on donation platforms such as Naver Co.’s Happy Bean and Daum Kakao Corp.’s Together with Kakao to build Woori’s unique culture of sharing along with employees, their families and customers. Nurturing the Future Generation and Supporting the Underprivileged In 2020, Woori Bank will expand its financial education sessions for community children’s cen- ters and the Woori Together Scholarships for Youth program to continue its projects to nurture the future generation. In addition, Woori Bank will work on reducing inequality and sharing with neighbors through support projects for elderly members in the area, persons with disabilities and multicultural families. Furthermore, the bank will take the lead in practicing CSR by providing im- mediate support whenever a natural disaster, like a fire, epidemic or typhoon strikes the country. In H1 2020, Woori Bank provided preventive kits to high-risk groups of COVID-19 in order to pre- vent the spread of the virus. In February, the bank delivered KRW 500 million worth of food items and monetary donations from employees to socially vulnerable elderly individuals and children’s facilities in the Daegu-Gyeongbuk region. In March, Woori Bank supplied lunch boxes and health supplements every day for 400 healthcare providers in district general public hospitals in Daegu and starting in April, Woori Bank has been continuing anti-infection projects at 160 children’s wel- fare centers in Seoul. Supporting underprivileged children with not enough to eat as COVID-19 forces schools to suspend school meals Woori OverviewBusiness OperationsFinancial Review072 WOORI CARD Customer -Centered Services Woori Card was separated from Woori Bank in April 2013 in a bid to bolster Woori Financial Group's competencies in the credit card business and competitiveness in the non-banking sector. Based on an expansive banking network and customer base, Woori Card devised optimal business strategies as the credit card affiliate of the Group and is proactively pursuing new business to secure a new engine of growth. Furthermore, Woori Card places topmost priority on customer value throughout its business in developing products and services that cater to the needs of its customers. Woori Card also brings differentiated services to customers by actively forging partnerships with other industrial sectors and expanding business scope. As Woori Financial Group was inaugurated in January 2019, and Woori Card was incorporated as a subsidiary in September of that same year, Woori Card expects to generate powerful synergy with its Group affiliates. 2019 Woori Card wins 2019 Family Friendly Certification and Government Award, Ministry of Gender Equality and Family Woori Card wins Check Card No.1 Award, Korean Standard – Premium Brand Index Grand Prix 2019, Korea Standards Association / Chosun Ilbo 'Standard of Cards' wins the Credit Card Category of Korea Good Brand Awards 2019, Dong-A Ilbo WOORI FINANCIAL GROUP ANNUAL REPORT 2019Woori Card 073 Usage (Unit: KRW in 100 millions) 826,495 763,575 738,565 YoY +8.2% 2017 2018 2019 Operating Income (Unit: KRW in 100 millions) 17,558 13,867 13,681 2017 2018 2019 Net Profit (Unit: KRW in 100 millions) 1,265 1,142 927 YoY -1.3% YoY -9.7% 2019 Performance Part 1. Business Performance The volume of payments being settled via cards is increasing, driven by a growing membership pool, aligned business with Woori Bank and an aggressive entry into the simple payment market. Woori Card also continues to expand financial assets (long-term card loans) based on its high-val- ue customers. In addition, as part of the efforts to develop new businesses to diversify its revenue base, Woori Card has been operating installment, lease and credit loan businesses since 2016, while continuously expanding source of long-term income. As credit card merchant fees were lowered, its profits decreased by KRW 95.6 billion in 2019. However, Woori Card overachieved its initial target for net income (KRW 81.3 billion) with KRW 114.2 billion, thanks to financial asset ex- pansions, cost-cutting efforts and non-recurring factors relating to the BC Card litigation. Part 2. Business Management Rationalization Woori Card endeavors to systematically respond to the evolving business environment. Woori Card boosted focus on core functions and sped up decision-making processes by streamlining or- ganization through functional readjustments among departments. Driven by dedicated Big Data organization, Woori Card is also pressing ahead with ultra-personalized customer management by advancing marketing efforts to a whole new level, reinforcing the loyalty of active members and boosting the usage among inactive or dormant members. In addition, Woori Card established a new digital marketing organization to respond to the changes in the digital finance ecosystem such as the growth of simple payments. 2020 Plans Overall business conditions for the credit card industry are expected to only worsen in 2020. The pace of growth in the industry is predicted to slow amid contracted private consumption, a near-mature credit card business environment, ever-rising household debt, lower merchant fees and particularly because of universal recession triggered by COVID-19. Further threats are posed by fiercer competition from other industries such as ICT companies expanding their business in the payment and settlement market and online-only banks planning to launch credit card businesses. In order to meet such changes head on, Woori Card sets the business goal of 2020 as “Securing the Future Growth Engine through Innovation and Challenge”, under which the company has six business strategies: Raising Value alongside Customers; Securing Sources of Income; Accelerating Digital Innovation; Bolstering Risk/Compliance Monitoring; Expanding Group Synergy; and Firmly Establishing the Foundation for Future Growth. To this end, Woori Card plans to focus on boosting income by thoroughly managing the profitabil- ity of each business and efficiently controlling costs. In addition, Woori Card will expand profitable 2017 2018 2019 assets mainly through high-value members by reinforcing data analytics and advancing marketing efforts. Woori Card will also readjust portfolio to attract new members and improve cost structure. Woori Card will secure the foundation to continuously create income by aggressively boosting the efficiency of its business management: Woori Card will actively cut costs by raising company-wide business efficiency; deploy ultra-personalized marketing driven by a dedicated Big Data organiza- tion; and bolster asset soundness by thoroughly managing risk. Furthermore, in order to secure the engine of new growth, Woori Card will make the utmost effort to align with the global networks of Woori Bank and expand synergetic businesses with Group affiliates under Woori Financial Group. Woori OverviewBusiness OperationsFinancial Review074 WOORI INVESTMENT BANK Woori Investment Bank is the only company in Korea fully dedicated to total financial services with main business lines in deposits including bills issued and CMA as well as loans and securities management. Recently, Woori Investment Bank has been striving to diversify revenue base by expanding its business scope to include NPL investments and IB, while developing new sources of income through the synergy created by Woori Financial Group. Building a Financial Foundation through Stable Growth and Innovation Woori Investment Bank is the only company in Korea fully dedicated to total financial services Creating financial ecosystem for innovative growth Direct investments in innovative growth companies: 36 cases Discovering IB business opportunities overseas Engaged in Binh Duong New City development project in Vietnam WOORI FINANCIAL GROUP ANNUAL REPORT 2019Woori Investment Bank 075 Interest Income (Unit: KRW in 100 millions) 601 498 YoY +20.7% 2018 2019 Net Income (Unit: KRW in 100 millions) 550 324 2019 Performance Part 1. Boosting Fee Income through Bolstered IB, Diversifying Business Scope Amid the trends of low interest rate and low growth, Woori Investment Bank bolstered the secu- rities business in order to expand its proportion of fee income. Woori Investment Bank revitalized IB business including deal management/arrangement/advisory services and reinforced organi- zation and workforce in order to diversify revenue base through bonds management and acquisi- tion/brokerage businesses. As a result, fee income in 2019 jumped 143 percent (KRW 18.4 billion) year-over-year to KRW 31.3 billion (stand-alone basis). Part 2. Reinforcing Management of Loan Soundness As uncertainties in the financial environment continue to unfold, Woori Investment Bank is rein- forcing management for the stability of loans. Woori Investment Bank is not only monitoring risk management indicators and bolstering ex-ante reviews, but perform ex-post reviews through the newly established Loan Review Department. In 2019, its ratio of substandard-or-below loans and non-performing loans was 0.49 and 0.21 percent respectively, down 1.02 percent and 1.28 percent respectively from last year. 2020 Plans Woori Investment Bank has set its 2020 business goal as “Building a Financial Foundation through Stable Growth and Innovation,” targeting a profit growth of 31 percent and asset expansion of 28 percent y-o-y. In particular, as the one and only financial investment subsidiary within the Group, Woori Investment Bank is focusing efforts on expanding non-banking business in order to drive towards Woori Financial Group’s goal of becoming the “No.1 Comprehensive Financial Group.” YoY +69.7% 2018 2019 In step with its plan to expand the loan business, Woori Investment Bank is pressing ahead with as- Operating Income (Unit: KRW in 100 millions) 555 320 YoY +73.1% 2018 2019 set expansion mainly in reliably profitable assets. Woori Investment Bank is also pushing forward loan transactions through businesses aligned with Woori Bank. Amid the continuing low interest rate trend, Woori Investment Bank will also continue to boost non-interest income through fee incomes generated by IB business and securities management/brokerage. In the mid-to-long term, Woori Investment Bank plans to expand and raise creditworthiness. As the nation’s only fully dedicated financial service provider, Woori Investment Bank is also reviewing mid-to-long term development measures from multiple angles, taking into consideration market changes and the Group’s portfolio. Boosting Fee Income through Bolstered IB (Unit: KRW in 100 millions) Woori Investment Bank’s First Venture Capital Fund YoY +143% 313 2019 129 2018 KRW 26 billion in size Result of CIB collaboration within Woori Financial Group Woori OverviewBusiness OperationsFinancial Review076 WOORI FINANCE INFORMATION SYSTEM 'Clean Road 90' Campaign Establishing zero-defect IT operation system to ensure reliability of IT services Woori FIS Co., Ltd. will drive Woori Financial Group’s conversion into a holding company system and continue the expansion of its affiliates. It will reinforce customer-centric marketing that leverages non-face-to-face channels and Big Data, engaging in asset management with the use of new digital technologies and become a leading bank in the foreign currency market. It will expand the global financial belt and its global non-face-to-face channels and renew digital banking services with a user-centric perspective and revitalize the mobile web, and lastly, it will maximize its business competencies by using innovative digital technologies. Woori FIS plans to concentrate organizational competencies on the stable operation of next-generation systems; foster personnel and secure competitiveness to deploy new digital technologies and launch new businesses for customers; secure global service personnel and reinforce their competencies; affect change in the way it works to enhance customer satisfaction; develop organization-centric IT services; and acquire operational competencies. 2019 Performance Under the 2019 business goal of “Securing Group IT Stability and Reliability,” Woori FIS focused en- deavors on the three business strategies: a) Enhance Quality and Service Level; b) Bolster Efficiency in the IT Operation System; and c) Boost Organizational and Specialized Competencies. Woori FIS also focused on the six business tasks: a) enhance IT quality by optimizing IT and continuously removing risk factors; b) provide timely support to Group businesses and procure site-tailored IT services; c) bolster efficiency and competitiveness by improving the IT system and organization; d) build the computing environment for end users in mind; e) rebuild the corporate culture (enhancing organizational synergy); and f) secure competencies to support the continued growth of the orga- nization. 2020 Plans In 2020, Woori FIS has set three business strategies: a) (stability) IT Operations with Zero Interrup- tion and Full Integrity; b) (innovation) Continued Reinforcement of the 2SP Business Management Innovation; and c) (expansion) Expansion of IT-Business Convergence. Woori FIS also plans to focus on nine business tasks: a) expanding the stability and availability of IT services; b) bolstering com- petencies to protect information against ongoing security threats; c) advancing the IT compliance and quality monitoring system; d) innovating IT service processes in a customer-centric manner; e) innovating the system to optimize IT services; f) establishing an organizational culture of dedication and respect; g) reinforcing R&D to leverage technologies; h) discovering IT-based businesses and making preemptive proposals to customers; and i) expanding services based on IT competencies. 'IT and Business Convergence' 2020 Business Goal Business Strategy STABILITY INNOVATION EXPANSION IT Operations with Zero Interruption and Full Integrity Continued Reinforcement of the 2SP Business Management Innovation Expansion of IT-Business Convergence. WOORI FINANCIAL GROUP ANNUAL REPORT 2019Woori Finance Research Institute 077 WOORI FINANCE RESEARCH INSTITUTE Woori Finance Research Institute (WFRI) was established in 2012 with the vision of becoming the nation’s best think-tank specializing in finance and an insight provider that spearheads financial development. In order to effectively support the management in their decision-making processes, Woori Finance Research Institute conducts in-depth research across all aspects of management strategies within financial companies and within the economy and the financial market itself. Woori Finance Research Institute is establishing itself as an opinion leader of Korean finance by sharing the results of its research with customers, the authorities and financial market participants. 2019 Performance In 2019, WFRI published 330 reports with a focus on management strategies, risk management and the discovery of new growth engines in pursuit of the stable growth of Woori Financial Group. In response to the rapidly changing management environment, Woori Finance Research Institute has decided that, in 2020, it will be concentrating efforts on digital finance research, consulting services for subsidiaries and the group’s inside perspective on macro and financial variables. Fur- thermore, in a bid to expand the group’s business portfolio, Woori Finance Research Institute plans to bolster research on global financial companies for benchmarking purposes, non-banking indus- tries and on the nations in which the Group has presence in. Global Leading Insight Provider Best Financial Think Tank in Korea Research on business strategies of financial institutions Research on financial policies and regulations Research on the global financial market and financial industry Analysis of domestic and international economic trends Opinion leader of Korea’s financial industry Contributor to the development of Korea’s financial industry Woori OverviewBusiness OperationsFinancial Review078 WOORI CREDIT INFORMATION Woori Credit Information’s main line of business is debt collection, credit investigation and asset management. Woori Credit Information has solid financial soundness with the smallest liabilities and largest assets among credit information companies that are under financial holding companies in Korea. Furthermore, it has reinforced independent business viability by securing various business partners outside Woori Financial Group. Woori Credit Information will secure the topmost position and lead the market, driven by vigorous sales capacity and business management efficiency. First credit information company in Korea 01 Diversified and specialized manpower 02 IT system of perfection 03 Best financial soundness in the industry 04 Robust CSR activities WOORI FINANCIAL GROUP ANNUAL REPORT 2019Woori Credit Information 079 2019 Performance Part 1. Solid Financial Soundness Woori Credit Information currently operates business with zero leverage and have maintained a constant surplus ever since the founding of company. In addition, it is financially sound and has the largest assets and the lowest debt ratio (26.6 percent) among all credit information companies that Debt-to-Equity Ratio (Unit: %) Woori Credit Information 26.6 Company A Company B 65.9 are under the wings of a financial holding company in Korea. 86.8 Category Total Assets Debt-to-Equity Ratio (unit: KRW in 100 millions) Company A Company B Woori Credit Information 379 26.6% 253 65.9% 278 86.8% Percentage of Revenue from Non-Affiliates (Unit: %) Woori Credit Information 31.0 21.0 Company A Company B 2.3 Part 2. Highest Level of Revenue from Non-Affiliates One measure of sales capacity for credit information companies under the umbrella of financial holding companies is the percentage of their revenue generated outside the holding company. Woori Credit Information has proven its sales capacity with the highest percentage of revenue from non-affiliates. It has secured various business partners outside the holding company and boosted revenue by expanding the scope of business continuously through proactive marketing efforts. Category Woori Credit Information Company A Company B Percentage of Revenue from Non-Affiliates 31.0% 21.0% 2.3% 2020 Plans Woori Credit Information’s business goal this year is “Venturing into New Markets, Managing Busi- ness Based on Internal Robustness.” It aims to achieve this goal based on the following systematic and efficient management strategies. First, “Venturing into New Markets.” It will concentrate its efforts toward discovering new engines of growth and diversifying sources of income in order to overcome the harsh business environment and to continue growth. It will also expand customer base by attracting more business partners. Second, “Maximizing Efficient Management.” Woori Credit Information will maximize efficiency in its business management based on a profitability analysis of each segment by efficiently manag- ing the organization and personnel, simplifying work, building a new system, saving non-essential expenses, and bolstering the competencies of workforce. Third, “Customer-Centric, On-Site Business Management.” Woori Credit Information will earn sup- port from customers and gain competitiveness by prioritizing customers and providing them with differentiated, tailored services that meet their needs. Lastly, “Stronger Support Policies for Debtors.” In step with government policies to boost support for the socially vulnerable, Woori Credit Information will boldly push forward measures to revitalize debt adjustment to the benefit of both debtors and Woori Credit Information. Furthermore, Woori Credit Information will fulfill social responsibility by bolstering ethical management through legiti- mate debt collection and reinforced individual credit information. Woori OverviewBusiness OperationsFinancial Review 080 WOORI FUND SERVICE Administrative management services for KRW 110 trillion of assets Specialized adminis- trative management company with best- in-class system Woori Fund Service is a specialized administrative management company equipped with a best-in-class system that provides various administration services including fund accounting and reference price computation for collective investment vehicles. Woori Fund Service is also increasingly being recognized as a powerhouse in handling general administration for real estate investment trusts, or REITs. Woori Fund Service endeavors to become a better service provider by stabilizing services with its new DRS system and through minimizing errors through stringent internal controls. 2019 Performance Woori Fund Services commenced administrative management services for Woori Asset Manage- ment, which was incorporated as a subsidiary of Woori Financial Group in August 2019. Its System advancement process proceeded for six months from October 2019, involving data relocation and customized services for asset management companies. As a result, it now provides administrative management services for assets amounting to KRW 110 trillion. Woori Fund Service will also initiate administrative management services for Woori Global Asset Management in September 2020. Woori Fund Service believes this will create great synergy with asset management companies under the wings of Woori Financial Group, and will actively deploy marketing initiatives on their behalf. 2020 Plans Recent improvements (cut-off) on the fund reference price computation scheme will be applied to the system, which will enable a sooner completion of the computation and contribute to the stabiliza- tion of this industry. Moreover, Woori Fund Service plans to file for a patent application on the (tentatively called) “Man- agement Direction Forwarding Service,” developed to remove risks from the reference price com- putation. The Management Direction Forwarding Service enables the IT system to automatically notify whether management directions from asset management companies have been received or processed. This means that issues with manual processing can be prevented in advance. Woori Fund Service also aims to enter into the insurance industry based on bolstered business competitiveness by computing reference prices for variable insurance, building an IFRS system and developing an accounting system for REITs. In addition, it plans to press ahead with global business linked with its affiliates at Woori Financial Group beginning in the Asian region. WOORI FINANCIAL GROUP ANNUAL REPORT 2019Woori Asset Trust 081 WOORI ASSET TRUST Woori Asset Trust is a comprehensive real estate financing company that Woori Financial Group newly acquired in 2019. On the basis of experience and customer trust cumulated over nearly 20 years, Woori Asset Trust pushes forward continued growth with over KRW 30 trillion in entrusted assets. Woori Asset Trust will provide the complete financial services for the Group to become the No.1 comprehensive real estate financing company with an excellent customer satisfaction track record by managing customer assets in a safe but highly profitable manner. 2019 Performance Since its incorporation into the Woori Financial Group as of December 30 2019, Woori Asset Trust has restructured its organization under the leadership of the current co-CEOs, aiming to invigo- rate synergetic effects created by the “business management sector” and the “business promo- tion sector”. Despite the industry-wide recession, market impact and financial strain on Woori Asset Trust were both limited as business has a low percentage of loan-type land trusts that are high-risk in nature. Woori Asset Trust was able to generate stable profits by gradually expanding its proportion of management-type land trusts backed by completion guarantees, based on its existing strength in collateral trust, agency business and other areas that are relatively less sensitive to fluctuations in the real estate market. Company Woori Asset Trust Korea Trust Hana Asset Trust KB Real Estate Trust Kyobo Asset Trust Asia Trust Mugunghwa Trust Daehan Real Estate Trust Korea Asset Investment Trust Korea Real Estate Investment and Trust KORAMCO REITs and Trust (unit: %, KRW in millions) ROE(%) ROA(%) Net Income 36.4 28.1 26.7 23.4 22.7 21.9 21.0 13.9 13.8 11.8 8.3 24.5 20.7 17.1 18.4 18.0 16.5 11.8 5.1 7.6 7.0 3.9 31,122 25,361 65,701 61,713 26,473 25,409 18,745 37,078 79,598 90,737 21,629 Note: Data from Korea Financial Investment Association E-Disclosure Service (As of Dec. 31 2019, 11 existing companies) 2020 Pursuing Revenue Diversification through Internal Robustness REITs Brand Reputation Index No.3 Seeking reapproval as REITs AMC Woori OverviewBusiness OperationsFinancial Review082 Operating Income KRW 41.15 billion YoY +0.34% Profitability ROE ROA 36.4% 24.5% 2020 Plans Goal for this year is “Building Reliable Total Real Estate Finance,” and Woori Asset Trust plans to carry out strategies accordingly on “building a stable system”, “diversifying the revenue base”, and “revitalizing Group synergies”. In the mid-to-long term, Woori Asset Trust will seek out opportunities to venture into new busi- nesses by hiring outstanding talent (discovery), ensuring consistency in management policies through Group-level business administration and risk management (bolstering internal robust- ness), and building stable business capacity (scaling out externally). Detailed business strategy for this year is as follows: Build a Stable System through Organizational Restructuring (including New Set-Ups) · Establish a Business Planning Department to build a growth engine for promoting new business by reinforcing capacity in strategic planning and financial management. · Appoint a Risk Management Officer to an executive position (with a new, dedicated subordinate organization) to bolster internal and external risk management as well as internal controls. Im- prove the process of the entrustment system to take on trust businesses more selectively. · Appoint a Compliance Officer to an executive position (with a new, dedicated subordinate organi- zation) to firmly establish a spirit of compliance and ethical management. Conduct a regular train- ing program to reduce and prevent litigation. Diversifying the revenue base · Expand market share by quickly securing management-type land trusts backed by completion guarantees in stable businesses, based on heightened credibility from being incorporated into Woori Financial Group. · Pursue small redevelopment projects in the metropolitan area by winning the small scale recon- struction project for the Daeheung Townhouse near Namguro Station, Seoul · Allocate essential personnel and secure a larger space to be reapproved as a REITs asset manage- ment company within the year Revitalize Group synergies · Promote synergy through collateral trust and land trust businesses aligned with PF loans (includ- ing introduction) extended by Woori Bank, etc. · Promote the development of the Group’s available, unused real estate for youth housing and other government policy projects. WOORI FINANCIAL GROUP ANNUAL REPORT 2019WOORI ASSET MANAGEMENT AUM KRW 19.1 trillion Net Income KRW 8 billion 2019 Market Share 1.57% Woori Asset Management 083 Woori Asset Management is a comprehensive asset management company that carries out fund management, investment advisory business, discretionary investment and additional lines of business. On top of managing the three leading publicly offered bond funds – Woori High Plus Bond Fund, Woori High Plus Short Duration Blue Chip Bond Fund and Woori Short-Term Bond Fund – Woori Asset Management is entrusted to manage discretionary funds by multiple institutions including pension companies, insurers, banks and mutual aid associations. Woori Asset Management is also gaining substantial recognition with stock funds including index funds, small-mid high dividend funds and Samsung Group stock funds. 2019 Performance As of end of 2019, in net asset value (NAV) terms, Woori Asset Management is entrusted to man- age KRW 19.1 trillion, around the same level as was at the end 2018, and it realized a net income of KRW 8 billion. In terms of assets under management (AUM), market share was 1.57 percent, 2.3 percentage points down from the 1.80 percent at the end of 2018. Breakdown of key changes revealed that the AUM of stock funds grew by KRW 223.9 billion (up 17.4 percent y-o-y) and that of bond funds dropped by KRW 258.3 billion (down 1.8 percent q-o-q). Category (unit: KRW in 100 millions) End of Dec. 2019 End of Dec. 2018 End of Dec. 2017 AUM of Woori Asset Management 191,346 191,367 213,760 AUM Total Market Share 12,151,476 10,608,562 10,280,506 1.57% 1.80% 2.08% (Source: Korea Financial Investment Association, funds+discretionary funds, NAV) With interest rates on a constant decline, the AUM of domestic bond funds spiked up its YTD figures through August. Since then, however, interest rates have rebounded and investors have withdrawn their money from bond funds. Publicly offered bond funds underperformed as they are short- er-lived than competing funds as a result of going after a “bank rate plus mark-up” yield. Private eq- uity bond funds, on the other hand, are performing solidly, under stable management that meets the needs of institutional beneficiaries. For stock bonds, Woori Asset Management adopted a new management method focused on re- sponsible investment and applied a Quant Model in pursuit of alpha. As a result, stock bonds are performing better, realizing a healthy yield well above the benchmark. The Global Investment Management Unit, established on October 21 2019, will boost competitive- ness by broadening the product line-up that meets the market needs. Woori Asset Management launched the Global EMP Asset Allocation Fund and is preparing a TDF (Target Date Fund) to raise its market share in retirement pensions. It also seeks to regain investors’ trust by pushing up yields on Chinese and Vietnamese funds. Woori OverviewBusiness OperationsFinancial Review 084 Net Income KRW 8 billion YoY +33.3% Operating Income KRW 10.2 billion YoY +21% 2020 Plans Business goal for 2020 is reliable management with highest priority on customers’ yield. Under this goal, Woori Asset Management expects to increase net income by 19.5 percent to KRW 10.4 billion and add a face value amount of KRW 4.3 trillion to its AUM. Under this goal, Woori Asset Management is aggressively promoting specific tasks that include diversifying new sales channels, expanding new product line-ups, advancing a research-based management process and perfor- mance evaluation system, bolstering preemptive risk management and creating synergetic effects with Group affiliates. Woori Asset Management foresees an annual average growth rate of around 5 percent for con- ventional stock and bond funds. Previously, it managed to achieve market-level growth, mainly through bond funds. This type of growth, however, is no longer viable as interest rates remain low and the market share of bond funds has reached its maximum level. As such, Woori Asset Manage- ment aims to overcome somewhat limited recognition resulting from its focus on handling small and mid-cap stocks by expanding market share in the large-cap stock market to equip itself with a new engine for growth. In 2020, Woori Asset Management will also bolster synergetic effects with the holding company. Woori Asset Management will promote joint marketing efforts for key products including MMFs for individual investors and bond funds by reinforcing affiliated sales with Woori Bank. It will also provide “tailored” products to CIB and WM customers. In addition, Woori Asset Management plans to boost Group collaboration to prepare for the introduction of the trust-based retirement pension scheme and also develop new products by collaborating with IB. It also aims to fully step into the role of being a Solution Provider and develop solution products and TDF products that meet the needs of investors. Outstanding Excellence in Domestic Bond Funds KG Zeroin Korea Fund Awards Feb. 12, 2019 Best Fund in Domestic Bonds Category Maekyung Securities Awards Feb. 21 2019 WOORI FINANCIAL GROUP ANNUAL REPORT 2019Woori Private Equity Asset Management 085 The private equity business continues to grow as key investment institutions enlarge their alternative investments and private capital assumes a larger role in the restructuring and M&A market. Woori Private Equity Asset Manage- ment is a first generation private equity fund management company in Korea that was established in October 2005. In July 2016, the company expanded its business scope by adding the management of hedge funds (“alternative invest- ment” henceforth) to its existing business of managing private equity funds (“PEF” henceforth), thereby contributing to Woori Financial Group’s scale-out in the IB sector as the private equity asset management company of the Group Woori Private Equity Asset Management will continue quantitative and qual- itative growth as a PEF management company that leads the industry by pre- senting the best investment value and realizing customer satisfaction. 2019 Performance In 2019, Woori Private Equity Asset Management achieved quantitative and qualitative growth by discovering and promoting various investment businesses under the goal of maximizing fund management performance and expanding the scope of its business. As the company was selected to undertake fiduciary management for KDB and Korea Growth Investment Corp, the PEF Depart- ment accordingly built two blind funds – one at the end of 2018 (Woori-Shinyoung Growth-Cap Private Equity Fund I, KRW 163 billion) and another in May 2019 (Woori-Q Corporate Restructuring Private Equity Fund, KRW 155.1 billion). It then went on to execute four investments in the excellent investees it discovered. The Asset Management Department ventured out of mainly investing in domestic SOC projects and expanded into the overseas development infrastructure, overseas real estate and innovative growth support funds, further boosting its profitability. Part 1. Successful Investment Executions by the PEF Department The PEF Department manages three funds as of end of 2019, with a total capital commitment of KRW 361.6 billion. In 2019, main focus was executing investments for the two existing blind funds. In particular, for the Woori-Shinyoung Growth-Cap Private Equity Fund I, which was developed as Woori Private Equity Asset Management and which became the fiduciary manager for KDB, it executed investments selectively in enterprises with technological prowess and growth potential. The department did so in various sectors that encompass advertising media, real estate platforms, security and anti-wiretapping device manufacturing, while generating outstanding investment performance by enhancing the value for investees. Furthermore, 60.3 percent of the total capital commitment was executed at the end of March 2020. Such remarkable records in carrying out in- vestments laid the foundation to foster more blind funds going forward. WOORI PRIVATE EQUITY ASSET MANAGEMENT The Most Value-Creating Equity Provider 15 Alternative Investment Funds under Management KRW 1.2 trillion in accumulated commitments (As of end-2019) Woori OverviewBusiness OperationsFinancial Review086 Total Capital Commitments in PEF KRW 362 billion Part 2. Expansion of Diverse Investments Driven by Stability and Profitability The Alternative Investment Department manages 15 funds as of end of 2019, with accumulated commitments reaching KRW 1.1972 trillion. In 2019, profitability was improved as the department successfully diversified its business by ex- panding overseas investments that display both stability and profitability, and the average rate of the management fees climbed 119.2 percent year-on-year. Moreover, as it ensures thorough man- agement of ex-ante and ex-post risks, not a single investment has incurred a loss since the launch Growth of Average Rate of Management Fees YoY +119.2% 2019 2018 of the business. 2020 Plans Woori Private Equity Asset Management will continue to grow in quantitative and qualitative terms in 2020, with the aim to leap towards becoming the industry-leading asset management company by offering the best investment value and customer satisfaction. The PEF Department will maximize return on investment by enhancing the values of investees that compose the portfolio of the two blind funds, while making more investments to generate the best results. In addition, it will secure position as a leading player that drives the domestic PEF market by pushing ahead to foster another blind fund of around KRW 300 billion in volume by attracting investments from major institutions. The Alternative Investment Department plans to broaden assets under management by discov- ering new businesses to invest in, including overseas infrastructure and real estate. The depart- ment will also produce stable investment performance with the existing business by thoroughly managing investment ex-post. The Alternative Investment Department also plans to foster a new fund amounting at around KRW 300 billion, which will bring accumulated commitments to KRW 1.5 trillion within 2020. WOORI FINANCIAL GROUP ANNUAL REPORT 2019WOORI GLOBAL ASSET MANAGEMENT Woori Global Asset Management 087 Woori Global Asset Management started off as Allianz Global Investors and grew into a global asset management company with approximately KRW 9 trillion in assets under its management at the end of 2019. Woori Global Asset Management became an affiliate of Woori Financial Group in December 2019. On top of its existing strength in stocks, bonds and overseas fund of funds, the company broadened its business scope into the alternative investment market by establishing the Global Investment Unit and Alternative Investment Unit to handle investments in infrastructure, real estate and acquisition financing. Woori Global Asset Management believes that the best way to gain a competitive edge in the market begins by truly understanding the big picture. Woori Global Asset Management leaves no stone unturned in doing its utmost to fully understand the needs of both the market and its customers, and based on the solid foundation and global networks of the Woori Financial Group it presents customers with best-in-class management competencies and competitive investment solutions. Sustainable 2019 Performance Smart Investing Multilateral In 2003, Woori Global Asset Management launched the very first fund of funds in Korea, that was based on the sophisticated asset management methodologies of the German Allianz Group, that invested overseas. Since then, Woori Global Asset Management has been spearheading the market by taking the lead in launching a wide range of overseas investment products. In 2019, the company expanded product line-up in step with customer demand by launching USD-de- nominated overseas bond funds and unhedged funds, firmly entrenching its leadership position in overseas bond funds. Furthermore, it broadened strategic partnerships with reputable asset management companies overseas by launching the Woori G. Artisan Global Opportunities Fund in late 2019 with Artisan Partners - a US company with a stellar track record in global stock asset man- Responsible agement. Moreover, as the alternative investment market has recently been posting rapid growth, Woori Global Asset Management selected alternative investments as a new growth business and estab- lished the Global Investment Unit and Alternative Investment Unit. They focus on preemptively discovering investment opportunities in reliably profitable alternative investment assets, in Korea and abroad, from which they can expect value appreciation and consistent yields. To this end, the Global Investment Unit and Alternative Investment Unit reinforced operation systems and sourc- ing channels and also developed and launched products in the fields of domestic and overseas acquisition finance, real estate and infrastructure. Transparent Woori OverviewBusiness OperationsFinancial Review088 AUM KRW 8.7 trillion 2020 Plans Woori Global Asset Management aims to provide investment products that guarantee reliable in- come for customers based on specialized and accurate in-house research and operation system as well as its sophisticated risk and compliance monitoring systems. As an affiliate of Woori Financial Group, Woori Global Asset Management will strive to actively present the best investment solutions to all individual, corporate and institutional customers of the Group and generate synergy in multiple fields with other Group affiliates including through aligned business and combined product development. In stocks, Woori Global Asset Management promotes a bold kind of management driven by fundamentals and corporate value analysis that is based on in-house research and targets mid- to-long term results. The company is building competitive asset management and risk manage- ment systems to maintain stable performance in managing domestic general stock funds and small-and-medium cap funds, while developing new products to diversify investments into over- seas markets. In bonds, Woori Global Asset Management strives to build a system that can further stabilize as- set management and achieve outstanding risk-adjusted return. In the institutional discretionary sector, it will bolster collaboration with the marketing unit in order to boost AUM and also enlarge MMF net asset value through stable management. In global and alternative investments, its goal is to become a reliable asset management company specializing in overseas funds. To help achieve this, the company will reinforce strategic part- nerships with reputable asset management companies overseas and enhance the quality of its management process and communications with customers for launched products. Furthermore, based on its global networks in relation to alternative investments, the company will develop vari- ous alternative investment products in the fields of domestic and overseas real estate, infrastruc- ture, aircraft finance and acquisition finance on top of existing focus on stock funds and bond fund of funds. Risk Management Process Risk Management Committee Risk Management Team Management Team Decision making Review of risks, Sharing of data Report Submission of explanatory statement, Approval of violation Establishes risk management policies and makes decisions Monitors for violations of risk management regulations Manages funds in compliance with risk management guidelines WOORI FINANCIAL GROUP ANNUAL REPORT 2019089 FINANCIAL REVIEW Management’s Discussion and Analysis Separate Financial Statements Consolidated Financial Statements Global Network 090 120 168 319 Woori OverviewBusiness OperationsFinancial Review090 MANAGEMENT’S DISCUSSION AND ANALYSIS 1. Disclaimers on Forecast Information Activities, events or phenomena that are expected and predicted to occur in the future in this annual report for Woori Financial Group Inc. reflect the company’s thoughts and opinions on the events and financial performance at the time when this document was prepared for disclosure in the same term. The forecast information is based on diverse assumptions associated with the future business environment, and, consequently, such assumptions may be judged to be inaccurate in the future. Moreover, the assumptions include risks, uncertainties and other factors that might cause critical differences between estimated outcomes in the forecast information indicated here and the actual outcomes. Factors that might induce such critical differences encompass factors related to internal corporate management and those related to the external environment, and include other wide-ranging factors. Woori Financial Group has no obligation to disclose a revised report with corrections on matters prescribed in the forecast information in order to reflect risks or uncertainties that might occur after the preparation of the forecast information. In conclusion, Woori Financial Group cannot confirm the realization of expected results or matters forecast by the Group or the occurrence of any impacts projected in this business report. Forecast information prescribed in this report is current as of the time the report was prepared. Please note that Woori Financial Group has no plan to provide updates on such risk factors or forecast information. Furthermore, it should be noted that even under such circumstances, the forecast data shall not be used as evidence for legal responsibility regarding investment outcomes for customers. 2. Overview After establishing Woori Financial Group, Inc. on January 11 2019, Woori Financial Group Inc. acquired two asset management companies (Woori Asset Management Corp. and Woori Global Asset Management Co., Ltd.) and a real estate trust company (Woori Asset Trust Co., Ltd.). In addition, Woori Card Co., Ltd. and Woori Investment Bank Co., Ltd., which were subsidiaries of Woori Bank, were incorporated as Group subsidiaries, widening the business portfolio and solidifying the Group system. Four percent of the shares in mutual ownership issued in the process of launching the holding company and incorporating subsidiaries were sold to Fubon Life Insurance – a Taiwanese major financial company. As such, despite harsh financial conditions, Woori Financial Group was able to complete the selling of shares, driven by thorough preparation and aggressive endeavors to attract investors, shedding any issues regarding share overhang and stabilizing the Group’s governance. Furthermore, Woori Financial Group purchased the Woori Financial Namsan Tower across the street from the main office building of Woori Bank. Some of the Group affiliates have relocated to the Tower, giving impetus to building the “Namsan Woori Financial Town.” In terms of financial performance, Woori Financial Group Inc. realized a net income of KRW 2.0038 trillion on a consolidated basis in 2019 (Net Income Attributable to Controlling Interests: KRW 1.8722 trillion). In 2019, the business environment in the financial industry was generally strained in general as the US-China trade conflicts continued, on, triggering a global recession and causing central banks in the US and other nations to lower interest rates, which also pushed down market rates. Nevertheless, Woori Financial Group realized strong performance with an improved profit structure by growing assets, mainly in reliably profitable corporate loans and expanding core deposits, while further enhancing asset soundness, that which was already one of the best in the industry. In terms of profitability, the decline in market rates and fiercer competition for deposits brought on by the new LDR rule pushed down NIM (0.10%p on the Group basis, 0.08%p on the Bank basis). Even so, a balanced growth of financially sound corporate loans and household loans bolstered interest- bearing assets, as net interest income climbed 4.3% over the previous year (2018 Woori Bank consolidated basis, same applied henceforward) to KRW 5.8937 trillion. Non-interest income dropped 1.3% y-o-y to KRW 1.0466 trillion, but net fees and commissions income, which is core non- interest income, stood at a solid KRW 1.1026 trillion, mainly driven by the asset management business. General and administrative expenses slightly movedinched upwards due to general expenses during the initial stage of establishing the holding company and wages for new subsidiaries. Going forward, however, the CI ratio will be robustly managed with efficient channels and business strategies. In asset quality, Woori Financial Group recorded an NPL ratio of 0.45% and delinquency ratio of 0.33% on the Group basis – the lowest level in the industry. This was possible as Woori Financial Group improved portfolio by boosting the share of financially sound assets and by proactively writing off bad debt and preemptively managing risk to restrain non-performing loans. In terms of capital adequacy, Woori Financial Group applies the standardized approach in calculating capital adequacy ratios, this being its first year as a holding company. At end-2019, BIS total capital ratio of the Group was 11.89%, which was above the regulatory requirement of 10.5%. Woori Financial Group is also strenuously actively striving to enhance capital adequacy by issuing capital securities and boosting high-quality assets. At present, review is underway for the approval of the internal ratings-based (IRB) approach. In October 2019, major subsidiary Woori Bank acquired the approval to switch to the IRB approach. The capital adequacy ratio is expected to be enhanced once Woori Financial Group Inc. acquires the said approval. WOORI FINANCIAL GROUP ANNUAL REPORT 2019091 Meanwhile, as the growth of the domestic financial market becomes stagnant, there is an increasing need to diversify the revenue base by making inroads into overseas markets. At the end of 2019, the Group owned a total of 474 global networks in 23 nations and is still aggressively actively venturing into other markets. Endeavors to boost global businesses with an aim to restructure domestic-centered revenue base led to a global business net income of KRW 224 billion, a 15.8% increase y-o-y, accounting for more than 10% of total profits. In step with the growth of digital finance in Southeast Asia, Woori Financial Group will further advance locally specialized mobile banking services and accelerate qualitative growth based on global risk management. Key Management Indicators Category B/S I/S Total Assets (Including AUM) Total Assets (Excluding AUM) Loans in KRWNote 1) Net Interest Income Net Fees & Commissions Income Other Operating Income Operating Income Net Income Management Indicators ROA Including Non-Controlling Interests Net Income Attributable to Non-Controlling Interests Net Income Attributable to Controlling Interests Excluding Non-Controlling Interests ROE Including Non-Controlling Interests Excluding Non-Controlling Interests NPL Ratio BIS Total Capital RatioNote 2) (Unit: KRW in billions, %) At End-2019 473,794 361,981 221,687 5,894 1,103 430 △ 2,800 2,038 165 1,872 0.57 0.52 10.11 9.29 0.45 11.89 Note 1) Based on consolidated financial statements Note 2) Based on standardized approach Note 3) Net fees and commissions income: Fees and commissions income in KRW + Note 4) Other operating income: gain (loss) on insurance + gain (loss) on Valuation & Disposi- tion of Securities + gain (loss) on Valuation and Disposal of Loan + gain (loss) on foreign exchange + gain (loss) on derivatives + provision for/reversal of credit loss reserve + provision for/reversal of allowances + dividend income and commissions income in foreign currency + fees and commissions income related to credit cards + fees and commissions income related to securities + fees and commissions income related to leases + fees and commissions income related to brand usage + fees and commissions income related to trust Note 4) Other operating income: gain (loss) on insurance + gain (loss) on Valuation & Disposition of Securities + gain (loss) on Valuation and Disposal of Loan + gain (loss) on foreign exchange + gain (loss) on derivatives + provision for/reversal of credit loss reserve + provision for/reversal of allowances + dividend income Although 2020 started off with expectations of an economic recovery, the outlook for both the economy in general and the financial industry is dismal, due to the unexpected COVID-19 outbreak. It seems that recovery will all depend on when the outbreak subsides, but concern of another global recession is looming as the World Health Organization has recently declared COVID-19 a pandemic. The Federal Reserve lowered its benchmark interest rate to 1.5%, subsequently, and many other nations are rolling out liquidity expansion policies, which are likely to take a toll on the profitability of banks. In addition, the creation of an innovate digital finance environment by open banking services or third-party online-only banks indicate that Woori Financial Group faces ever fiercer competition with not only other financial institutions but with ICT companies. Provided, Woori Financial Group plans to solidify existing business prowess by presenting customer-centric comprehensive financial solutions and spearhead changes and innovations in new areas such as digital finance, thereby proactively discovering new growth engines. Moreover, in the second year into the Group system, Woori Financial Group will continue to carry out strategic M&As with capital banks, savings banks and securities firms to expand non-banking lineup. Woori Financial Group will also create synergy by bolstering the competitiveness of newly incorporated subsidiaries and boosting collaboration among Group affiliates, in order to discover new business opportunities. Woori OverviewBusiness OperationsFinancial ReviewManagement’s Discussion and Analysis 092 3. Financial Position & Business Performance A. Financial Position & Business Performance (1) Growth 1) Woori Financial Group Inc. Category Total Assets (Including AUM) Total Assets (Excluding AUM) Loans in KRW Loans in Foreign Currency Marketable Securities Credit Card Receivables (Unit: KRW in billions) At End-2019 473,794 361,981 221,687 26,206 53,764 8,399 Note 1) Based on Group consolidated financial statements Note 2) Loans in KRW: Inclusive of inter-bank loans Note 3) Loans in Foreign Currency: Loans in foreign currency + domestic import usance bills + bills bought, inter-bank loans in foreign currency Note 4) Marketable Securities: Marketable securities + investment in subsidiaries + marketable securities credit loss reserve At end-2019, the Group’s total assets (including AUM) stood at KRW 473.8 trillion, growing by KRW 79.3 trillion (or 19.9%) since first disclosure as a holding company at the end of March 2019. Of this growth, newly incorporate subsidiaries (Woori Asset Management, Woori Global Asset Management, Woori Asset Trust) accounted for KRW 55.6 trillion. At the end of 2019, on the Group basis, loans in KRW stood at KRW 221.7 trillion, loans in foreign currency at KRW 26.2 trillion, and marketable securities at KRW 53.8 trillion. 2) Woori Bank Category Total Assets Loans in KRW Corporate Loans Household Loans Public and Other Loans 2019 End of the (current) 186th term 2018 End of the (previous) 185th term Change (amount) Change (%) (Unit: KRW in billions) 348,182 219,910 97,080 119,720 3,110 340,447 211,065 93,856 113,704 3,505 7,734 8,845 3,224 6,016 395 △ 2.27% 4.19% 3.43% 5.29% 11.27% △ Note) Based on consolidated financial statements of Woori Bank Woori Bank – a major subsidiary of the Group – posted total assets of KRW 348.2 trillion at end-2019 (consolidated basis), which is KRW 7.7 trillion larger than the year before (2.27% growth). The main driver was the growth of loans in KRW by KRW 8.8 trillion (or 4.19%) y-o-y. Meanwhile, corporate loans increased by KRW 3.2 trillion and household loans by KRW 6 trillion, with each asset category assuming a similar share out of total as the year before. Woori Bank will continuously implement balanced asset growth strategies in 2020, taking into account risk management and profitability. WOORI FINANCIAL GROUP ANNUAL REPORT 2019 3) Financial Information of the Major Subsidiaries (Unit: KRW in millions) 093 Category Woori Card Woori Investment Bank Woori Asset Trust Woori Asset Management Asset Liability Equity Asset Liability Equity Asset Liability Equity Asset Liability Equity At end-2019 At end-2018 10,087,342 8,299,175 1,788,167 3,398,960 3,031,622 367,338 139,839 45,410 94,429 112,781 6,017 106,764 9,987,400 8,305,436 1,681,964 2,682,660 2,367,418 315,242 113,786 37,333 76,453 101,536 3,824 97,712 Note) Woori Card/Woori Investment Bank: Based on K-IFRS consolidated financial statements, Woori Asset Trust/Woori Asset Management: Based on K-IFRS separate financial statements Woori Card saw an increase of around KRW 100 billion in total assets, driven by greater usage of credit cards and financial assets on a broader revenue base. Credit card usage is increasing, driven by a growing membership pool, aligned business with Woori Bank and a bold entry into the simple payment market. Woori Card also continues to expand its financial assets (long-term card loan) based on high-value customers. In addition, as part of efforts to develop new businesses to diversify the revenue base, Woori Card has been operating installment, lease and credit loan businesses since 2016, while continuously expanding its sources of long-term income within the regulatory leverage ratio (600%) of credit card companies. Woori Investment Bank recorded total assets of KRW 3.4 trillion at end of 2019, which is KRW 0.7 trillion (or 26.7%) higher than the previous year. The growth was mainly attributable to continued increase of financially sound loan transaction partners and to affiliated business with Woori Bank, in accordance with the plan to expand the loan business. Consequently, loans in KRW surged by KRW 380.1 billion (or 46%) y-o-y. Woori Investment Bank also took on bonds management in full-swing, recording a KRW 487.3 billion (or 90.2%) growth y-o-y in public bonds and financial bonds. Woori Investment Bank will continue to roll out balanced asset growth strategies, taking into account risk management and profitability. As of end-2019, Woori Asset Trust has KRW 27.5 trillion in assets under management, which is KRW 3.9 trillion higher than the year before, in terms of the face value amount. Total assets stood at KRW 139.8 billion, recording a y-o-y growth of KRW 26 billion (or 23%). In 2019, real estate regulations were reinforced and the economy was in a downturn, which pushed up the volume of unsold new property developments. As a result, new order placements in the industry generally declined, as major companies with main lines of business in loan-type land trust downsized their businesses amid surging bad debt write-offs and widespread risks. On the other hand, as Woori Asset Trust focuses on non-loan type products, including management-type land trust, collateral trust and agency business, its new order placement and revenue increased in 2019. On top of its solid business foundation, Woori Asset Management plans to build the framework for full-fledged growth as a subsidiary of the Woori Financial Group Inc. by venturing into the business of management-type land trusts backed by completion guarantees. In the mid-to-long term, Woori Asset Management also aims to continue its growth trend by developing new businesses. As of end of 2019, in net asset value (NAV) terms, Woori Asset Management is entrusted to manage KRW 19.2 trillion, which is similar to the 2018 year-end level. With the interest rates falling since 2019, AUM in domestic bond funds increased, but as interest rates climbed since August, the competitiveness of bond-type products has weakened and AUM therein declined. As market volatility grows, Woori Asset Management will expand its new lineup of MMF, index and EMP products, thereby facilitating the inflow of funds from institutional investors and private equity. Woori Asset Management set the goal of boosting the AUM by KRW 4.3 trillion in its face value amount. To this end, Woori Asset Management is diversifying new sales channels, expanding its new product line-up, advancing research-based management processes and performance evaluation systems, bolstering preemptive risk management and creating synergetic effects with Group affiliates. Woori OverviewBusiness OperationsFinancial ReviewManagement’s Discussion and Analysis 094 Total Assets (including AUM) of Affiliates Category Group Woori Bank Woori Card Woori Investment Bank Woori FIS Woori Finance Research Institute Woori Credit Information Woori Fund Service Woori Asset Trust Woori Asset Management Woori PE Woori Global Asset Management Note1) Woori Bank, Woori Investment Bank: Based on consolidated financial statements (2) Profitability 1) Woori Financial Group Inc. Category Net Interest Income Net Fees and Commissions Income Other Operating Income General and Administrative Expenses Operating Income Non-Operating Income(Expense) Net Income before Income Tax Expense Income Tax Expense Gain (Loss) on Discontinued Operations Net Income Total Net Income Attributable to Non-Controlling Interests Net Income Attributable to Controlling Interests (Unit: KRW in billions) At End-2019 473,794 403,914 10,087 3,399 91 5 38 17 27,651 19,248 811 8,696 (Unit: KRW in billions) 2019 5,894 1,103 430 △ 3,766 2,800 77 △ 2,723 685 - 2,038 165 1,872 Note 1) Net fees and commissions income: Fees and commissions income in KRW + fees and commissions income in foreign currency + fees and commissions income related to credit cards + fees and commissions income related to securities + fees and commissions income related to leases + fees and commissions income related to brand usage + fees and commissions income related to trust Note 2) Other operating income: gain (loss) on insurance + gain (loss) on Valuation & Disposition of Securities + gain (loss) on Valuation and Disposal of Loan + gain (loss) on foreign exchange + gain (loss) on derivatives + provision for/reversal of credit loss reserve + provision for/reversal of allowances + dividend income Although the base rate was lowered twice this year (July and October 2019), Woori Financial Group Inc. realized a total net income of KRW 2,038 billion in 2019, or KRW 1,872 billion when excluding net income attributable to non-controlling interests, based on the improvement of profit structure and the reversal of credit loss expenses. The net interest income amounted to KRW 5,894 billion, net fees and commissions income to KRW 1,103 billion and operating income after credit loss expenses and general and administrative expenses to KRW 2,800 billion. Pursuant to the conversion into a holding company structure, net income attributable to non-controlling interests of KRW 165 billion is reflective of dividends to hybrid securities. WOORI FINANCIAL GROUP ANNUAL REPORT 2019 2) Woori Bank Category I. Operating Income Net Interest Income Non-Interest Income Net Fees and Commissions Income Securities Income Net Gain (Loss) on Disposal of Financial Assets at Amortized Cost FX/Derivatives/Other Operating Income Impairment Losses Due to Credit Loss General and Administrative Expenses II. Non-Operating Income (Expense) III.Net Income before Income Tax Expense IV. Gain (Loss) on Discontinued Operations V. Income Tax Expense VI. Net Income Net Income Attributable to Controlling Interests Based on consolidated financial statements Note) Based on consolidated financial statements 2019 (current) 186th term 2018 (previous) 185th term 2,592 5,317 887 972 214 84 383 △ 118 △ 3,494 52 △ 2,644 471 △ 645 1,527 1,506 22 2,422 5,141 850 911 213 44 318 △ △ 85 △ 3,484 48 2,470 299 717 2,052 2,033 18 095 (Unit: KRW in billions) Changes +170 +176 +38 +61 +1 +40 65 △ 33 △ 10 △ +4 +174 770 △ 72 △ 525 528 △ △ +3 In 2019, the net income (consolidated, controlling interests) of Woori Bank – major subsidiary – was KRW 1.506 trillion, down KRW 528 billion from 2018. The main reason for the fall in net income can be attributed to the accounting loss of KRW 508.8 billion in relation to the transfer of shares from seven subsidiaries, including Woori Card, to the holding company. Meanwhile, the operating income of 2019 was KRW 2.592 trillion, up KRW 170 billion y-o-y. The decline in market rates and fiercer competition for deposits with the implementation of the new LDR rule pushed down NIM 0.08%p. Even so, net interest income was up KRW 176 billion from 2018 to KRW 5.317 trillion, on the back of the growth of interest-bearing assets. Non-interest income increased KRW 38 billion y-o-y to KRW 887 billion, with net fees and commissions income climbing KRW 61 billion and net gain on available-for- sale (AFS) financial assets (gains on sales of loans in KRW) jumping KRW 40 billion, while securities income maintained the level of the last year. FX, derivatives and other operating income altogether recorded a decline of KRW 65 billion y-o-y. Net interest income was up 3.4% y-o-y, non-interest income 4.4% y-o-y, and continued efforts to raise cost efficiency contained the growth of general and administrative expenses to just KRW 10 billion, or 0.3%, y-o-y to KRW 3.494 trillion. Consequently, the operating income of 2019 posted a y-o-y growth of 7%. Impairment losses due to credit loss was KRW 118 billion, up KRW 33 billion from the year before. This is mainly due to the decline in the reversal of massive allowance for credit loss relating to Kumho Tire and STX Group in 2018, despite the sustained decrease in ordinary bad debt expenses driven by efforts to improve asset soundness. Woori Bank has been managing asset soundness and bad debt expenses by boosting the share of financially sound loans, continuously monitoring and preemptively managing industries of interest including shipbuilding, construction and shipping and stringently managing risks. Driven by these endeavors, its NPL ratio in 2019 improved to the lowest-ever level of 0.4%. In 2020, as economic uncertainties are expected to continue at home and abroad, the business environment is anticipated to be rough. However, based on robust asset soundness, Woori Bank will strive to generate stable profits through its meticulous management of risks and customer-centric innovation. 3) Woori Card Category Credit Card Payment Volume Operating Revenue Net Income (Unit: KRW in millions) 2019 (7th Term) 2018 (6th Term) 2017 (5th Term) 82,649,489 1,368,140 114,196 76,357,503 1,386,707 1,386,707 73,833,473 1,755,810 92,734 Woori OverviewBusiness OperationsFinancial ReviewManagement’s Discussion and Analysis 096 As credit card merchant fees were lowered, profits were down by KRW 95.6 billion in 2019. However, Woori Card overachieved initial target for net income with KRW 114.2 billion, thanks to financial asset expansion, cost-cutting efforts and non-recurring factors relating to the BC Card litigation. Overall business conditions for the credit card industry are expected to continue worsen in 2020, amid contracted private consumption due to slow growth, a near-mature credit card business environment, rising household debt and lower merchant fees. More threats are posed by fiercer competition from other industries such as ICT companies expanding their businesses in the payment and settlement market and online-only banks planning to launch credit card businesses. Woori Card, however, plans to focus on boosting its revenue by thoroughly managing the profitability of each business and efficiently controlling costs. In addition, Woori Card will expand profitable assets mainly through high-value members by reinforcing data analytics and advancing marketing efforts. Woori Card will also readjust portfolio to attract new members and improve cost structure. Woori Card will secure the foundation to continuously create income by boldly boosting the efficiency of business management. Woori Card will actively cut costs by raising company-wide business efficiency and bolster asset soundness by thoroughly managing risk. Furthermore, in order to secure the engine of new growth, Woori Card will make utmost efforts to align with the global networks of Woori Bank and expand synergetic businesses with Group affiliates under Woori Financial Group Inc. 4) Woori Investment Bank (Unit: KRW in millions) Category Operating Revenue Operating Expenses Operating Income Net Income before Income Tax Expense Net Income Total Comprehensive Income Note 1) Based on K-IFRS separate financial statements 2019 (48th Term) 2018 (47th Term) 2017 (46th Term) 201,329 145,790 55,539 53,945 54,981 53,719 202,168 170,086 32,081 31,732 32,388 32,369 183,595 161,446 22,149 21,890 20,637 20,824 In 2019, Woori Investment Bank recorded an operating income of KRW 55.5 billion, 73.1% (or KRW 23.5 billion) higher than the year before. Although an increase in loans pushed up interest income, FX trading income declined y-o-y, bringing down operating revenue 0.4% (or KRW 800 million) from the previous year to KRW 201.3 billion. In terms of operating expenses, the growth of deposits mainly led to higher interest expenses. General and administrative expenses climbed from KRW 26.1 billion in 2018 to KRW 31.2 billion in 2019, as the workforce expanded during that period. The net income after non-operating income (expense) and income tax expenses amounted to KRW 55 billion, up 69.8% (or KRW 22.6 billion) from KRW 32.4 billion in 2018. Increases in deferred tax assets led to income tax benefits of KRW 700 million and KRW 1 billion in 2018 and 2019, respectively. Woori Investment Bank is developing and implementing vigorous growth plans with an aim to become a competitive non-banking subsidiary of the Group as well as a core subsidiary in charge of financial investments. 5) Woori Asset Trust Category Operating Revenue Operating Expenses Operating Income (Loss) Net Income from Continuing Operations before Income Tax Expense(Loss) Net Income(Loss) Total Comprehensive Income(Loss) (Unit: KRW in millions) 2019 2018 2017 75,191 34,037 41,154 40,876 30,980 30,443 63,666 22,649 41,016 41,202 31,495 31,120 53,848 18,592 35,257 35,224 27,010 27,218 Note) 2017, 2018: Based on K-IFRS separate financial statements, 2019: Based on K-IFRS consolidated financial statements and controlling interest Woori Asset Trust observed an increase of 18% (or KRW 11.5 billion) y-o-y in operating revenue, which reached KRW 75.2 billion in 2019. Despite the negative outlook on the domestic real estate market, operating revenue increased 22% (or KRW 7.4 billion) in land trusts and other trust businesses, while interest income jumped 45% (or KRW 1.4 billion) thanks to increased lending to trust accounts driven by expansion in loan-type land trusts. Dividends also increased by 1,186% (or KRW 2.4 billion) due to the liquidation of Saengbo 4th Real Estate Investment Trust Company. Operating expenses moved up 50% y-o-y (or KRW 11.4 billion) to KRW 34 billion. General and administrative expenses including payroll increased by 42% (or KRW 7.5 billion) as the sales organization was realigned and reinforced with a larger workforce. Meanwhile, lending to trust accounts also increased due to expansion in loan-type land trusts, increasing loan write-offs by 749% (KRW 3.5 billion). WOORI FINANCIAL GROUP ANNUAL REPORT 2019 097 Woori Asset Trust had one of the highest ROAs in the industry in 2019, at 25.2%. Real estate trust revenue is generally leveling off as trust fees continue to fall and three new securities firms have entered the market and are fueling competition. Woori Asset Trust plans to gradually expand its presence in the market for management-type land trusts backed by a completion guarantee, which has a lower risk relative to loan-type land trusts and higher fees compared to other trust products. In addition, Woori Asset Trust will pursue mutually beneficial success with Group affiliates. As such, the revenue and profitability of Woori Asset Trust is expected to grow. 6) Woori Asset Management (Unit: KRW in millions) Category Operating Revenue Operating Expenses Operating Income (Loss) Net Income from Continuing Operations before Income Tax Expense Net Income (Loss) Total Comprehensive Income (Loss) Note) Based on K-IFRS separate financial statements 2019 2018 2017 24,990 14,754 10,236 10,236 8,001 8,822 23,999 15,584 8,415 8,415 5,991 5,743 28,110 17,837 10,273 10,273 7,110 7,258 Woori Asset Management recorded an operating revenue of KRW 25 billion in 2019, up 4% (or KRW 1 billion) y-o-y. With bond rates declining, AUM of publicly offered bond funds increased, pushing up investment trust fees. However, as interest rates climbed in the second half of the year, AUM curved downwards and discretionary funds were partially withdrawn, pushing down fees on discretionary investments. All in all, net fees and commissions income remained similar to those of the previous year, but the management of inherent funds boosted gains on valuation and sales of securities by 107% (or KRW 1.1 billion) y-o-y. Operating expenses decreased by KRW 830 million (or 5.3%) y-o-y to KRW 14.7 billion. Losses on valuation and sales of securities declined by KRW 1.1 billion over the previous year, while general and administrative expenses went up KRW 230 million as the workforce expanded. Net income after non-operating income and income tax expenses reached KRW 8 billion, which is 36% (or KRW 2.1 billion) higher than the KRW 5.9 billion of 2018. The growth in net income drove up income tax expenses by 16% (or KRW 380 million) y-o-y. The ROA of Woori Asset Management was a solid 7.41% as of 2019. Although revenue in the management industry in general is plateauing as management fees decline and deregulation spurs specialized PE management companies that fuel competition, Woori Asset Management expects its AUM to grow, based on synergetic effects created with Group affiliates. Net Income of Affiliates (Unit: KRW in billions) Category Group Woori Bank Woori Card Woori Investment Bank Woori FIS Woori Finance Research Institute Woori Credit Information Woori Fund Service Woori Asset Trust Woori Asset Management Woori PE Woori Global Asset Management 2019 2,038 1,906 114 53 3 0 2 2 - 2 2 △ 1 △ Note 1) Net income: Based on total net income (Group-based Net Income Attributable to Controlling Interests: KRW 1,872 billion + net income attributable to non-controlling interests: KRW 165 billion) Note 2) Woori Bank: Based on separate financial statements of the Bank + overseas subsidiaries Note 3) Newly incorporated subsidiaries of 019: Gain (loss) reflected after being incorporated into consolidated work sheet - Date of incorporation into consolidated work sheet: Dec. 30 for Woori Asset Trust, Aug. 1 for Woori Asset Management and Woori Global Asset Management Woori OverviewBusiness OperationsFinancial ReviewManagement’s Discussion and Analysis 098 (3) Asset Quality 1) Woori Financial Group Inc. Category Total Loans Sub-Standard or Below Loans Sub-Standard or Below Ratio Coverage Ratio (Unit: KRW in billions, %) Mar 2019 June 2019 Sept 2019 Dec 2019 256,893 263,090 1,324 0.52 129.8 1,240 0.47 131.6 271,487 1,240 0.46' 136.5 266,432 1,198 0.45 133.6 Since its inception in January 2019, Woori Financial Group Inc. has been demonstrating remarkable performance every quarter in terms of asset soundness. In particular, Woori Bank – the major subsidiary of the Group – continues to raise asset quality by boosting the share of financially sound assets and by proactively writing off bad debt and preemptively managing risks to restrain non-performing loans. Woori Financial Group Inc. is lowering its substandard or below ratio from 0.52% in Q1 to 0.47% in Q2, 0.46% in Q3 and 0.45% in Q4. Not only the substandard or below ratio but the actual amount of such loans is also declining. In addition, Woori Financial Group Inc. stands fully ready to cover additional losses should they be incurred, with a substandard and below coverage ratio (excluding reserves) of 133.6% at end-2019. 2) Asset Quality Indicators of Major Subsidiaries (Unit: KRW in 100 millions, %) Category Indicator 2019 2018 2017 Woori Bank Total Loans 2,430,845 2,339,165 2,221,185 Sub-Standard or Below Loans Sub-Standard or Below Ratio NPL NPL Ratio Coverage Ratio(A/B) Total Allowance for NPL(A) Sub-Standard or Below Loans(B) Woori Card Total Loans Sub-Standard or Below Loans Sub-Standard or Below Ratio Delinquency Ratio Coverage Ratio(A/B) Credit Loss Provisions Outstanding(A) Minimum Regulatory Reserve for Credit Loss(B) Woori Investment Bank Total Loans Sub-Standard or Below Loans Sub-Standard or Below Ratio NPL NPL Ratio Coverage Ratio(A/B) Credit Loss Provisions Outstanding(A) Sub-Standard or Below Loans(B) Woori Asset Trust Assets Subject to Quality Classification Sub-Standard or Below Assets Ratio of Sub-Standard or Below Assets Note) Based on Work Report of Financial Supervisory Service (FSS) 9,797 0.40 8,793 0.36 121.80 11,933 9,797 98,170 789 0.80 1.61 102.84 7,641 7,430 18,737 92 0.49 39 0.21 167.39 154 92 71,216 26,715 37.51 11,825 0.51 10,156 0.43 119.42 14,121 11,825 96,072 772 0.80 1.78 104.02 7,273 6,991 16,495 248 1.51 247 1.49 51.21 127 248 43,081 4,534 10.52 18,396 0.83 17,249 0.78 87.71 16,136 18,396 79,044 621 0.79 1.82 102.74 6,356 6,187 12,088 227 1.88 271 2.24 45.81 104 227 50,234 2,117 4.21 WOORI FINANCIAL GROUP ANNUAL REPORT 2019 099 The substandard and below ratio of Woori Bank is on a downward trend from 0.83% in 2017 to 0.51% in 2018 and 0.40% in 2019, while the coverage ratio (excluding reserves) has been boosted from 87.7%, 119.4% and 121.8% in the respective years. As such, Woori Bank is fully prepared to cover for additional losses should they be incurred. Corporate loans extended by Woori Bank was KRW 120 trillion in 2018 with a substandard and below ratio of 0.75%. In 2019, the numbers were KRW 123 trillion and 0.57%, respectively. As such, Woori Bank has been cutting its substandard and below ratio drastically by boosting the share of financially sound assets and by proactively writing off bad debt and preemptively managing risk to restrain non-performing loans. Household loans recorded a total of KRW 113 trillion and a substandard and below ratio of 0.25% in 2018. In 2019, total household loans amounted to KRW 120 trillion and the substandard and below ratio declined slightly to 0.23% (based on NPL criteria of FSS). As sufficient provisions have been set aside for substandard or below loans to borrowers undergoing debt restructuring through work-out or rehabilitation procedures, additional losses are unlikely to be incurred. These companies are proactively pursuing to normalize their business and if unsuccessful, they are contemplating on closing their business through asset disposition. Woori Bank is also vigilantly monitoring risk signals from other possible NPLs, thereby preemptively responding to economic uncertainties at home and abroad. Woori Card has seen its delinquency ratio decline consistently from 1.82% in 2017 to 1.78% in 2018 and 1.61% in 2019. By fine-tuning risk management, bolstering competencies to recover loans and constantly removing bad debt, Woori Card has been maintaining its delinquency ratio at a healthy level. Woori Investment Bank has been striving to improve asset soundness since 2013. Bad loans that correspond to the numerator when calculating the ratio of asset soundness were reduced by recovery, sale or write-off, while financially sound assets that correspond to the denominator were boosted, resulting in improved asset soundness ratio overall. Furthermore, risk management has been reinforced in order to prevent non-performing assets. Consequently, the ratio of new non-performing assets has dropped significantly since 2013. Woori Investment Bank is also boosting both preemptive and ex-post risk management. Loans of Woori Asset Trust, including lending to trust accounts, increased y-o-y by 68% (or KRW 30.1 billion), driven by the growth in loan-type land trusts. However, substandard and below ratio ones, including lending to trust accounts also increased 25.65% (or KRW 22.2 billion), due to the strained real estate market in Korea. Woori Asset Management is bolstering preemptive risk management and internal controls inspection competencies as the core comprehensive asset management company of the Group. To this end, Woori Asset Management is selecting and managing the investment universe of domestic stocks and bonds more meticulously, while building a risk management system based on credit ratings of overseas bonds and establishing an internal controls system on new products. Woori Asset Management also bolstered inspection on overseas/alternative investment processing procedures. (4) Capital Adequacy 1) Woori Financial Group, Inc. Category Common Equity Tier 1 Capital Additional Tier 1 Capital Tier 2 Capital Total BIS Capital Risk-Weighted Assets Common Equity Tier 1 Ratio Tier 1 Capital Ratio BIS Capital Adequacy Ratio (Unit: KRW in billions) 2019 (1st Term) 19,135 3,340 4,640 27,115 228,046 8.39% 9.86% 11.89% At end-2019, the Group BIS capital adequacy ratio using the Basel III standardized approach was 11.89%, which was above the requirement of 10.5%, as a result of rigorous endeavors to improve capital adequacy by issuing capital securities worth KRW 1.95 trillion and boosting high- quality assets. Woori Financial Group, Inc. will continue to comply with regulatory requirements, realize profits and recapitalize at an adequate level to raise capital adequacy. Woori OverviewBusiness OperationsFinancial ReviewManagement’s Discussion and Analysis 100 2) Capital Ratios of Major Subsidiaries (Unit: KRW in 100 millions, %) Category Indicator 2019 2018 2017 Woori Bank BIS Capital Adequacy Ratio Total BIS Capital(A) 243,142 242,508 226,032 Risk-Weighted Assets(B) 1,578,895 1,549,710 1,467,622 Woori Card Adjusted Capital Ratio Tangible Common Equity Ratio Woori Investment Bank BIS Capital Adequacy Ratio Total BIS Capital(A) BIS Capital Adequacy Ratio(A/B) Risk-Weighted Assets(B) BIS Capital Adequacy Ratio(A/B) Woori Asset Trust Net Operating Capital Ratio (NCR) Woori Asset Management Minimum Operating Capital Ratio 15.40 18.33 14.29 3,381 26,303 12.86 1,397.97 655.8 15.65 18.08 13.54 3,003 23,192 12.95 957.76 558.9 15.40 20.74 14.98 2,713 16,202 16.74 698.59 514.7 Note 1) BIS capital adequacy ratio=total BIS capital/risk-weighted assets x 100 Note 2) Woori Bank numbers are based on K-IFRS consolidated financial statements and BASEL III Note 3) Woori Card numbers are based on FSS work report criteria Note 4) Woori Investment Bank numbers are based on FSS work report criteria/K-IFRS consolidated financial statements Note 5) Net capital ratio of Woori Asset Trust=(net capital-subordinated borrowings, etc.)/total risk exposures (market risk + credit risk + operating risk)x100/K-IFRS separate financial statements Note 6) Woori Asset Management numbers are based on K-IFRS separate financial statements Woori Bank (Unit: KRW in billions, %) Common Equity Tier 1 Capital Additional Tier 1 Capital Tier 2 Capital Total BIS Capital Risk-Weighted Assets Common Equity Tier 1 Ratio Tier 1 Capital Ratio BIS Capital Adequacy Ratio 2019 (current) 186th Term 2018 (previous) 185th Term 17,321 3,466 3,527 24,314 157,890 10.97 13.17 15.40 17,276 3,148 3,828 24,251 154,971 11.15 13.18 15.65 Changes +46 +318 △ 301 +63 +2,919 0.18%p △ 0.01%p △ 0.25%p △ At end-2019, Woori Bank – the major subsidiary of the Group – had a Common Equity Tier 1 Capital of KRW 17.321 trillion, up KRW 46 billion (or 0.3%) y-o-y. Additional Tier 1 Capital was KRW 3.466 trillion, up KRW 318 billion y-o-y, which was driven by the issuance of new hybrid securities taking into account the redemption (exercise of call option) of previously issued ones. Going forward, Woori Bank will continuously reduce the volume of its hybrid securities, considering the cost of issuance. Tier 2 Capital amounted to KRW 3.527 trillion, down KRW 301 billion from the previous year. The decline follows a reduction in the volume of subordinated bonds recognized as equity, but the reduction was minimized through the issuance of new subordinated bonds. Total BIS Capital was KRW 24.314 trillion, which was KRW 63 billion higher than the year before. In 2019, risk-weighted assets increased KRW 2.919 trillion (or 1.9%) y-o-y to KRW 157.89 trillion. This rate of increase is smaller than that of total assets on a consolidated basis (2.3%) and is reflective of the vigorous efforts to improve capital adequacy by boosting the share of financially sound assets and reducing potential non-performing assets. Common Equity Tier 1 ratio, Tier 1 capital ratio and BIS capital adequacy ratio in 2019 fell by 0.18%p, 0.01%p and 0.25%p, respectively, from the year before to 10.97%, 13.17% and 15.40%. This is because the dividends of Woori Bank, as the major subsidiary of the Group, were increased y-o-y to secure sufficient funding for the dividends of the holding company in the initial days of its incorporation. Woori Bank will enhance its capital adequacy by continuing to realize profits, paying out adequate levels of dividends and expanding capital. WOORI FINANCIAL GROUP ANNUAL REPORT 2019 101 Woori Card had an adjusted capital ratio (ACR) of 18.33% at end-2019, which was above what is required by the Management Guidance (8% or above) as per Supervisory Regulations on Specialized Credit Financial Business. Woori Investment Bank had a strong BIS capital adequacy ratio of 12.86% at end-2019 (requirement by the Financial Investment Services and Capital Markets Act: 8%). Woori Investment Bank is expected to see its BIS capital adequacy ratio fall with the growth of its assets under management. However, even after reflecting the asset expansion plan for 2020 under the business management plan, the ratio is set to maintain a stable level above 12%. In addition, the Total BIS Capital in December 2019 consisted of KRW 327.1 billion in Tier 1 Capital and KRW 11.1 billion in Additional Tier 1 Capital. With such a high Tier 1 percentage, there is great potential for asset expansion or recapitalization through an Additional Tier 1, if needed. Woori Asset Trust had an equity capital of KRW 94.4 billion, which was 944.3% of the KRW 10 billion in minimum equity required of the company by the Financial Investment Services and Capital Markets Act and the Enforcement Decree thereof. The net operating capital ratio was 1,398%, up 440%p y-o-y, which was the largest gain among 11 existing trust companies last year. Woori Asset Management had an equity capital of KRW 106.7 billion, while the minimum operating capital required of the company by the abovementioned Act and relevant regulations was KRW 16.1 billion. As such, the minimum operating capital ratio of Woori Asset Management was 662.73%, with a very high share of equity capital. B. New Businesses and Suspended Businesses Woori Financial Group, Inc. has been seeking to expand its business portfolio since the launch, based on which it is bolstering its status and competitiveness as a comprehensive financial group. (1) Acquisition of Woori Asset Management and Woori Global Asset Management Woori Financial Group, Inc. concluded a share purchase and sale agreements in April 2019 to acquire Woori Asset Management and Woori Global Asset Management. After obtaining approval from the Financial Services Commission, Woori Asset Management and Woori Global Asset Management were incorporated into Woori Financial Group Inc. as subsidiaries in August and December, respectively. The two companies will endeavor to create synergy by sharing management expertise and co-developing fund products with Group affiliates and by providing a wide array of products and services to its customers. (2) Acquisition of Woori Asset Trust Woori Financial Group, Inc. concluded a share purchase and sale agreement in April 2019 to obtain controlling interest in Woori Asset Trust, in order to expand its business scope and competitiveness in the real estate trust sector. Incorporated into Woori Financial Group Inc. as a subsidiary in December, Woori Asset Trust is expected to perform a pivotal role in real estate finance for the Group and boost the affiliated synergies. C. Business Rationalization (1) Alteration and Reorganization of Business Groups 1) Woori Financial Group, Inc. New organization established to boost competitiveness in IT (Feb. 2019) ① The ICT Planning Division was established to function as the IT control tower of Woori Financial Group Inc. The ICT Planning Group was organized in February 2019 to oversee strategies in the areas of ICT planning, digital strategies and information security. This organization enabled a preemptive response to the financial innovation driven by fintech and the fourth industrial revolution, while bolstering the expertise and competitiveness in ICT. New organizations established to reinforce innovative growth and fintech support (May 2019) ② In May 2019, the Future Finance Department and the Digital Innovation Department were established: the former with an aim to systematically support companies with innovative growth potential and build a long-term sustainable growth system for the Group; and the latter targeting the efficient discovery and nurturing of fintech companies. Woori Financial Group has since been carrying out such efforts to secure future growth engines at the Group level and to provide systematic and intensive support to companies with innovative growth potential. Reorganization to bolster Group collaboration and synergy (Jul. 2019) ③ In July 2019, Woori Financial Group, Inc. implemented a system of Main Business Units, under which the four growth engines of asset management, global business, CIB and digital business that previously operated at each affiliate level were integrated at the Group level for systematic management. Based on the system of collaboration among Group affiliates, responsible management and efficient decision making are expected to maximize synergy. Furthermore, Woori Financial Group now has a foundation for a collaborative system that can prepare for the expansion of business portfolio. Reorganization including units (Feb. 2020) ④ Units were established in Feb. 2020 to systematically manage businesses carried out by the Group and to reinforce responsible management. Woori Financial Group also newly established a consumer protection organization as part of innovative measures to gain customer trust. In the second year into the holding company system, Woori Financial Group will further solidify structure as a comprehensive financial group by systematically managing major businesses. Woori OverviewBusiness OperationsFinancial ReviewManagement’s Discussion and Analysis102 2) Woori Bank In order to reinforce a swift decision making system in step with changes in the business environment, Woori Bank reorganized its operations to center on group leaders. Also, in order to establish a customer-centered asset management business culture, Woori Bank established an integrated bank-wide asset management strategy and ensured that the role of each group was reflected in their names. Woori Bank also newly established a dedicated organization to bolster expertise and increase the independence of customer protection. The previous “unit-group-division” system was reorganized to a “group-division” structure, thereby bolstering a system of autonomous responsible management and swift decision making that allows a timely response to changes in the financial environment. In addition, the “WM Group” was renamed “Asset Management Group” to reflect bank-wide asset management strategies into the name and to entrench a business culture of customer-centric asset management. Furthermore, the “Consumer Protection Group” was newly established in order to promote the rights and interests of financial consumers, while the previous “Consumer & Brand Group” was reorganized into the “Consumer Protection Group” and the “Public Relations and Brand Group”. The “Consumer Protection Group” has been separated as an independent organization directly under the CEO to function as the control tower of consumer protection that oversees all the groups of Woori Bank. 3) Woori Card Woori Card endeavors to aggressively and systematically respond to the changing business environment. Woori Card boosted focus on core functions and speeded up decision-making by streamlining organization through functional readjustments among departments. With new and dedicated Big Data organization, Woori Card is also pressing ahead with customer management by advancing marketing efforts to a higher level based on in-depth customer analysis, reinforcing the loyalty of active members and boosting usage among inactive or dormant members. In addition, Woori Card is building digital competencies with newly established and expanded digital marketing organization in order to respond to the ever-growing simple payment market and digital finance ecosystem. 4) Woori Investment Bank Woori Investment Bank restructured its organization with an aim to diversify the revenue base and reinforce risk management by newly establishing the CIB Unit, under which CIB, DCM and venture finance organizations were realigned to maximize synergy creation among Group affiliates. Woori Investment Bank is also pressing ahead to raise work efficiency by exchanging the site and workforce with Woori Bank. In addition, the FICC Finance Department was newly established to head the bonds management and arrangements and a department in charge of ex-post management of loans was created to bolster risk management. 5) Woori Asset Trust Woori Asset Trust restructured its organization under the leadership of co-CEOs, aiming to invigorate synergetic effects created by the business management sector and the business promotion sector. The Business Planning Department was newly established to build a growth engine for promoting new business by reinforcing capacity in strategic planning and financial management. Furthermore, a Risk Management Officer and a Compliance Officer were appointed to executive positions (with new, dedicated subordinate organizations) to bolster internal and external risk management as well as internal controls. Woori Asset Trust also realigned itself to improve the entrustment review system to take on trust businesses more selectively. In addition, efforts are being made to be reapproved as a REITs asset management company within the year. 6) Woori Asset Management The Global Investment Management Unit is building a line-up of global fund products that continue to attract the interests of domestic investors including lifecycle funds, Global EMP Asset Allocation Fund and global bond balanced funds. (2) Voluntary Early Retirement Program and Other Matters Since 2005, Woori Bank has implemented an Outplacement Services Program that serves as amended and upgraded ERP program. The Outplacement Services Program (supporting individuals who are exiting the business) aims to resolve the bottleneck in promotions and improve the bank’s human resource structure while allowing employees to find new opportunities during the second chapter of their lives. In particular, the bank operates a support center and various programs for employees who plan to change jobs to provide systematic support for a new career or post-retirement life. As of 2019, the Outplacement Services Program was provided to a total of 325 employees, improving the bank-wide human resource structure. WOORI FINANCIAL GROUP ANNUAL REPORT 2019103 D. Asset Impairment Losses and Reduction Losses Asset impairment losses and reduction losses incurred based on consolidated financial statements are as follows. Category Credit Loss on Financial Assets at Fair Value through Other Comprehensive Income (“FVTOCI”) Reversal of (Provision for) Credit Loss on Securities at Amortized Cost Provision for Credit Loss On Loans and Other Financial Assets at Amortized Cost Reversal of Allowance for Acceptances and Guarantees Losses Reversal of (Provisions for) Allowance for Undrawn Commitment Reversal of (Provisions for) Impairment Losses on Premises, Equipment, Intangible Assets, Goodwill and Other Assets Provision for Impairment Losses on Investments in Joint Ventures and Associates (Unit: KRW in millions) (current) 1st Term 2018 (3,297) 1,415 (385,758) 4,352 9,044 (28,192) (3,634) (2,027) (1,922) (415,084) 105,985 (16,526) 674 (177) 1) Woori Bank (1) Asset Impairment Losses Category Loss Amount Cause of Loss Intangible Assets and GoodwillNote 1) KRW 25.85 billion Reduction in amount recoverable within the commitment period due to market changes Shares in Affiliates Based on separate financial statements (cost method): KRW 41.9 billion Following the decision by the majority shareholder KT to assume loss (as requested by independent auditor) Based on consolidated financial statements (net asset value method): KRW 3.6 billion Note 1) Assumes that the 2019 average balance of deposits and yield rate are maintained during the commitment period (2) Reduction Losses Woori Bank recognized reduction losses whenever the book value of the securities in equity method decreased by over 30 percent against their acquired values. (Unit: KRW in millions) Category Item Loss Amount Cause of Loss Securities in Equity Method Chinhung International Inc. 1,112 Book value decreased by over 30% against acquired values Securities in Equity Method Saman Corp. 93 Book value decreased by over 30% against acquired values Woori OverviewBusiness OperationsFinancial ReviewManagement’s Discussion and Analysis 104 2) Woori Investment Bank Category Impairment Loss on Intangible Assets and Goodwill Impairment Loss on Financial Assets Available for Sale Total (Unit: KRW in millions) 2019 (the 48th Term) 2018 (the 47th Term) 2017 (the 46th Term) 786 - 786 - - - - 2,018 2,018 Woori Investment Bank conducts impairment tests each year on intangible assets and its activities of goodwill. Whenever there is sign of asset impairment loss and the book value of intangible assets and goods are set to exceed the estimated recoverable amount, the book value is immediately reduced to the recoverable amount. In the 2019 fiscal period, an impairment test was conducted on membership in the Bank’s possession and the impairment loss was recognized for the book value of KRW 786 million that was in excess of the estimated recoverable value. 3) Woori Asset Trust Category Impairment Loss on Premises and Equipment Impairment Loss on Intangible Assets and Goodwill Total Note 1) Based on K-IFRS separate financial statements 4. Liquidity, Sources & Applications of Fund A. Liquidity 1) Woori Financial Group, Inc. Category Liquid Assets Liquid Liabilities LCR in KRW 2019 660 - 660 (Unit: KRW in millions) 2017 - 231 231 2018 - - - (Unit: KRW in millions, %) At End-2019 45,079 7,475 603.1 Note 1) Based on liquid assets and liabilities with time to maturity of one month or less Liquidity risk refers to the risk of incurring unexpected losses (abnormal disposition of assets, financing through high interest rate, etc.) or becoming insolvent due to disparities in dates of payment between assets and liabilities or the drastic outflow of funds. Each subsidiary of the Group secures an adequate level of liquidity and minimizes their risk of shortage of funds by early prediction methods and systematically managing the causes of fluctuations in liquidity, relevant to sourcing and managing funds. Woori Financial Group, Inc. maintains an LCR in KRW at a level higher than 100% as required by law. Please refer to 4-3) Liquidity Risk in [III. Matters on Financials/5. Notes for Financial Statements] of this report for details regarding liquidity risk management based on separate financial statements, and to [III. Matters on Financials/3. Notes for Consolidated Financial Statements] 4-4) Liquidity Risk for details regarding liquidity risk management based on consolidated financial statements. WOORI FINANCIAL GROUP ANNUAL REPORT 2019 2) Woori Bank Category 105 (Unit: %) 2019 (the 186th Term) 2018 (the 185th Term) 2017 (the 184th Term) LCR (Including KRW and all other currencies) Foreign Currency LCR 107.27 110.50 103.40 108.98 102.06 103.11 Note 1) The figures are calculated using the same method applied to management disclosure (average of the ratio per business day during the quarter.), based on the average balance of Q4 in 2019, 2018 and 2017 Woori Bank has managed liquidity levels in compliance with regulatory standards of Basel III (90% in 2017, 95% in 2018, 100% since 2019). In order to respond to regulatory LCR, highly liquid assets were expanded through deposits and debentures, preemptively. As a result, Woori Bank maintained a stable LCR above the regulatory requirement (100%) at an average of 107.27% in Q4 2019. Foreign currency LCR has been implemented since 2017, and Woori Bank has complied with the regulatory standards (60% for 2017, 70% for 2018, and 80% from 2019 onwards). To secure a stable structure in regards to managing foreign currency LCR, Woori Bank has worked to maintain a higher Foreign Currency LCR than what is required by regulatory standards (80% in 2019), with an average of 110.50% in Q4 2019, by securing sufficient high- liquidity assets including U.S. Treasury bills, etc. Furthermore, Woori Bank ensures that the liquidity gap ratio and concentration of funding more than satisfy regulatory guidelines in order to secure a stable funding structure. Woori Bank also checks for excessive shortages of liquid assets through periodic stress testing. If liquidity is lacking due to an unexpected crisis, Woori Bank executes contingency funding plans and utilizes committed lines from overseas financial institutions to acquire liquidity. As such, Woori Bank establishes and manages bank-wide measures to preemptively mitigate and efficiently manage liquidity risks. 3) Woori Card Woori Card performs funding based on the principles of diversifying sourcing channels, maintaining an adequate maturity structure and securing liquidity, in order to maintain a stable funding structure. At end-2019, outstanding debenture issues amounted to KRW 7.0809 trillion, which was KRW 34.9 billion higher than the KRW 7.0460 trillion of the previous year. In addition, Woori Card has an adequate level of liquidity and a credit line of KRW 480 billion as means to repay borrowings that reach maturity and provide operating funds without financing from the market for a certain period of time, even during an unexpected credit crunch in the financing market. (1) Liquidity Based on consolidated financial statements (Unit: KRW in 100 millions) Category Cash and Deposits Credit Line Total 2019 (the 7th Term) 2018 (the 6th Term) 2017 (the 5th Term) 1,362 4,800 6,162 3,822 5,300 9,122 6,461 4,200 10,661 (2) Financing through Debentures Based on consolidated financial statements Category Debentures Issued in KRW Liquid Debentures Debentures Issued in Foreign Currencies Total (Unit: KRW in 100 millions) 2019 (the 7th Term) 2018 (the 6th Term) 2017 (the 5th Term) 60,500 9,383 926 70,809 60,200 9,701 559 70,460 54,300 6,455 535 61,290 Woori OverviewBusiness OperationsFinancial ReviewManagement’s Discussion and Analysis 106 (3) Time to Maturity of Debentures Based on consolidated financial statements Category One Year or less 1 to 2 Years 2 to 3 Years Over Three Years Total 4) Woori Investment Bank Category KRW LCR Foreign Currency LCR 2019 (the 7th Term) 2018 (the 6th Term) 2017 (the 5th Term) (Unit: KRW in 100 millions) 20,154 17,839 15,616 17,200 70,809 19,555 20,040 16,865 14,000 70,460 11,900 19,414 19,946 10,030 61,290 (Unit: %) At End-2019 (the 48th Term) At End-2019 (the 47th Term) At End-2019 (the 46th Term) 149.49 109.72 266.26 105.80 165.82 102.27 LCR in KRW stood at 149.49% and foreign currency LCR at 109.72% at the end of 2019, marking a 116.77%p drop and a 3.92%p increase, respectively, year-over-year. LCR in KRW is the ratio of assets and liabilities over a three-month period and Woori Investment Bank ensures that the figure remains at 100% or above (as per Article 8-41, Regulation on the Financial Investment Services and Capital Markets, Liquid Assets/Liquid Liabilities). At end-2019, LCR in KRW was 149.49%, which is lower than that of end-2018, but still solid. Foreign currency LCR refers to the ratio of foreign currency liabilities and assets over a three-month period that is required to be maintained at or above 85% (as per Article 8-69, Regulation on the Financial Investment Services and Capital Markets, Liquid Assets, Liquid Liabilities). At end-2019, the figure climbed slightly from that of the previous year to a stable 109.72%. B. Sources and Management of Fund 1) Woori Financial Group, Inc. (based on separate financial statements of the holding company) Category Source of Fund Total Source of Fund Management of Fund Total Management of Fund Debentures Other Liabilities Equity Cash and Deposits Share Investments in Subsidiaries Non-Current Assets Other Assets (Unit: KRW in billions) At End-2019 948 153 20,106 21,207 1,173 19,874 11 149 21,207 Note 1) Other liabilities: Provisions + current income tax liabilities + deferred tax liabilities + other liabilities Woori Financial Group, Inc. is a pure financial holding company incorporated pursuant to the Financial Holding Companies Act. Dividends from subsidiaries are its main source of revenue, and no other sales activities are pursued. The sources of funds in 2019 include KRW 94.8 billion in debenture issuance, KRW 99.8 billion in hybrid securities and KRW 67.6 billion in dividends. Funds were managed mainly through the acquisition (including transfers) of shares in subsidiaries worth KRW 1,347 billion and hybrid securities dividends of KRW 4 billion. WOORI FINANCIAL GROUP ANNUAL REPORT 2019 3) Woori Bank (1) Sources of Funds 107 (Unit: KRW in millions, %) Category Fund 2019 (186th Term) 2018 (185th Term) 2017 (184th Term) Average balance Interest rate % Average balance Interest rate % Average balance Interest rate % Funds in KRW Deposits, installments 212,554,654 1.50 66.58 197,572,001 1.41 66.67 187,332,008 1.26 66.02 Certificates of deposit Borrowings in KRW Call money in KRW Others Subtotal 4,759,552 6,965,780 407,753 2.09 1.43 1.60 1.49 2.18 0.13 5,039,885 6,554,881 221,027 21,924,679 2.36 6.87 20,937,173 1.97 1.47 1.50 2.39 1.70 2.21 0.07 7.07 4,500,100 6,213,903 1,254,623 20,168,307 1.66 1.32 1.23 2.29 1.59 2.19 0.44 7.11 246,612,418 1.59 77.25 230,324,967 1.51 77.73 219,468,941 1.37 77.34 Funds in foreign currencies Deposits in foreign currencies 16,646,668 Borrowings in foreign currencies 7,944,242 Call money in foreign currencies 877,414 Debentures in foreign currencies 4,209,041 Others Subtotal Others Total Equity Provisions Others Subtotal 623,209 30,300,573 21,874,591 453,821 20,006,615 42,335,027 1.19 2.24 2.38 3.89 1.11 1.87 - - - - 5.21 2.49 0.27 1.32 0.20 9.49 6.85 0.14 6.27 15,219,710 6,458,485 787,171 3,669,625 658,810 26,793,801 20,897,275 433,092 17,876,203 13.26 39,206,571 0.88 2.13 1.84 3.96 0.38 1.62 - - - - 5.14 2.18 0.27 1.24 0.22 9.04 7.05 0.15 6.03 14,338,927 7,267,096 980,001 3,649,805 574,786 26,810,615 20,134,843 351,750 16,993,430 13.23 37,480,023 0.51 1.38 1.14 3.11 0.14 1.12 - - - - 5.05 2.56 0.35 1.29 0.20 9.45 7.10 0.12 5.99 13.21 319,248,018 1.40 100.00 296,325,338 1.32 100.00 283,759,580 1.16 100.00 Note 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. Note 2) Deposits in foreign currencies = Deposits in foreign currencies + off-shore deposits in foreign currencies Note 3) Borrowings in foreign currencies = Borrowings in foreign currencies + dues to BOK in foreign currencies + off-shore borrowings in foreign currencies Note 4) Debentures in foreign currencies = Debentures issued in foreign currencies + offshore debentures in foreign currencies Note 5) Excluding merchant banking accounts The average fund balance sourced by Woori Bank in 2019 stood at KRW 319 trillion, an increase of KRW 23 trillion over the previous year. The average funds in Korean won totaled KRW 247 trillion, mainly sourced by deposits from customers for the stable management of liquidity. As a result, deposits increased by KRW 15 trillion over the previous year, mainly in core deposits and time deposits. In order to respond to the regulatory LCR requirement of 100% and changes in the LDR regulations, Woori Bank plans to ensure the stable management of liquidity through preemptive funding and boost profitability through a more robust control of portfolio funding and management. The average balance of funds in foreign currencies increased KRW 3.5 trillion y-o-y, while deposits in foreign currencies were boosted by KRW 1.4 trillion and financing from the market (borrowings and debentures) by KRW 2 trillion to stabilize funding. Time to Maturity for Major Financial Liabilities Category of Financial liabilities 3 months or less 4 to 6 months 7 to 9 months 10 to 12 months Financial Liabilities at Fair Value through Profit and Loss 115,156 - - - (Unit: KRW in millions) 1 to 5 years - Over 5 years Total - 115,156 Depository Borrowings Debentures 160,955,482 35,917,880 23,560,412 28,653,283 5,305,862 543,242 254,936,161 5,516,024 2,522,971 2,068,362 1,742,550 3,213,689 500,685 15,564,281 1,775,711 2,326,926 2,770,855 1,998,438 13,872,930 1,487,529 24,232,389 Other Financial Liabilities 9,673,409 32,753 28,959 2,5170 147,182 2,547,159 12,454,632 Total 178,035,782 40,800,530 28,428,588 32,419,441 22,539,663 5,078,615 307,302,619 Note 1) Derivative financial liabilities and off-balance accounts (payment guarantees and commitments) are excluded Woori OverviewBusiness OperationsFinancial ReviewManagement’s Discussion and Analysis 108 (2) Applications of Funds (Unit: KRW in millions, %) Category Applications 2019 (186th Term) 2018 (185th Term) 2017 (184th Term) Average balance Interest rate % Average balance Interest rate % Average balance Interest rate % Funds in KRW Deposits in KRW 981,487 1.66 0.31 3,264,104 1.52 1.10 3,424,567 1.28 1.21 Marketable Securities in KRW 45,340,836 2.10 14.20 35,898,300 2.16 12.11 35,186,537 1.95 12.40 Loans in KRW 216,362,134 3.21 67.77 203,432,263 3.22 68.65 194,161,817 3.05 68.42 Advance Payments On Acceptances And Guarantees Call Loans in KRW Privately Placed Bonds Credit Card Receivables Others Allowance for Doubtful Accounts in KRW(-) Subtotal 14,190 1.30 0.00 15,856 1.95 0.01 26,639 3.14 0.01 693,296 1.76 0.22 1,334,138 1.67 0.45 2,275,748 1.33 0.80 82,645 2.80 0.03 135,856 2.89 0.05 185,092 5.94 0.07 - - - - 3,040,943 2.56 0.95 5,562,417 1,150,551 △ 265,364,980 - 3.01 0.3 △ 83.12 1,197,910 △ 248,445,023 - 2.10 - △ - 1.88 0.40 3.03 83.84 28 - 0.00 4,235,478 1.99 1.49 1,284,188 △ 238,211,718 - 2.85 0.45 △ 83.95 Funds in foreign currencies Deposits in Foreign Currencies 5,475,080 1.91 1.71 3,664,724 1.29 1.24 3,791,184 0.67 1.34 Marketable Securities in Foreign Currencies 4,618,998 2.09 1.45 3,467,435 1.30 1.17 2,735,707 1.07 0.96 Loans in Foreign Currencies 13,682,670 3.41 4.29 11,346,607 3.14 3.83 10,790,442 2.51 3.80 Call Loans in Foreign Currencies 1,491,754 2.61 0.47 2,365,465 2.07 0.80 2,506,588 1.33 0.88 Bills Bought in Foreign Currencies 6,504,880 2.71 2.04 7,274,987 2.70 2.46 7,417,500 1.88 2.61 Others 71,016 2.12 0.02 32,665 3.31 0.01 48,472 2.50 0.02 Allowance for Doubtful Accounts in Foreign Currencies(-) 228,898 △ - 0.07 △ 390,923 △ - 0.13 △ 332,301 △ - 0.12 △ Subtotal Others Cash 31,615,501 2.80 9.90 27,760,961 2.50 9.37 26,957,590 1.85 9.50 1,090,887 Property, Plant and Equipment for Business 2,698,226 Others Subtotal 18,478,423 22,267,537 - - - - 0.34 0.85 5.79 6.97 1,228,818 2,353,944 16,536,592 20,119,354 - - - - 0.41 0.79 5.58 6.79 1,201,343 2,352,466 15,036,463 18,590,272 - - - - 0.42 0.83 5.30 6.55 Total 319,248,018 2.78 100.00 296,325,338 2.78 100.0 283,759,580 2.57 100.0 Note 1) Deposits in KRW = Deposits in KRW – Reverse deposits with BOK Note 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 Note 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 Guar- antee Fund Note 4) Deposits in foreign currencies = Deposits in foreign currencies + Offshore deposits in foreign currencies Note 5) Marketable securities in foreign currencies = marketable securities in foreign currencies + Loaned securities in foreign currencies * Interest for calculating interest rates = Securi- ties 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 Note 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 Note 7) Cash = Cash – Total checks & bills in the process of collection Note 8) Property, plant and equipment for business = Property, plant, and equipment for business – Accumulated depreciation Note 9) Based on K-IFRS financial statements Note 10) Excluding merchant banking accounts The average fund balance managed by Woori Bank in 2019 stood at KRW 265.3 trillion, an increase of KRW 16.9 trillion over the previous year, mainly driven by an increase of loans in KRW by KRW 12.9 trillion. Out of all loans in Korean won, household loans increased by KRW 8.4 trillion, while corporate loans increased by KRW 4.5 trillion. Yields for loans in Korean won declined 1bp from December 2018. Assets in foreign currency increased by KRW 3.8 trillion from the previous year to KRW 31.6 trillion, which is attributable to the increase of KRW 2.3 trillion and KRW 1.2 trillion in loans in foreign currency and marketable securities, respectively. Woori Bank will continuously strive to comply with the liquidity guidelines (for loan-to-deposit ratio, LCR, etc.) and ensure a stable management structure. WOORI FINANCIAL GROUP ANNUAL REPORT 2019 4) Woori Investment Bank (1) Sources of Funds 109 (Unit: KRW in millions, %) Category Fund 2019 (48th Term) 2018 (47th Term) 2017 (46th Term) Average balance Interest rate % Average balance Interest rate % Average balance Interest rate % Funds in KRW Deposits Borrowings in KRW Others Subtotal Others Total Equity Provisions Others Subtotal 2,282,715 2.24 79.05 1,892,535 2.03 74.98 1,346,377 1.72 72.92 111,690 0 1.43 0.00 3.87 0.00 712 0 1.64 0.00 0.03 0.00 521 0 1.44 0.00 0.03 0.00 2,394,405 2.21 82.92 1,893,247 2.03 75.01 1,346,898 1.72 72.95 337,102 29,889 126,364 493,355 - - - - 11.67 1.04 4.38 17.08 337,102 27,894 265,655 630,651 - - - - 13.36 1.11 10.53 24.99 240,663 27,210 231,500 499,373 - - - - 13.04 1.47 12.54 27.05 Total 2,887,760 1.83 100.00 2,523,899 1.53 100.00 1,846,271 1.25 100.00 Note) Based on K-IFRS financial statements (2) Applications of Funds (Unit: KRW in millions, %) Category Applications 2019 (48th Term) 2018 (47th Term) 2017 (46th Term) Average balance Interest rate % Average balance Interest rate % Average balance Interest rate % Funds in KRW Deposits in KRW Marketable securities in KRW 157,946 802,499 1.73 5.47 2.74 27.79 167,363 540,982 1.64 6.63 3.33 21.43 Loans in KRW 1,394,034 5.30 48.27 1,071,107 4.95 42.44 Privately placed bonds 363,269 4.99 12.58 387,406 4.86 15.35 127,635 414,778 760,529 193,679 1.15 6.91 3.08 22.47 4.63 41.19 5.29 10.49 Others 0 0.00 0.00 0 0.00 0.00 0 0.00 0.00 Allowance for doubtful accounts in KRW (-) (13,821) - -0.48 (11,829) - -0.47 (14,839) - -0.80 Subtotal 2,703,926 4.32 93.63 2,155,028 4.30 85.38 1,481,782 4.03 80.26 Funds in foreign currencies Deposits in foreign currencies Marketable securities in foreign currencies Subtotal Cash Others Property, plant and equipment for business 1,438 2,623 4,061 0 9,415 0.04 0.05 2.45 0.09 1.60 0.00 0.14 0.00 - 0.33 1,524 2,281 3,805 0 9,757 0.15 0.06 -0.48 0.09 -0.23 0.00 0.15 0.00 - 0.39 1,624 404 2,028 0 9,198 - - 0.09 0.02 0.05 0.00 0.11 0.00 - 0.50 Others Subtotal 170,358 179,772 - - 5.90 6.22 355,308 365,065 - - 14.08 14.46 353,263 362,461 - - 19.13 19.63 Total 2,887,760 4.05 100.00 2,523,899 3.67 100.00 1,846,271 3.23 100.00 Note) Based on K-IFRS financial statements Woori OverviewBusiness OperationsFinancial ReviewManagement’s Discussion and Analysis 110 5) Woori Asset Trust (1) Sources of Funds (Unit: KRW in millions) Category 2019 2018 2017 Total Liabilities Other Liabilities Other Account Payables Withholdings Advance Receipts Accrued Income Tax Lease Liabilities Unearned Income Accrued Dividends Leasehold Deposits Allowance for Severance Benefits Allowance for Trust Risk Total Equity Total Note) Based on K-IFRS separate financial statements (2) Applications of Funds Category Total Assets Cash and Deposits Marketable Securities Loans Premises and Equipment Other Assets Total Note) Based on K-IFRS separate financial statements Balance 45,410 45,410 9,081 1 24,552 4,857 2,443 - 656 - - 3,820 94,429 139,839 2019 Balance 139,839 67,564 655 57,704 3,983 9,933 % 32% 32% 6% 18% 3% 2% - - - 3% 68% 100% % 100% 48% 1% 41% 3% 7% Balance 37,333 37,333 2,292 1 26,040 6,462 - 102 656 - 230 1,550 76,453 113,786 2018 Balance 113,786 61,514 6,935 35,397 2,539 7,401 139,839 100% 113,786 % 27% 27% 2% 19% 5% - - 1% 55% 100% % 100% 54% 6% 31% 2% 7% 100 Balance 67,204 67,204 31,186 5 30,256 5,339 - - 256 12 - 150 % 54% 54% 25% 24% 5% - - - 57,699 124,903 46% 100% (Unit: KRW in millions) 2017 Balance 124,903 61,261 9,603 26,644 1,013 26,382 % 100% 49% 8% 21% 1% 21% 124,903 100% WOORI FINANCIAL GROUP ANNUAL REPORT 2019 6) Woori Asset Management (1) Sources of Funds 111 (Unit: KRW in millions) Category 2019 2018 2017 Average Balance % Average Balance % Average Balance Sources (Total Liabilities and Equity) Liabilities Derivatives Other Liabilities (Accrued Income Tax) (Accrued Expense) (Others) Total Equity Note) Based on K-IFRS separate financial statements 107,159 4,921 - 4,921 1,506 2,428 987 102,238 100% 5% 0% 100% 31% 49% 20% 95% 98,762 3,930 14 3,915 1,416 2,099 400 94,832 100% 92,981 4% 0% 100% 36% 54% 10% 96% 4,658 499 4,158 1,185 1,992 982 88,324 % 100% 5% 11% 89% 28% 48% 24% 95% (2) Applications of Funds (Unit: KRW in millions) Category 2019 2018 2017 Average Balance % Average Balance % Average Balance Management (Total Assets) Cash and Deposits Securities Available for Sale Financial Assets at Fair Value through Profit or Loss (FVTPL) Financial Assets at FVTOCI Investments in Affiliates Derivatives Loans Premises and Equipment Other Assets (Accrued Income) (Deferred Tax Assets) Note) Based on K-IFRS separate financial statements 107,159 24,757 - 54,653 15,995 3,240 25 100 848 7,541 5,329 1,639 100% 23% - 51% 15% 3% 0% 0.1% 0.9% 7% 98,762 36,424 19,123 20,852 12,648 1,230 228 180 246 7,831 5,471 1,774 100% 37% 19% 21% 13% 1.2% 0.3% 0.3% 0.3% 7.9% 92,981 42,705 39,380 - - 670 2,083 315 182 7,646 5,445 1,543 % 100% 46% 42.1% - - 1% 2.2% 0.3% 0.2% 8.2% Woori OverviewBusiness OperationsFinancial ReviewManagement’s Discussion and Analysis 112 5. Off-Balance Sheet Activities (1) Acceptances and guarantees at the end of the current term and the previous year are as follows. (Unit: KRW in millions) Category Confirmed Guarantees Guarantees for Loans Acceptances Acceptances for L/G Other Confirmed Guarantees Subtotal Unconfirmed Guarantees Guarantees for Local L/C Guarantees for Import L/C Other Unconfirmed Guarantees Subtotal CP Purchase Commitments and Others Total Note) Based on K-IFRS separate financial statements End of (current) First Term End of Previous Year 89,699 391,688 224,746 6,982,889 7,689,022 193,096 3,081,390 771,378 4,045,864 884,031 12,618,917 125,870 371,525 158,179 6,452,791 7,108,365 305,057 3,322,731 669,677 4,297,46 1,260,587 12,666,417 (2) Loan agreements at the end of the current term and the previous year are as follows. (Unit: KRW in millions) Category Loan Agreements Other Agreements End of (current) First Term End of Previous Year 103,651,674 5,993,608 97,796,704 5,041,314 For off-balance sheet activities, please refer to ‘Note 40. Contingent Liabilities and Commitments’ in [III. Matters on Financials / 3. Notes for Consolidated Financial Statements] in this report. WOORI FINANCIAL GROUP ANNUAL REPORT 2019 113 6. Other Issues Required for Making Investment Decisions A. Matters on Key Accounting Policies and Changes in Estimates Please refer to ‘Note 2. Standards applied in the preparation of (Consolidated) Financial Standards and Key Accounting Policies’ and ‘Note 3. Key Accounting Estimates and Assumptions’ in [III. Matters on Finance / 3. Note on Consolidated Financial Statements and 5. Note on Financial Statements] of this report. B. Environmental Impact and Employees (1) Environmental Impact Woori Financial Group Inc.’s financial services (banking, credit card, trusts business, etc.) do not have an environmentally destructive impact. Therefore, the Group is neither currently paying nor is likely to have to pay any environmental restoration or damage compensation 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, the major affiliate of Woori Financial Group Inc., however, has been designated as a company subject to premise control under Paragraph 5, Article 42 of the Framework Act on Low-Carbon, Green Growth. Accordingly, the Bank has reported to the government its greenhouse gas emissions and energy consumption. Please refer to [XI. Other Issues Required for Protecting Investors / 3. Environmental Sanctions, and etc. / (v) Green Management Issues]. (2) Employees and Other Matters Woori Bank, the major subsidiary of Woori Financial Group Inc., draws up a human resource plan based on changes in the management environment and bank-wide strategic directions, thereby preemptively responding to expected personnel shifts in the mid- and long-term. While the Bank’s continued recruitment and CDP control secure experts in corporate business, in-house training of human resources is nurturing a pool of future leaders in the global and fintech businesses and building up the best human resource pool in the financial sector. Meanwhile, as of the end of 2019, Woori Bank’s regular employees consisting of business unit and group heads (26%), managers (26%), and clerks or lower-level employees (48%), maintaining HR in a pyramid structure. Furthermore, another subsidiary, Woori Investment Bank, continues to hire experienced workers and new recruits in step with the broadening of assets and work scope. Woori Investment Bank is expanding its business competencies by recruiting experts from the market, while building an organization that can grow sustainably by hiring new recruits through public job openings. In addition, employees are sharpening their expertise under the training support scheme. C. Matters on Statutory Regulations As a financial holding company, Woori Financial Group complies with the Financial Holding Companies Act, the Act on Corporate Governance of Financial Companies and other relevant legislations. The main contents of the Financial Holding Companies Act are as follows: 1. Incorporation of financial holding companies 2. Restriction on ownership of financial holding companies 3. Business affairs of financial holding companies and inclusion of companies as subsidiaries thereof 4. Operation of financial holding companies 5. Supervision of financial holding companies The main contents of the Act on Corporate Governance of Financial Companies are as follows: 1. Qualifications for operating officers and the establishment of an appointment procedure for major operating officers 2. Reinforced qualifications for outside directors and procedures for nominating candidates for executive officers 3. Composition of the Board centered on outside directors and bolstering the authority of the Board 4. Establishment and disclosure of internal rules on governance 5. Qualifications for members of the Audit Committee and improvement of the appointment procedure thereof 6. Improvement of the risk management scheme and remuneration system 7. Introduction of a regular examination on the eligibility of major shareholders Woori OverviewBusiness OperationsFinancial ReviewManagement’s Discussion and Analysis114 D. Risk Management Policy (1) Overview of Risk Management Policy Woori Financial Group Inc. develops strategies to remove excessive risks and manage risks at an adequate level in order to maximize revenue relative to risks. To this end, procedure is to first recognize the risk, measurement and assess it and then control and monitor and report it. Risk is managed by the Risk Management Department based on policy resolutions. The Risk Management Committee makes decisions on risk strategies including the allocation of any capital at risk and the approval of loss limits as the top decision-making body for risk management. (a) Risk Management Principles The Group’s risk management principles are as follows: - A ll busines s ac ti v i ties mus t be per for med in consideration of the balance bet ween r isk and revenue, w i thin the scope of the preset risk thresholds. - Decision making systems regarding risk must be operated in a way that allows sufficient consideration of risk by the management - Risk management organization must be composed and operated independently from business departments - Performance management systems must be operated to allow for the clear consideration of risks when making business decisions - Even during normal times, precautionary views must be shared in preparation for the possible worsening of situations - The holding company oversees the risk management of its subsidiaries (b) Risk Management Organization Risk Management Committee ① The Risk Management Committee performs the role of comprehensively managing and controlling risks at the Group level, in order to promptly recognize, measure, monitor and control risks that may arise in the course of business management by the holding company and subsidiaries thereof. The major roles of the Risk Management Committee are as follows: - Establishment of basic risk management policies and strategies: The Risk Management Committee establishes basic policies and strategies for risk management including a risk philosophy and risk management principles, for the systematic management of risks. - Determination of tolerable risks: The Risk Management Committee annually determines the overall permissible risk threshold of the Group and each subsidiary by giving consideration to the economic and financial environment at home and abroad. - Approval of Risk Capital Limit and Loss Limit: Depending on the risk threshold determined each year, the Risk Management Committee sets aside the amount of capital at risk out of all available capital, then approves and allocates the loss limits accordingly by type of risk and subsidiary. - Enactment and Revision of Risk Management Regulations and Group Risk Management Council Regulations: The Risk Management Committee enacts, operates and, if necessary, revises and abolishes risk management regulations and Group Risk Management Council regulations in order to achieve optimal risk management - Others: The Risk Management Committee deliberates on relevant risks that accompany important matters concerning business management at the Group level that requires Board resolution, including changes to the organization, entry into new businesses and large-scale investment. The Committee is also briefed on the current status and major issues of risk management of the Group. WOORI FINANCIAL GROUP ANNUAL REPORT 2019115 Group Risk Management Council ② The Group Risk Management Council has the authority to deliberate on necessary details in relation to carrying out the risk management policies established by the Risk Management Committee at the level of the holding company and subsidiaries. The Council also reaches resolution on matters delegated by the Risk Management Committee and performs the role of understanding the current status of risk management of the Group as a whole and each subsidiary as well as exchanging information on risk management among subsidiaries. The major roles of the Group Risk Management Council are as follows: - Matters for Resolution ‧ Matters delegated by the Committee ‧Matters to be resolved pursuant to the [Attached Table] of the Group Risk Management Council Regulation ‧ Enactment and abolishment of guidelines on risk management. Provided, heads of departments in charge of risk management are delegated authority to copy and incorporate in full any changes to higher regulations such as relevant legislations and regulations of supervisory authorities and to make simple revisions to terminology or phrases, and shall report to the Council ex-post. - Matters for Deliberation ‧ Matters concerning agenda tabled by the Committee (Provided, agenda for deliberation may be omitted when deemed necessary by the risk management officer of the holding company) ‧ Important matters among matters for resolution by the Risk Management Committees of subsidiaries and result of implementation thereof ‧ Adjustments to the classification of asset quality or allowances for questionable accounts in accordance with criteria set by the Committee ‧ Matters concerning the introduction of a new product at the Group level ‧ Matters the Chair is requested to deliberate on by a member or matters recognized by the Chair to be in need of deliberation - Matters for Report ‧ Status of progress and management of matters deliberated or resolved by the Council ‧ Other matters deemed necessary by the Council Risk Management Department ③ The Risk Management Department is responsible for overseeing the risk management affairs of the financial holding company and its subsidiaries, including the monitoring, control and reporting of risks. The department operates independently from departments within the financial holding company and business (support) departments of subsidiaries. Woori OverviewBusiness OperationsFinancial ReviewManagement’s Discussion and Analysis116 (2) Credit Risk Credit risk represents ‘the potential financial losses that the Bank may incur when the counterparty becomes insolvent or rejects transactions within the period provided in the contract.’ The goal of credit risk management is to maintain the bank’s credit risk exposure to a permissible degree and to optimize its rate of return considering such credit risks. (a) Management of Credit Risk Woori Financial Group Inc. measures credit risk by taking into account the possibility of non-performance of contract obligations by a customer or counterparty, a counterparty’s exposure to insolvency and the rate of loss upon insolvency. For assets subject to credit risk management, internal capital is measured and utilized as a management indicator by accounting for risk and expected/unexpected loss. The Group allocates ceilings of internal capital to each subsidiary. Based on the allocated ceiling of the internal capital, each subsidiary then considers its business characteristics and annual financial goals to set and manage detailed ceilings for each business segment. Furthermore, loans are prevented from failing to perform and credit concentration risk is adequately controlled by monitoring large-scale exposures and credit portfolio. The Group Risk Management Committee and Risk Management Council meet on a monthly or quarterly basis to check and adequately manage credit risks of the Group and subsidiaries including the BIS ratio, liquidity and other management indicators, current status of exposure, compliance with ceilings, delinquency ratio and fluctuations in allowances. (b) Maximum Exposure Maximum exposure of financial assets to credit risk indicates the uncertainty of maximum volatility in the net value of the financial assets due to volatility in a particular risk factor, before considering the book value of collateral after allowances or other credit enhancement. Provided, the maximum exposure to credit risk of derivatives is the on-balance sheet fair value amount, that of payment guarantee is the maximum amount payable upon claims by the principal debtor pursuant to the guarantee contract, and that of loan agreement is undrawn commitment. (3) Market Risk Market risks refer to potential losses that can be incurred 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. (a) Market Risk Management Market risk management refers to the entire process of identifying the sources of risks by risk factor on the trading and non-trading sectors, measuring the scale of market risks, and assessing the adequacy of the scale of market risks being taken, in order to make decisions to avert, take or mitigate risks and carry out such decisions. Woori Financial Group Inc. uses both a standard approach and an internal model (Woori Bank) to measure market risks and the Risk Management Committee allocates the market risk capital. The risk management departments of the Group and subsidiaries manage detailed ceilings including risk limit and loss limit of trading positions. The result of risk management is reported regularly to the Risk Management Committee. (b) Analysis of Market Risk Sensitivity Woori Financial Group Inc. performs separate market risk sensitivity analyses for trading and non-trading segments. For the trading segment, Group-wide market risk is managed by the standard method of the FSS, while Woori Bank measures Value at Risk (VaR) to manage and measure market risk in order to predict the market risk of its trading positions and the maximum loss expected. Based on statistical methods, VaR estimates potential losses in the portfolio that may be incurred by unfavorable volatility in the market at a certain time in the present or future. VaR indicates the estimated maximum loss at a 99 percent confidence level. Therefore, statistically speaking, it is possible (1% probability) that the actual loss turns out to be larger than what was estimated by VaR. The actual losses incurred are monitored on a regular basis for the purpose of reviewing the feasibility of assumptions, variables and factors used when calculating VaR. This approach, however, does not prevent losses in excess of the limit when there is greater market volatility. WOORI FINANCIAL GROUP ANNUAL REPORT 2019117 For the non-trading segment, Woori Bank manages and measures risk by utilizing simulations on net interest income (NII) and net present value (NPV) to calculate changes in the NII and the economic value of equity (EVE). NII is a revenue-centered indicator that shows short-term changes in revenue caused by short-term changes in the interest rate and is calculated by deducting the cost of servicing interest-burdened liabilities from the revenues generated by interest-bearing assets. NPV is an indicator of risk from an economic value point of view caused by interest rate volatility and is measured by deducting the present value of liabilities from that of assets. Meanwhile, changes in the NII indicates changes due to interest rate volatility within a certain period (i.e., one year). Changes in the EVE indicates changes that can take place as interest rate volatility impacts the present value of assets, liabilities and off-balance sheet items. Subsidiaries other than Woori Bank measures and manages risk by calculating interest rate Earnings at Risk (EaR) and interest rate VaR. Interest rate EaR refers to the estimated maximum changes to earnings manifested by the largest reduction in the NII that can be caused in a certain period (i.e., one year) by unfavorable volatility in the interest rate. Interest rate VaR refers to the estimated maximum loss that shows the maximum possible reduction in net asset value at a certain time in the present or future that can be caused by unfavorable volatility in the interest rate. (4) Liquidity Risk Liquidity risk refers to the risk of failing to perform the payment obligation at maturity on financial liabilities that consolidated companies bear. Liquidity risk management is aimed at preventing potential losses arising from a shortage of funds by effectively managing liquidity crunches caused by disparities in the maturity of assets and liabilities or unexpected outflow of funds. Products relevant to liquidity risk that recognized as financial liabilities on the consolidated financial statements are subject to liquidity risk management. In managing liquidity risk, Woori Financial Group Inc. groups assets and liabilities according to a different ALM chart of accounts, then determines the maturity gaps and gap ratios from cash flow statements by time group (time to maturity or contract periods). Based on the outcomes, Woori Financial Group maintains the gap ratios within predetermined target ratios (limits). (5) Operational Risk Woori Financial Group defines operational risks as the potential risk of loss that could result from inadequate internal processes, personnel and systematic factors, as well as external factors. To reinforce competitiveness, reduce the amount of risk capital, enhance operational risk management competencies and prevent any unexpected incidents, Woori Bank has established an operational risk management system developed under Basel II. The objectiveness of operational risk management system has been tested internally and by an independent third party. The advanced measurement approach was submitted to and obtained approval from the FSS. (6) Capital Management Woori Financial Group Inc. complies with the capital adequacy standards put forth by financial supervisory bodies that are based on Basel III of the Basel Committee on Banking Supervision under the Bank for International Settlements. These standards were introduced in Korea at the end of December, 2013. The capital adequacy ratio is calculated by dividing total capital by total risk-weighted assets, based on consolidated financial statements. Woori OverviewBusiness OperationsFinancial ReviewManagement’s Discussion and Analysis118 D. Matters Concerning Overseas Subsidiaries As the growth of domestic financial market remains stagnant, Woori Bank, which is the major subsidiary of Woori Financial Group Inc., has been building a global business base by expanding regional networks in Southeast Asia – a region of promising growth potential in terms of NIM, branch and financial inclusivity and economic growth rate. Woori Bank is expanding localization endeavors through M&As with local banks (Indonesia, the Philippines, Cambodia) and the conversion of existing branches into local subsidiaries (Vietnam), while seeking to diversify through entry into new businesses such as savings banks and non-banking finance by considering market characteristics. In addition, other than entering existing business segments, Woori Bank is also striving to continue pioneering into new markets by conducting various market surveys in order to discover new business. As of end of December 2019, Woori Financial Group Inc. has global networks reaching 474. Woori Financial Group Inc. will continue to pursue global business with its strategy to expand its customer and growth base by boosting the share of financially sound assets, reinforcing business competencies through various business models and raising global digital banking competency. Furthermore, Woori Financial Group is in the process of building a Group-wide system to support and manage global business by nurturing a pool of global professional reviewers and building a better organized risk management system. Through these endeavors, Woori Financial Group is also seeking to grow both quantitatively and qualitatively. At end-2019, the status of overseas subsidiaries of major subsidiaries are as follows: Category Capital Adequacy Ratio Asset Quality Profitability Liquidity (Percentage of BIS Capital BIS Tier 1 Capital Tangible Common Loss-Risk Substandard and Ratio of Ratio of ROA Expense Ratio to Cost to Income Foreign Currency Ownership) Adequacy Ratio Ratio Equity Ratio Weighted Loan Below Ratio Allowance for Delinquent Loans Total Assets Ratio Liquidity Ratio (Unit: %) 17.19 16.82 13.41 Ratio 0.07 Credit Loss 0.06 667.03 0.03 0.83 2.34 66.81 112.75 14.66 14.30 13.21 6.65 1.38 63.85 1.58 1.42 1.81 46.13 107.58 Woori America Bank (100.00%) Indonesia Woori Saudara Bank (79.88%) China Woori Bank 22.89 22.66 6.74 1.78 0.60 44.74 0.65 0.09 1.15 70.26 185.90 (100.00%) Russia Woori Bank 26.62 26.40 16.59 - - - - 2.03 1.52 36.11 122.63 (100.00%) Brazil Woori Bank 20.86 20.71 15.11 0.07 0.28 195.92 0.28 0.62 2.83 68.11 317.57 (100.00%) Woori Finance 21.00 20.08 19.18 0.11 0.04 2,418.89 0.04 4.48 4.25 41.80 133.42 Cambodia (100.00%) Woori Finance 50.29 49.40 48.89 0.19 0.23 556.86 0.29 6.95 14.86 58.25 334.39 Myanmar (100.00%) Wealth Development Bank (51.00%) Vietnam Woori Bank (100.00%) WB Finance (Cambodia) (100.00%) Europe Woori Bank (100.00%) Hong Kong Woori Investment Bank (100.00%) 17.36 17.01 10.55 21.72 5.84 18.19 6.36 0.33 4.64 95.51 78.80 15.52 15.23 15.41 0.30 0.36 259.58 0.05 1.18 2.46 64.34 129.18 21.1 20.3 20.41 0.62 0.28 416.32 0.29 3.95 6.96 56.23 158.49 59.08 58.96 25.27 - - - 2.22 △ 3.28 304.0 100.89 - 43.18 43.18 21.41 1.57 3.37 35.60 3.37 1.20 0.78 28.41 107.65 Note) Based on K-IFRS separate financial statements WOORI FINANCIAL GROUP ANNUAL REPORT 2019 119 E. Korea BTL Infrastructure Fund Korea BTL Infrastructure Fund (“the Company”) is a collective investment vehicle as defined by the Act on Public-Private Partnerships in Infrastruc- ture and an investment company as per the Financial Investment Services and Capital Markets Act. The major shareholder, Woori Bank, has commit- ted to invest a total of KRW 1.3 trillion in the Company under a purchase agreement valid until June 4th, 2036 (extendible for up to six years). As of end of December 2019, funds under management of the Company are fully financed by equity capital and the major shareholder, Woori Bank, has been executing equity investment through capital call since the incorporation of the Company. The Company currently invests in or extends loans to project concessionaires, concentrating on highly stable projects whose principal and interest of investment are either paid or compensated by the government. Invested projects include one BTO project, 43 BTL projects and 2 government cost compensation projects. Maintaining this ten- dency, investments will be made gradually with the outstanding commitment under the purchase agreement. The Company is maintaining a robust return on investment (ROI) (as of Dec 2019, capital is KRW 811.7 billion, ROI is 4.79% [internal rate of return since incorporation, assuming recovery of investment principal at end-2019]). Most invested assets are BTL projects whose principal and interest are tied to the yield on five-year government bonds and as such, ROI is likely to fluctuate with the bond yield. At the end of December 2018, ROI based on the same assumption was 4.95%, indicating a small decline over the year in 2019, owing to the decline in the yield of five–year government bonds. Currently, the Company is both making and redeeming investments. Following the recovery schedules for each invested project, the princi- pals of investment will be recovered quarterly over the duration of the fund, once the investment is complete. Depending on whether new investments will be executed by the Company, either a capital increase of the Company or a redemption on investment by shareholders will be carried out systematically. Woori OverviewBusiness OperationsFinancial ReviewManagement’s Discussion and AnalysisDeloitte 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 120 INDEPENDENT AUDITORS’ REPORT INDEPENDENT AUDITORS’ REPORT English Translation of a Report Originally Issued in Korean on March 16, 2020 To the Shareholders and the Board of Directors of Woori Financial Group Inc. Report on the Separate Financial Statements Audit Opinion We have audited the separate financial statements of Woori Financial Group (the “Company”), which comprise the separate statement of financial position as of December 31, 2019, and the separate statement of comprehensive income, separate statement of changes in equity and separate statement of cash flows, for the period from January 11, 2019 (date of incorporation) to December 31, 2019, and a summary of significant accounting policies and other explanatory information. In our opinion, the accompanying separate financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and its financial performance and its cash flows for the period from January 11, 2019 (date of incorporation) to December 31, 2019 in accordance with Korean International Financial Reporting Standards (“K-IFRS”). Basis for Audit Opinion We conducted our audits in accordance with the Korean Standards on Auditing (“KSAs”). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements, including those related to independence, that are relevant to our audit of the separate financial statements in the Republic of Korea as required by prevailing audit regulations. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters The key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the separate financial statements of the current period. These matters were addressed in the context of our audit of the separate financial statements as a whole, and in forming our audit opinion thereon, and we do not provide a separate opinion on these matters. WOORI FINANCIAL GROUP ANNUAL REPORT 2019 121 Impairment Losses of Subsidiary Investment Equities in compliance with K-IFRS 1036 ‘Impairment of Assets’ Key audit matter description As described in notes 2 and 9, the company accounts for its investment in subsidiaries by selecting the cost method in accordance with K-IFRS 1027 and assessing their potential for impairment. If there is any indication of objective impairment, the difference between the recoverable amount and the carrying amount of the subsidiary investment shares is recognized as impairment losses, and the recoverable amount is measured by calculating the estimated future cash flows based on the previous financial and operating plan data. The measure of recoverable amount of subsidiary investment shares uses discount rate, growth rate and expected economic indicators, and significant management judgment is involved in determining their adequacy. Given the high level of estimation and judgement of management, the audit of impairment assessment of subsidiary investment shares involves complex and subjective judgment by experts. Therefore, we selected the impairment loss assessment of subsidiaries' investment shares as the key audit matter. How the scope of our audit responded to the key audit matter Our audit procedures related to the assumptions and unobservable inputs used by management for the estimate of the recoverable amount included the following: - The effectiveness of the design and operation of internal controls related to the impairment assessment process, including the use of external experts by the company’s management, has been tested. - We verified the process of determining the rationale of the input variables used and the discount rate, growth rate, and expected economic indicators by using the shareholder cash flow discount method by engaging a fair value valuation specialist. - The recoverable amount was recalculated by considering the discount rate and future cash flows deemed appropriate with the fair value valuation specialist. Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial Review122 Responsibilities of Management and the Those Charged with Governance for the Separate Financial Statements Management is responsible for the preparation of the accompanying separate financial statements in accordance with K-IFRS, and for such internal control as they determine is necessary to enable the preparation of separate financial statements that are free from material misstatement, whether due to fraud or error. In preparing the separate financial statements, management of the Company is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Company’s financial reporting process. Auditor’s Responsibilities for the Audit of the Separate Financial Statements Our objectives are to obtain reasonable assurance about whether the separate financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with KSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these separate financial statements. As part of an audit in accordance with KSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: - - - - - Identify and assess the risks of material misstatement of the separate financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit 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 Company’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of the management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the separate financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the separate financial statements, including the disclosures, and whether the separate financial statements represent the underlying transactions and events in a manner that achieves fair presentation. WOORI FINANCIAL GROUP ANNUAL REPORT 2019123 We communicate with those charged with governance of the Company regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance of the Company with a statement that we have complied with relevant ethical requirements, including those related to independence, and to communicate with them all matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the separate financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partner on the audit resulting in this independent auditor’s report is Tae Jin Jo. March 16, 2020 Notice to Readers This report is effective as of March 16, 2020 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 separate financial statements and may result in modifications to the auditors’ report. Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial Review124 WOORI FINANCIAL GROUP INC. SEPARATE STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2019 WOORI FINANCIAL GROUP INC. SEPARATE STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2019 December 31, 2019 (Korean Won in millions) ASSETS Cash and cash equivalents (Note 5 and 28) Financial assets at fair value through profit or loss (“FVTPL”) (Note 4, 6, 8 and 16) Loans and other financial assets at amortized cost (Notes 4, 7, 8 and 28) Investments in subsidiaries (Note 9 and 28) Premises and equipment (Note 10 and 28) Intangible assets (Note 11) Total assets LIABILITIES Debentures (Notes 4, 8 and 12) Provisions (Note 13) Net defined benefit liability (Note 14) Current tax liabilities (Note 25) Deferred tax liabilities (Note 25) Other financial liabilities (Notes 4, 8, 15, 28 and 29) Other liabilities (Notes 15 and 28) Total liabilities EQUITY Owners’ equity: Capital stock (Note 17) Hybrid security(Note 17) Capital surplus (Note 17) Other equity (Note 17) Retained Earnings (Note 17) (Regulatory reserve for credit loss has no balance. Regulatory reserve for credit loss to be reserved is 692 million Won. Planned provision of regulatory reserve for credit loss is 692 million Won) Total equity Total liabilities and equity See accompanying notes 43,670 9,434 1,269,203 19,873,593 7,383 3,310 21,206,593 947,679 600 3,482 133,526 154 10,745 4,142 1,100,328 3,611,338 997,544 14,874,084 (631) 623,930 20,106,265 21,206,593 WOORI FINANCIAL GROUP ANNUAL REPORT 2019125 WOORI FINANCIAL GROUP INC. WOORI FINANCIAL GROUP INC. SEPARATE STATEMENTS OF COMPREHENSIVE INCOME SEPARATE STATEMENTS OF COMPREHENSIVE INCOME FOR THE PEIOD FROM JANUARY 11, 2019 (DATE OF INCORPORATION) TO FOR THE PERIOD FROM JANUARY 11, 2019 (DATE OF INCORPORATION) TO DECEMBER 31, 2019 DECEMBER 31, 2019 For the period from January 11, 2019 (Date of incorporation) to December 31, 2019 (Korean Won in millions, except for per share data) Interest income Interest expense Net interest income (Note 8,18 and 28) Fees and commissions income Fees and commissions expense Net fees and commissions loss (Note 19 and 28) Dividend income (Note 20 and 28) Net gain on financial instruments at FVTPL (Note 8 and 21) Impairment losses due to credit loss (Note 8, 22 and 28) General and administrative expenses (Notes 23 and 28) Operating income Net other non-operating expense Non-operating loss (Note 24) Net income before income tax expense Income tax expense (Note 25) Net income for the period (Adjusted net income after the provision of regulatory reserve: For the period from January 11, 2019 (Date of incorporation) to December 31, 2019: 627,601 million Won) (Note 17) Remeasurement of the net defined benefit liability Other comprehensive loss, net of tax Total comprehensive income Basic and diluted income per share (in Korean Won) (Note 26) See accompanying notes 7,741 (7,701) 40 - (15,833) (15,833) 676,000 9,434 (263) (39,941) 629,437 (750) (750) 628,687 (394) 628,293 (631) (631) 627,662 900 Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial Review 126 WOORI FINANCIAL GROUP INC. WOORI FINANCIAL GROUP INC. SEPARATE STATEMENTS OF CHANGES IN EQUITY SEPARATE STATEMENTS OF CHANGES IN EQUITY FOR THE PERIOD FROM JANUARY 11, 2019 (DATE OF INCORPORATION) TO FOR THE PERIOD FROM JANUARY 11, 2019 (DATE OF INCORPORATION) TO DECEMBER 31, 2019 DECEMBER 31, 2019 Capital stock Capital surplus Hybrid Other equity Security (Korean Won in millions) Retained Earnings Total equity January 11, 2019 (Date of incorporation) New stock issuance (Comprehensive stock exchange) New stock issuance costs Net income Remeasurement of the net defined benefit liability Issuance of hybrid security Dividends to hybrid security December 31, 2019 3,400,822 14,565,637 210,516 - - - - - 3,611,338 309,460 (1,013) - - - - 14,874,084 - - - - - 997,544 - 997,544 See accompanying notes - - - - (631) - - (631) - 17,966,459 - - 628,293 - - (4,363) 623,930 519,976 (1,013) 628,293 (631) 997,544 (4,363) 20,106,265 WOORI FINANCIAL GROUP ANNUAL REPORT 2019127 WOORI FINANCIAL GROUP INC. SEPARATE STATEMENTS OF CASH FLOWS FOR THE PERIOD FROM JANUARY 11, 2019 (DATE OF INCORPORATION) TO DECEMBER 31, 2019 WOORI FINANCIAL GROUP INC. SEPARATE STATEMENTS OF CASH FLOWS FOR THE PERIOD FROM JANUARY 11, 2019 (DATE OF INCORPORATION) TO DECEMBER 31, 2019 For the period from January 11, 2019 (Date of incorporation) to December 31, 2019 (Korean Won in millions) Cash flows from operating activities: Net income Adjustments: Income tax expense Interest income Interest expense Dividend income Additions of expenses not involving cash outflows: Impairment losses due to credit loss Retirement benefits Depreciation and amortization Deductions of incomes not involving cash in-flows: Gain on valuation of financial instruments at FVTPL Changes in operating assets and liabilities: Loans and other financial assets at amortized cost Net defined benefit liabilities Other financial liabilities Other liabilities Interest income received Interest expense paid Dividend income received Net cash provided by operating activities Cash flows from investing activities: Cash in-flows from investing activities Cash out-flows from investing activities: Acquisition of investments subsidiaries Acquisition of premises and equipment Acquisition of intangible assets Increase in guarantee deposits for leases Increase in other investment assets Net cash used in investing activities Cash flows from financing activities: Cash in-flows from financing activities: Increase in borrowings Issuance of debentures Issuance of hybrid security (Continued) 628,293 394 (7,741) 7,701 (676,000) (675,646) 263 4,899 4,098 9,260 9,434 9,434 (1,365) (1,687) 7,055 4,142 8,145 4,082 (6,097) 676,000 634,603 - 1,370,785 6,722 4,630 955 1,130,000 2,513,092 (2,513,092) 64,769 947,604 997,544 2,009,917 Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial Review 128 WOORI FINANCIAL GROUP INC. SEPARATE INTERIM STATEMENTS OF CASH FLOWS FOR THE PERIOD FROM JANUARY 11, 2019 (DATE OF INCORPORATION) TO DECEMBER 31, 2019 (CONTINUED) WOORI FINANCIAL GROUP INC. SEPARATE INTERIM STATEMENTS OF CASH FLOWS FOR THE PERIOD FROM JANUARY 11, 2019 (DATE OF INCORPORATION) TO DECEMBER 31, 2019 (CONTINUED) For the period from January 11, 2019 (Date of incorporation) to December 31, 2019 (Korean Won in millions) Cash out-flows from financing activities: Decrease in borrowings Repayment of lease liabilities New stock issuance costs Dividends to hybrid security Net cash provided by financing activities Net increase in cash and cash equivalents Cash and cash equivalents, date of incorporation (Note 5) Cash and cash equivalents, end of the year (Note 5) See accompanying notes 64,769 1,289 17,337 4,363 87,758 1,922,159 43,670 - 43,670 WOORI FINANCIAL GROUP ANNUAL REPORT 2019129 WOORI FINANCIAL GROUP INC. WOORI FINANCIAL GROUP INC. NOTES TO SEPARATE FINANCIAL STATEMENTS NOTES TO SEPARATE FINANCIAL STATEMENTS AS OF DECEMBER 31, 2019 AND FOR THE PERIOD FROM JANUARY 11, 2019 (DATE OF AS OF DECEMBER 31, 2019 AND FOR THE PERIOD FROM JANUARY 11, 2019 (DATE OF INCORPORATION) TO INCORPORATION) TO DECEMBER 31, 2019 DECEMBER 31, 2019 1. GENERAL (1) Woori Financial Group Effective as of January 11, 2019, Woori Financial Group Inc. (hereinafter referred to the “Company”) was established in accordance with the Financial Holding Companies Act for the main purposes of controlling subsidiaries that operate financial business and similar business closely related to finance, through comprehensive stock transfer under Article 360-15 of the Korean Commercial Code of Woori Bank, Woori FIS Co., Ltd., Woori Finance Research Institute Co., Ltd., Woori Credit Information Co., Ltd., Woori Fund Service Co., Ltd. and Woori Private Equity Asset Management Co., Ltd.. The head office of the Company is located in 51, Sogong-ro, Jung Gu, Seoul, Korea. As of September 30, 2019, the common stock of the Company amounts to 3,611,338 million Korean won, and the Korea Deposit Insurance Corporation (“KDIC”), the majority shareholder of the Company holds 124,604,797 shares (17.25% ownership interest) of the Company’s shares issued. The Company’s common stocks were listed on the Korea Exchange on February 13, 2019 and its American Depositary Shares(“ADS”) are being traded as the original stock on the New York Stock Exchange since the same date. (2) The stock transfer of the Company and its subsidiaries on the date of incorporation is as follows (Unit: Number of shares): Subsidiaries Woori Bank Woori FIS Co., Ltd. Woori Finance Research Institute Co., Ltd. Woori Credit Information Co., Ltd. Woori Fund Service Co., Ltd. Woori Private Equity Asset Management Co., Ltd. Total number of issued shares 676,000,000 4,900,000 600,000 1,008,000 2,000,000 6,000,000 Exchange ratio per share Number of shares in the Company 1.0000000 0.2999708 0.1888165 1.1037292 0.4709031 0.0877992 676,000,000 1,469,857 113,289 1,112,559 941,806 526,795 As of August 1, 2019, the company acquired a 73% stake in Woori Asset Management Co. (Formerly Tongyang Asset Management Co.). The remaining payment was completed in August, 2019 after the request for the change of major shareholder was approved by the Financial Service Commission in July, 2019 and the company gained 100% control of Woori Global Asset Management Co. (formerly ABL Global Asset Management Co.) to add as a consolidated subsidiary at the end of 2019. The company paid 598,391 million won in cash and 42,103,377 new shares of the parent company to acquire 100% interest of Woori Card Co., Ltd. from its subsidiary Woori Bank on September 10, 2019. On the same date, the company also acquired 59.8% interest of Woori Investment Bank Co., Ltd. from Woori Bank with 392,795 million won in cash. As of December 30, 2019, the company acquired a 67.2% interest in Woori Asset Trust Co. (formerly Kukje Asset Trust Co.). Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial Review130 - 2 - 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (1) Basis of presentation The Company’s separate financial statements are prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”). Significant accounting policies applied in the preparation of the financial statements are described below. The Company is preparing its financial statements in accordance with the K-IFRS, and the separate financial statements are prepared in accordance with K-IFRS 1027 “Separate Financial Statements”. The financial statements of the parent, associate or joint venture represent the investment assets in a manner that is based on direct equity investments, not based on the reported performance and net assets of the investee. The financial statements are prepared at the end of each reporting period on the historical cost basis, except for certain non-current assets and financial assets that are either revalued or measured in fair value. Historical cost is generally measured at the fair value of consideration given to acquire assets. The financial statements of the company were approved with adjustments as of March 3, 2020 after the initial approval for the issuance as of February 7, 2020, and are planned to be finalized at the shareholder’s meeting on March 25, 2020. 1.1 It is believed that the following issued and revised standards that have been newly applied during the current term will not have a significant impact on the company. - - - - - - K-IFRS 2123 Uncertainty over Income Tax Treatments (Issued) K-IFRS 1109 Financial Instruments (Revised) K-IFRS 1028 Investment in Associates and Joint Ventures (Revised) K-IFRS 1019 Employee Benefits (Revised) K-IFRS 1115 Revenue from Contracts with Customers (Revised) Annual Improvements to IFRSs 2015-2017 Cycle The annual improvements include partial amendments of K-IFRS 1012 ‘Income Tax,’ K-IFRS 1023 ‘Borrowing Cost,’ K-IFRS 1103 ‘Business Combination’ and K-IFRS 1111 ‘Joint Arrangements.’ 1.2 The details of K-IFRSs that have been issued and published as of the date of issue approval of the financial statements but have not yet reached the effective date, and which the Company has not applied at an earlier date are as follows: - - - Revised Conceptual Framework for Financial Reporting Revised K-IFRS 1103 ‘Business Combinations’ Revised K-IFRS 1001 ‘Financial Statements Presentation’ and K-IFRS 1008 ‘Accounting policies, changes in Accounting Estimates and Errors’ It is believed that the above revised standards will not have a significant impact on the company. (2) Investments in subsidiaries and Associates in separate financial statements The Company selects and processes the cost method in accordance with K-IFRS 1027 for investments in subsidiaries, associates and jointly controlled entities, except for those classified as held for sale in accordance with K-IFRS 1105 ‘Non-current Assets Held for Sale and Discontinued Operations’. Dividends received from subsidiaries, associates and jointly controlled entities are recognized as dividend income when the right to receive dividends is established. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 3 - 131 (3) Revenue recognition 3.1 Revenue from contracts with customers The Company recognizes revenue when the Company satisfies a performance obligation by transferring a promised good or service to a customer. When a performance obligation is satisfied, the Company shall recognize as a revenue the amount of the transaction price that is allocated to that performance obligation. The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties. 3.2 Revenues from sources other than contracts with customers Interest income on financial assets measured at FVTOCI and financial assets at amortized costs is measured using the effective interest method. The effective interest method is a method of calculating the amortized cost of debt securities (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 total carrying amount over the expected period, or shorter if appropriate. Future cash flows include commissions and cost of reward points (limited to the primary component of effective interest rate) and other premiums or discounts that are paid or received between the contractual parties, and future cash flows exclude expected credit loss when calculating the effective interest rate. All contractual terms of a financial instrument are considered when estimating future cash flows. For purchased or originated credit-impaired financial assets, interest revenue is recognized by applying the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition. Even if the financial asset is no longer impaired in the subsequent periods due to credit improvement, the basis of interest revenue calculation is not changed from amortized cost to unamortized cost of the financial assets. (4) Accounting for foreign currencies The Company’s separate financial statements are presented in Korean Won, which is the functional currency of the Company. 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. (5) Cash and cash equivalents The Company is classifying cash on hand, demand deposits, interest-earning deposits with original maturities of up to three months on acquisition date, and highly liquid investments that are readily convertible to known amounts of cash and subject to an insignificant risk of changes in value as cash and cash equivalents. (6) Financial assets and financial liabilities The Company’s accounting policies in accordance with the newly adopted K-IFRS 1109 are as follows: 6.1 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 FVTPL, financial assets at FVTOCI, and financial assets at amortized cost. Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial Review132 - 4 - 6.1.1 Business model The Company evaluates the way business is being managed, and the purpose of the business model for managing a financial asset best reflects the way information is provided to the management at its portfolio level. Such information considers the following: - The accounting policies and purpose specified for the portfolio, and the actual operation of such policies. This includes strategy of the management focusing on the receipt of contractual interest revenue, maintaining a certain level of interest income, matching the duration of financial assets and the duration of corresponding liabilities to obtain the asset, and outflow or realization of expected cash flows from disposal of assets. - The way the performance of a financial asset held under the business model is evaluated, and the way such evaluation is being reported to the management - The risk affecting the performance of the business model (and financial assets held under the business model), and the way such risk is being managed - The compensation plan for the management (e.g. whether the management is being compensated based on the fair value of assets or based on contractual cash flows received) - Frequency, amount, timing and reason for sale of financial assets in the past and forecast of future sale activities 6.1.2 Contractual cash flows The principal is defined to be the fair value of a financial asset at initial recognition. Interest is not only composed of consideration for the time value of money, consideration for the credit risk related to remaining principal at a certain period of time, and consideration for other cost (e.g. liquidity risk and cost of operation) and fundamental risk associated with lending, but also profit. When evaluating whether contractual cash flows are solely payments of principal and interests, the Company considers the contractual terms of the financial instrument. When a financial asset contains contractual conditions that modify the timing and amount of contractual cash flows, it is required to determine whether contractual cash flows that arise during the remaining life of the financial instrument due to such contractual condition are solely payments of principal and interest. The Company considers the following elements when evaluating the above: - Conditions that lead to modification of timing or amount of cash flows - Contractual terms that adjust contractual nominal interest, including floating rate features - Early payment features and maturity extension features - Contractual terms that limit the Company’s claim on cash flows arising from certain assets (e.g. non- recourse feature) 6.1.2.1 Financial assets at FVTPL The Company is classifying those financial assets that are not classified as either financial assets at amortized cost or financial assets at FVTOCI, and those designated to be measured at FVTPL, as financial assets at FVTPL. Financial assets at FVTPL are measured at fair value, and related profit or loss is recognized in net income. Transaction costs related to acquisition at initial recognition is recognized in net income immediately upon its occurrence. It is possible to designate a financial asset as financial asset at FVTPL if at initial recognition: (a) it is possible to remove or significantly reduce recognition or measurement mismatch that may otherwise have occurred if not for its designation as financial asset at FVTPL; (b) the financial asset forms part of the Company’s financial instrument group (A group composed of a combination of financial asset or liability), is measured at fair value and is being evaluated for its performance, and such information is provided internally; and (c) the financial asset is part of a contract that contains one or more of embedded derivatives, and is a hybrid contract in which designation as financial asset at FVTPL is allowed under K- IFRS 1109 ‘Financial Instruments’. However, the designation is irrevocable. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 5 - 133 Financial assets at FVTOCI 6.1.2.2 When financial assets are held under a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and when contractual cash flows from such financial assets are solely payments of principal and interest, the financial assets are classified as financial assets at FVTOCI. Also, for investments in equity instruments that are not held for short-term trade, an irrevocable election is available at initial recognition to present subsequent changes in fair value as other comprehensive income. At initial recognition, financial assets at FVTOCI is measured at its fair value plus any direct transaction cost and is subsequently measured in fair value. However, for equity instruments that do not have a quotation in an active market and in which fair value cannot be measured reliably, they are measured at cost. The changes in fair value except for profit or loss items such as impairment losses (reversals), interest revenue calculated by using effective interest method, and foreign exchange gain or loss, and related income tax effects are recognized as other comprehensive income until the asset’s disposal. Upon derecognition, the accumulated other comprehensive income is reclassified from equity to net income for FVTOCI (debt instrument), and reclassified within the equity for FVTOCI (equity instruments) 6.1.2.3 Financial assets at amortized cost When financial assets are held under a business model whose objective is to hold financial assets in order to collect contractual cash flows, and when contractual cash flows from such financial assets are solely payments of principal and interest, the financial assets are classified as financial assets at amortized cost. At initial recognition, financial assets at amortized cost are recognized at fair value plus any direct transaction cost. Financial assets at amortized cost is presented at amortized cost using effective interest method, less any loss allowance. 6.2 Financial liabilities At initial recognition, financial liabilities are classified into either financial liabilities at FVTPL or financial liabilities at amortized cost. Financial liabilities are usually classified as financial liabilities at FVTPL when they are acquired with a purpose to repurchase them within a short period of time, when they are part of a certain financial instrument portfolio that is actually and recently being managed with a purpose of short-term profit and joint management by the Company at initial recognition, and when they are derivatives that do not qualify as hedging instruments. Financial liabilities at FVTPL are measured at fair value plus direct transaction cost at initial recognition and are subsequently measured at fair value. Profit or loss arising from financial liabilities at FVTPL is recognized in net income when occurred. It is possible to designate a financial liability as financial liability at FVTPL if at initial recognition: (a) it is possible to remove or significantly reduce recognition or measurement mismatch that may otherwise have occurred if not for its designation as financial liability at FVTPL; (b) the financial liability forms part of the Company’s financial instrument group (a group composed of a combination of financial asset or liability) according to the Company’s documented risk management or investment strategy, is measured at fair value and is being evaluated for its performance, and such information is provided internally; and (c) the financial liability is part of a contract that contains one or more of embedded derivatives, and is a hybrid contract in which designation as financial liability at FVTPL is allowed under K-IFRS 1109 ‘Financial Instruments’. Financial liabilities designated as at FVTPL are initially recognized at fair value, with any direct transaction cost recognized in profit or loss, and are subsequently measured at fair value. Any profit or loss from financial liabilities at FVTPL are recognized in profit or loss. Financial liabilities not classified as financial liabilities at FVTPL are measured at amortized cost. The Company is classifying liabilities such as borrowings etc. as financial liabilities at amortized cost. 6.3 Reclassification Financial assets are not reclassified after initial recognition unless the Company modifies the business model used to manage financial assets. When the Company modifies the business model used to manage financial assets, all affected financial assets are reclassified on the first day of the first reporting period after the modification. Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial Review134 6.4 Derecognition - 6 - Financial assets are derecognized when contractual rights to cash flows from the financial assets are expired, or when substantially all of risk and reward for holding financial assets is transferred to another entity as a result of a sale of financial assets. If the Company does not have and does not transfer substantially all of the risk and reward of holding financial assets with control of the transferred financial assets retained, the Company recognizes financial assets to the extent of its continuing involvement. If the Company holds substantially all the risk and reward of holding a financial asset, it continues to recognize that asset and proceeds are accounted for as collateralized borrowings. When a financial asset is fully derecognized, the difference between the book value and the sum of proceeds and accumulated other comprehensive income is recognized as profit or loss in case of FVTOCI (debt instruments), and as retained earnings for FVTOCI (equity instruments). In cases when a financial asset is not fully derecognized, the Company allocates the book value into amounts retained in the books and removed from the books, based on the relative fair value of each portion at the date of sale, and based on the degree of continuing involvement. For the derecognized portion of the financial assets, the difference between its book value and the sum of proceeds and the portion of accumulated other comprehensive income attributable to that portion will be recognized in profit or loss in case of debt instruments and recognized in retained earnings in case of equity instruments. The accumulated other comprehensive income is distributed to the portion of book value retained in the books, and to the portion of book value removed from the books. The Company derecognizes financial liabilities only when, the Company’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss. When the Company exchanges with the existing lender one debt instrument into another one with the substantially different terms, such exchange is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, the Company accounts for substantial modification of terms of an existing liability or part of it as an extinguishment of the original financial liability and the recognition of a new liability. It is assumed that the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective rate is at least 10 percent different from the discounted present value of the remaining cash flows of the original financial liability. 6.5 Fair value of financial instruments Financial assets at FVTPL and financial assets at FVTOCI are measured and presented in financial statements at their fair values, and all derivatives are also subject to fair value measurement. Fair value is defined as the price that would be received to exchange an asset or paid to transfer a liability in a recent transaction between independent parties that are reasonable and willing. Fair value is the transaction price of identical financial assets or financial liabilities generated in an active market. An active market is a market where trade volume is sufficient and objective price information is available due to the fact that bid and ask price differences are small. When trade volume of a financial instrument is low, when transaction prices within the market show large differences among them, or when it cannot be concluded that a financial instrument is being traded within an active market due to disclosures being extremely limited, fair value is measured using valuation techniques based on alternative market information or using internal valuation techniques based on general and observable information obtained from objective sources. Market information includes maturity and characteristics, duration, similar yield curve, and variability measurement of financial instruments of similar nature. Fair value amount contains unique assumptions on each entity (the Company concluded that it is using assumptions applied in valuing financial instruments in the market, or risk-adjusted assumptions in case marketability does not exist). WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 7 - 135 The market approach and income approach, which are valuation techniques used to estimate the fair value of financial instruments, both require significant judgment. Market approach measures fair value using either a recent transaction price that includes the financial instrument, or observable information on comparable firm or assets. Income approach measures fair value through discounting future cash flows with a discount rate reflecting market expectations, and revenue, operating income, depreciation, capital expenditures, income tax, working capital and estimated residual value of financial investments are being considered when deriving future cash flows. Valuation techniques such as the above include estimates based on the financial instruments’ complexity and usefulness of observable information in the market. 6.5.1 Expected credit losses on financial assets The Company recognizes loss allowance on expected credit losses for the following assets: - Financial assets at amortized cost - Debt instruments measured at FVTOCI - Contract assets as defined by K-IFRS 1115 Expected credit losses are weighted-average value of a range of possible results, considering the time value of money, and are measured by incorporating information on past events, current conditions and forecasts of future economic conditions that are available without undue cost or effort at the reporting date. The methods to measure expected credit losses are classified into following three categories in accordance with K-IFRS: - General approach: Financial assets that does not belong to below two models and unused loan commitments - Simplified approach: When financial assets are either trade receivables, contract assets or lease receivables - Credit impairment model: Purchased or originated credit-impaired financial assets a) Measurement of expected credit losses on financial asset at amortized cost The expected credit losses on financial assets at amortized cost is measured by the difference between the contractual cash flows during the period and the present value of expected cash flows. Expected cash inflows are computed for individually significant financial assets in order to calculate expected credit losses. When financial assets that are not individually significant, they are included in a group of financial assets with similar credit risk characteristics and expected credit losses of the group are calculated collectively. Expected credit losses are deducted through loss allowance account, and when the financial asset is determined to be uncollectible, the loss allowance is written off from the books along with the related financial asset. When loan receivable previously written off is subsequently collected, the related loss allowance is increased and changes in loss allowance are recognized in profit or loss. b) Measurement of expected credit losses on financial asset at FVTOCI The measurement method of expected credit loss is identical to financial asset at amortized cost, but changes in the allowance is recognized in other comprehensive income. When financial assets at FVTOCI is disposed or repaid, the related allowance is reclassified from other comprehensive income to net income. (7) Offsetting financial instruments Financial assets and liabilities are presented as a net amount in the statements of financial position when the Company has an enforceable legal right and an intention to settle on a net basis or to realize an asset and settle the liability simultaneously. Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial Review136 - 8 - (8) Premises and equipment Premises and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of premises and equipment is expenditures directly attributable to their purchase or construction, which includes any cost 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 costs of dismantling and removing the item and restoring the site on which it is located. Subsequent costs are recognized in the carrying amount of an asset or as a separate asset (if appropriate) if it is probable that future economic benefit associated with the assets will flow into the Company 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 by applying the following estimated economic useful lives on the amount of cost or revalued amount less residual value. Leasehold Improvement Properties for business purpose Right-of-use asset Useful life 5 years 5 years Lease period The Company reassesses the depreciation method, the estimated useful lives and residual values of premises and equipment at the end of each reporting period. If changes in the estimates are deemed appropriate, the changes are accounted for as a change in an accounting estimate. When there is an indicator of impairment and the carrying amount of a premises and equipment item exceeds the estimated recoverable amount, the carrying amount of such asset is reduced to the recoverable amount. (9) Intangible assets and goodwill The Company is recognizing intangible assets measured at the manufacturing cost or acquisition cost plus additional incidental expenses less accumulated amortization and accumulated impairment losses. The Company’s intangible asset are amortized over the following economic lives using the straight-line method. The estimated useful life and amortization method are reviewed at the end of each reporting period. If changes in the estimates are deemed appropriate, the changes are accounted for as a change in an accounting estimate. Software Development cost Useful life 5 years or period of use 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. (10) Impairment of non-monetary assets Intangible assets with indefinite useful lives 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 by estimating the recoverable amount when there is an objective indication that the carrying amount may not be recoverable. Recoverable amount is the higher of value in use or 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. (11) Provisions The Company recognizes provision if (a) it has present or contractual obligations as a result of the past event, (b) it is probable that an outflow of resources will be required to settle the obligation and (c) the amount of the obligation is reliably estimated. Provision is not recognized for the future operating losses. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 9 - 137 Where the Company is required to restore a leased property that is used as an office 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. (12) Equity instruments issued by the Company The Company classifies a financial instrument that it issues as a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. A financial liability is a contractual obligation to deliver cash or another financial asset to another entity. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. In case of hybrid securities that have the unconditional right to avoid contractual obligations, such as to deliver cash or other financial assets related to financial instruments, they are classifies as equity instruments and presented as part of equity. If the Company reacquires its own equity instruments, the consideration paid including the direct transaction costs (net of income tax expense) are presented as a deduction from total equity until such instruments are retired or reissued. When these instruments are reissued, the consideration received (net of direct transaction costs) is included in the shareholder’s equity. (13) Employee benefits and pensions The Company recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by the employees. Also, the Company recognizes expenses and liabilities in the case of accumulating compensated absences when the employees render services that entitle their right to future compensated absences. Similarly, the Company recognizes expenses and liabilities for customary profit distribution or bonuses when the employees render services, even though the Company does not have legal obligation to do so because it can be construed as constructive obligation. The Company is operating defined benefit plans. For defined benefit plans, the defined benefit liability is calculated through an actuarial assessment using the projected unit credit method every end of the reporting period, conducted by professional actuaries. Remeasurement, comprising actuarial gains and losses, the return on plan assets (excluding interest), and the effect of the changes to the asset ceiling (if applicable) is reflected immediately in the separate statement of financial position with a charge or credit recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in the statement of comprehensive income is not reclassified to profit or loss in the subsequent periods. 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 and past service cost, as well as gains and losses on curtailments and settlements), net interest expense (income) and remeasurement. The Company 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 separate statement of financial position represents the actual deficit or surplus in the Company’s defined benefit plans. Any surplus resulting from this calculation is recognized as an asset 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) the date when the Company is no longer able to cancel its proposal for termination benefits or 2) the date when the Company has recognized the cost of restructuring that accompanies the payment of termination benefits. Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial Review138 - 10 - (14) Share-based payments For cash-settled share-based payment transactions that provide cash in return for the goods or services received, the Company measures the goods or services received, and the corresponding liability at the fair value and recognizes as employee benefit expenses and liabilities during the vesting period. The fair value of the liability is remeasured at the end of each reporting period and the settlement date until the liability is settled, and changes in fair value are recognized as employee benefits. (15) Income taxes Income tax expense is composed of current tax and deferred tax. That is, income tax expense is composed of taxes payable or refundable during the period and deferred taxes calculated by applying asset-liability method to taxable and deductible temporary differences arising from operating loss and tax credit carryforwards. 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 recognized for the change in deferred tax assets or liabilities. Deferred tax assets and liabilities are measured as of the reporting date using the enacted or substantively enacted tax rates expected to apply in the period in which the liability is settled or asset realized. Deferred tax assets, including the carryforwards of unused tax losses, are recognized to the extent it is probable that the deferred tax assets will be realized. The Company, as a consolidation group for its wholly-owned subsidiaries applies consolidated tax return approach, in which the Company and its subsidiaries are consolidated into a single tax base and tax amount. The Company determined whether temporary differences are realizable by considering the Company and each subsidiary’s future taxable income. For the changes in deferred income tax asset (liability), the Company recognized income tax expense (benefit), excluding the amounts that are directly adjusted from equity. Also, as the Company became the consolidation entity for tax filings and tax returns, it recognized the total amount of income tax payables as liabilities and individual tax amounts to be received from each of its wholly-owned subsidiaries as receivables. Deferred income tax assets and liabilities are offset if, and only if, the Company 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 or when the entity intends to settle current tax liabilities and assets on a net basis with different taxable entities. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. 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 taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity or when it arises from business combination. The tax uncertainty arises from the compensation claim filed by the Company, and refund litigation for the amount of tax levied by the tax authority due to differences in tax law analysis. In response, the Company paid taxes in accordance with K-IFRS 2123 due to the tax authority’s claim, but recognized as a corporate tax asset if it is highly probable of a refund in the future. (16) Earnings per share (“EPS”) Basic EPS is a calculation of net income per each common stock. It is calculated by dividing net income attributable to ordinary shareholders 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. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 11 - 139 (17) Leases 17.1 Definition of lease The Company determines whether the contract is, or contains, a lease at the date of initial application. A contract is or contains a lease if the right to control the use of an identified asset is transferred in exchange for the consideration received for a period of time. For a contract that contains a lease component, as a practical expedient, the company may elect, by class of underlying asset, not to separate non-lease components from lease components, and instead account for each lease component and any associated non- lease components as a single lease component. IFRS Interpretations Committee published its interpretation of ‘Lease Period and Lease Improvement Useful Life’ as of December 16, 2019. The Interpretation Committee discussed a question about how to determine the lease term for cancellable or renewable leases and according to the interpretation, the lease term will depend on both the termination penalties in the contract and the broader economics of the contract. Agenda decisions issued by the Interpretations Committee do not have an application date, but are expected to be implemented as soon as possible. The Company is currently assessing the impact of the agenda decision and does not expect a material impact to the financial statement. 17.2 Lessee At the commencement date, the Company recognizes a right-of-use asset and a lease liability. For initial recognition, a right-of-use asset is measured at a cost less any accumulated depreciation and any accumulated impairment losses, adjusted for any remeasurement of the lease liability. If a right-of-use asset satisfies the definition of an investment property, it can be presented as an investment property. A right-of- use asset as an investment property is initially measured at a cost and subsequently measured at fair value, in line with the Company’s accounting policy on the investment property. At the commencement date, a lease liability is measured at the present value of the lease payments that are not paid at that date. The lease payments are discounted using the interest rate implicit in the lease, if the rate can be readily determined. If the rate cannot be readily determined, the Company’s incremental borrowing rate can be used. Generally, the Company uses incremental borrowing rate as a discount rate. A lease liability is subsequently measured by increasing the carrying amount to reflect interest rate on the lease liability and reducing the carrying amount to reflect the lease payments made. A lease liability is remeasured when future lease payments change, depending on the changes in an index or a rate, change in amounts expected to be payable due to residual value guarantees, assessment of whether the Company is reasonably certain to exercise the purchase option and extension option, the Company is not reasonably certain to exercise the termination options. A Company’s judgment is used when determining the lease term for some contracts that contain extension options. The assessment on whether the Company is reasonably certain to exercise the extension option could affect the lease term, and therefore, the lease liability and the right-of-use asset could be significantly affected. The Company chose not to recognize the right-of-use asset and the lease liability for the short-term leases and some leases for which the underlying asset is of low value (e.g. IT facilities). The Company recognizes the lease payments associated with those leases as an expense on a straight-line basis over the lease term. 17.3 Lessor The Company classifies its leases as either an operating lease or a finance lease, and has different accounting treatments for the two types of lease. According to the Standards, if a lessor subleases an asset, the head lease and sublease must be accounted for as separate contracts, and the sublease is classified by reference to the assets arising from its head lease. Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial Review140 - 12 - 3. SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS The significant accounting estimates and assumptions are continuously being evaluated based on numerous factors including historical experiences and expectations of future events considered to be reasonably possible. Actual results can differ from those estimates based on such definitions. The accounting estimates and assumptions that contain significant risk of materially changing current book values of assets and liabilities in the next accounting periods are as follows: (1) Income taxes The Company has recognized current and deferred taxes based on best estimates of expected future income tax effect arising from the Company’s operations until the end of the current reporting period. However, actual tax payment may not be identical to the related assets and/or liabilities already recognized, and these differences may affect current taxes and deferred tax assets/liabilities at the time when income tax effects are finalized. 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. In this case the Company’s evaluation considers various factors such as estimated future taxable profit based on forecasted operating results, which are based on historical financial performance. The Company is reviewing the book value of deferred tax assets every end of the reporting period and in the event that the possibility of earning future taxable income changes, the deferred tax assets are adjusted up to taxable income sufficient to use deductible temporary differences. (2) Valuation of financial instruments Financial assets at FVTPL and FVTOCI are recognized in the separate financial statements at fair value. All derivatives are measured at fair value. Valuation techniques are required in order to determine fair values of financial instruments where observable market prices do not exist. Financial instruments that are not actively traded and have low price transparency 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. As described in Note 2, (6.5), ‘Fair value of financial instruments’, when valuation techniques are used to determine the fair value of a financial instrument, various general and internally developed techniques are used, and various types of assumptions and variables are incorporated during the process. (3) Impairment of financial instruments KIFRS 1109 requires entities to measure loss allowance equal to 12-month expected credit losses or lifetime expected credit losses after classifying financial assets into one of the three stages, which depends on the degree of increase in credit risk after their initial recognition. Stage 1 Credit risk has not significantly increased since initial recognition(*) Allowance for expected credit losses Expected 12-month credit losses: Expected credit losses due to possible defaults on financial instruments within a 12-month period from the end of reporting period. 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 the end of reporting period. The Company has estimated the allowance for credit losses based on reasonable and supportable information that was available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 13 - 141 (4) Defined benefit plan The Company operates a defined benefit pension plan. Defined benefit obligation is calculated at every end of the reporting period by performing actuarial valuation, and estimation of assumptions such as discount rate, expected wage growth rate and mortality rate is required to perform such actuarial valuation. The defined benefit plan, due to its long-term nature, contains significant uncertainties in its estimates. (5) Impairment of non-monetary assets At the end of each reporting period, the company assesses the existence of impairment indications for all non- monetary assets. An intangible asset with indefinite useful life is tested for impairment annually or in the event of signs of impairment, and other non-monetary assets are tested for impairment when there are indications that the carrying amount will be not recoverable. To calculate value in use, management estimates future expected cash flows from the asset or cash-generating unit and selects an appropriate discount rate to calculate the present value of this future cash flow. 4. RISK MANAGEMENT The Company is exposed to various risks that may arise from its operating activities and credit risk, market risk and liquidity risk are the main types of risks. In order to manage such risks, the Risk Management Committee analyzes, assesses, and establishes risk management standards, including policies, guidelines, management systems and decision-making to ensure sound management of the Group. The Risk Management Committee, Chief Risk Officer (“CRO”) and the Risk Management Department are operated as risk management organizations. The board of directors operates the Risk Management Committee, composed of nonexecutive directors for professional risk management. The Risk Management Committee performs as the top decision-making body for risk management by establishing fundamental risk management policies that are consistent with the Group’s management strategy and by determining the Group’s acceptable level of risk. CRO assists the Risk Management Committee and operates the Group Risk Management Council, which is composed of the risk management officers of the subsidiaries, to periodically check and improve the external environment and the Group’s risk burden. The Risk Management Department which is independently structured, controls the risk management matter of the Group and reports key risks and assists decision-making. (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 Company’s credit risk exposure to a permissible degree and to optimize its rate of return considering such credit risk. 1.1 Credit risk management The Company measures expected loss on assets subject to credit risk management and uses it as a management indicator. 1.2 Maximum exposure to credit risk The maximum exposure to credit risk for financial instruments is as follows (Unit: Korean Won in millions): Loans and other financial assets at amortized cost Banks Corporates Financial assets at FVTPL Derivatives Total December 31, 2019 1,228,918 40,285 1,269,203 9,434 1,278,637 Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial Review142 - 14 - a) Credit risk exposure by geographical areas The following tables analyze credit risk exposure by geographical areas (Unit: Korean Won in millions): Loans and other financial assets at amortized cost Financial assets at FVTPL Total b) Credit risk exposure by industries December 31, 2019 Korea 1,269,203 9,434 1,278,637 The following tables analyze credit risk exposure by industries, which are finance and insurance and others in accordance with the Korea Standard Industrial Classification Code (Unit: Korean Won in millions): Loans and other financial assets at amortized cost Financial assets at FVPTL Total 1.3 Credit risk exposure December 31, 2019 Finance and insurance 1,267,228 9,434 1,276,662 Others 1,975 - 1,975 Total 1,269,203 9,434 1,278,637 The credit soundness for financial assets is as follows (Unit: Korean Won in millions): December 31, 2019 Stage 1 Stage 2 Above appropriate credit rating (*1) Less than a limited credit rating (*3) Above appropriat e credit rating (*2) Less than a limited credit rating (*3) Allowance for loan losses Total, net Collateral value of impaired asset Stage 3 Total Loans and other financial assets at amortized cost Banks Corporates General corporates Total 1,269,466 1,229,181 40,285 40,285 1,269,466 - - - - - - - - - - - - - - - - - - - - 1,269,466 1,229,181 40,285 40,285 1,269,466 (263) (263) - - (263) 1,269,203 1,228,918 40,285 40,285 1,269,203 - - - - - (*1) Credit grade of corporates are AAA ~ BBB. (*2) Credit grade of corporates are A- ~ BBB (*3) Credit grade of corporates are BBB- ~ C. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 15 - 143 (2) Market risk Market risk is the possible risk of loss arising from trading and non-trading activities in the volatility of market factors such as interest rates, stock prices, and foreign exchange rates. The Company’s major market risk is interest rate risk. The Company 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), interest-bearing assets and liabilities, presented by each repricing date, are as follows (Unit: Korean Won in millions): Within 3 months 4 to 6 months December 31, 2019 10 to 12 months 7 to 9 months 1 to 5 years Over 5 years Total Asset: Loans and other financial assets at amortized cost Liability: Debentures (3) Liquidity risk 445,070 733,330 - - - - 1,178,400 5,486 5,486 5,486 5,487 87,780 1,049,863 1,159,588 Liquidity risk refers to the risk that the Company may encounter difficulties in meeting obligations from its financial liabilities. 3.1 Liquidity risk management Liquidity risk management is to prevent potential cash shortages as a result of mismatching the assets and liabilities or unexpected cash outflows. The financial liabilities in the statement of financial position that are relevant to liquidity risk are incorporated within the scope of risk management. The Company 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.). 3.2 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 5,486 335. 6,131 11,952 4 to 6 months 5,486 335 2,043 7,864 December 31, 2019 7 to 9 months 10 to 12 months 1 to 5 years 5,486 335 - 5,821 5,487 336 183 6,006 87,780 249 820 88,849 Over 5 years 1,049,863 - Total 1,159,588 1,590 - 1,049,863 9,177 1,170,355 Debentures Lease liabilities Other financial liabilities Total Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial Review144 - 16 - b) Cash flows of principals and interests by expected maturities of non-derivative financial liabilities are as follows (Unit: Korean Won in millions): December 31, 2019 Within 3 months 5,486 335. 4 to 6 months 5,486 335 7 to 9 months 5,486 335 6,131 11,952 2,043 7,864 - 5,821 10 to 12 months 1 to 5 years 5,487 336 183 6,006 87,780 249 820 88,849 Over 5 years 1,049,863 - Total 1,159,588 1,590 - 1,049,863 9,177 1,170,355 Debentures Lease liabilities Other financial liabilities Total (4) Capital management The Company complies with the standard of capital adequacy provided by financial regulatory authorities. The capital adequacy standard is based on Basel published by Basel III Committee on Banking Supervision in Bank for International Settlement in 2010 and was implemented in Korea in 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 company. According to the above regulations, the Company is required to meet the following new minimum requirements: Common Equity Tier 1 capital ratio of 7.0%, a Tier 1 capital ratio of 8.5% and a minimum total capital ratio of 10.5% as of December 31, 2019, respectively. Details of the Group’s capital adequacy ratio as of December 31, 2019 are as follows (Unit: Korean Won in millions): December 31, 2019 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 19,135,300 3,340,252 4,639,519 27,115,071 209,802,895 5,586,757 12,656,301 228,045,953 8.39% 9.86% 11.89% 5. STATEMENTS OF CASH FLOWS (1) Details of cash and cash equivalents are as follows (Unit: Korean Won in millions): Demand deposits December 31, 2019 43,670 (2) Significant transactions not involving cash inflows and outflows from investing and financing activities are as follows (Unit: Korean Won in millions): Changes in right-of-use assets due to new contract Changes in lease liabilities due to new contract Comprehensive stock transfer For the period from January 11, 2019 (date of incorporation) to December 31, 2019 3,439 2,812 18,502,760 WOORI FINANCIAL GROUP ANNUAL REPORT 2019 - 17 - 145 (3) Adjustments of liabilities from financing activities in current year are as follows (Unit: Korean Won in millions): For the period from January 11,2019 (date of incorporation) to December 31, 2019 Not involving cash inflows and outflows Variation of gains on valuation of hedged items Others Debentures Lease liabilities Total Beginning - - - Cash flow 947,604 (1,289) 946,315 Foreign Exchange - - - - - - 75 2,857 2,932 Ending 947,679 1,568 949,247 6. FINANCIAL ASSETS AT FVTPL (1) Details of financial assets at FVTPL are as follows (Unit: Korean Won in millions): Financial assets at FVTPL (2) Details of financial assets at FVTPL are as follows (Unit: Korean Won in millions): December 31, 2019 Derivatives December 31, 2019 9,434 9,434 (3) As of December 31, 2019, the Company does not hold financial assets designated at FVTPL. 7. LOANS AND OTHER FINANCIAL ASSETS AT AMORTIZED COST (1) Details of loans and other financial assets at amortized cost are as follows (Unit: Korean Won in millions): December 31, 2019 Due from banks Other financial assets Total (2) Details of due from banks are as follows (Unit: Korean won in millions): December 31, 2019 Due from banks in local currency: Due from depository banks Allowance for credit loss Total 1,129,738 139,465 1,269,203 1,130,000 (262) 1,129,738 Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial Review146 - 18 - (3) Changes in the loss allowance and gross carrying amount of due from banks are as follows (Unit: Korean Won in millions): 3.1 Allowance for credit losses Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Net provision of loss allowance Ending balance 3.2 Gross carrying amount For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Stage 1 - - - - (262) (262) Stage 2 Stage 3 Total - - - - - - - - - - - - - - - - (262) (262) For the period from January 11,2019(date of incorporation) to December 31, 2019 Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Net increase and decrease Ending balance Stage 1 - - - - 1,130,000 1,130,000 Stage 2 Stage 3 - - - - - - (4) Details of other financial assets are as follows (Unit: Korean Won in million): December 31, 2019 Receivables Accrued income Lease deposits Allowance for credit loss Total Total - - - - 1,130,000 1,130,000 - - - - - - 134,891 3,641 934 (1) 139,465 (5) Changes in the loss allowance and gross carrying amount of other financial assets are as follows (Unit: Korean Won in millions): 5.1 Allowance for credit loss For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Stage 1 Stage 2 Stage 3 Total Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Net provision of loss allowance Ending balance - - - - (1) (1) - - - - - - - - - - - - - - - - (1) (1) WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 19 - 147 5.2 Gross carrying amount For the period from January 11,2019 (date of incorporation) to December 31, 2019 Stage 1 Stage 2 Stage 3 Total Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Net increase Ending balance - - - - 139,466 139,466 - - - - - - - - - - - - - - - - 139,466 139,466 8. 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 Company 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 Company’s own assumptions reflect those that market participants would use for measuring the assets or liabilities at the measurement date. The fair value measurement is described in the one of the following three levels used to classify fair value measurements: • • • Level 1— When fair value of a financial instrument is measured using its fair value at the quoted price in the active market, the fair value of such financial instruments is classified as Level 1. The types of financial instruments generally included in Level 1 are publicly traded equity securities, derivatives, and debt securities issued by governmental bodies. Level 2— When fair value of a financial instrument is measured using valuation techniques, the fair value is classified as Level 2 when all major elements are market observable inputs. The types of financial instruments generally included in Level 2 are most of the debt securities both in local and foreign currencies and regular OTC derivatives such as swaps, forwards, options, etc. Level 3— When fair value of a financial instrument is measured using valuation techniques, the fair value is classified as Level 3 when one or more major elements are inputs that are not observable in the market. The types of financial instruments generally included in Level 3 are non-public securities, complex structured debt securities, and complex OTC derivatives. 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 Company’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 measured at fair value are as follows (Unit: Korean Won in millions): Financial assets: Financial assets at FVTPL: Derivative assets December 31, 2019 Fair value Level 1 Level 2 Level 3 Total - - 9,434 9,434 Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial Review 148 - 20 - Financial assets measured at FVTPL are recognized at fair value. Fair value refers to the price that will be paid at the measurement date as the assets are sold or the liabilities transferred in a normal transaction between market participants. 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 Company determines the fair value using valuation methods. Valuation methods and input variables for financial assets and liabilities that are measured at fair value are given as follows: Derivatives Valuation methods The fair value is measured considering the price and volatility of the underlying asset using the Binomial Tree, a commonly used technique in the market Input variables Price of underlying asset, volatility, risk-free market return, corporate bond yield rate Level 3 financial asset valuation techniques measured at fair value that are significant but unobservable inputs variables are as follows: Fair value valuation technique Optional pricing model etc. Type Stock- related Derivative assets Significant but not observable input variables Range Price and volatility of underlying asset 12.58% ~15.38 % Correlation between unobservable inputs and fair value The higher the price and volatility of the underlying asset, the greater the change in fair value The fair value of financial assets classified as level 3 uses external valuation figures. (3) Changes in financial assets measured at fair value classified into Level 3 are as follows (Unit: Korean Won in millions): For the period from January 11, 2019(date of incorporation) to December 31, 2019 Net Income (*) Other comprehensive income Purchases/ issuances Disposals/ settlements Transfer to or out of Level 3 Ending Beginning - 9,434 - - - - 9,434 Financial assets: Financial assets at FVTPL Derivatives assets (*) The gain amounting to 9,434 million Won for the period from January 11, 2019 (date of incorporation) to December 31, 2019, which is from financial assets that the company holds as at the end of the periods, has been recognized in net gain on financial instruments at FVTPL in the separate statement of comprehensive income. (4) The results of a sensitivity analysis on the rational fluctuation in the unobservable inputs used for measuring Level 3 financial instruments are as follows. The sensitivity analysis of the financial instruments has been performed by classifying favorable and unfavorable changes based on how changes in unobservable inputs would lead to the fluctuations of financial instruments’ value. When the fair value of a financial instrument is affected by more than one unobservable input, the below table reflects the most favorable or the most unfavorable circumstances. The sensitivity analysis was performed for level 3 financial instruments whose fair value changes are recognized in profit or loss and includes stock- related derivatives. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 21 - 149 The following table shows the sensitivity analysis to disclose the effect of reasonably possible volatility on the fair value of Level 3 financial instruments (Unit: Korean Won in millions): Financial assets: Financial assets at FVTPL Derivative assets (*) As of December 31, 2019 Net income (loss) Favorable Unfavorable 943 (943) (*) Fair value changes of equity related derivatives assets and liabilities are calculated by increasing or decreasing historical volatility of the stock price and correlation, which are major unobservable variables, by 10%, respectively. (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: Loans and other financial assets at amortized cost (*) Financial liabilities: Debentures Other financial liabilities (*) December 31, 2019 Fair value Level 1 Level 2 Level 3 Total Book value - - - - 1,269,203 1,269,203 1,269,203 951,387 - - 10,745 951,387 10,745 947,679 10,745 (*) For loans, other financial assets and liabilities at amortized cost classified as Level 3, the carrying amount was disclosed at fair value considering the carrying amount as an approximation of fair value. 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 company determines the fair value using valuation methods. For the disclosed items in which book value is considered to be the approximate value of fair value, valuation techniques and input variables are not disclosed. Valuation techniques for the fair value of financial assets and liabilities that are recorded at amortized cost are as follows.: Debentures Valuation methods The fair value is measured by discounting the projected cash flows of debt products by applying the market discount rate that is reflecting credit rating of the Company. (6) Financial instruments by category Carrying amounts of financial assets and liabilities by category are as follows (Unit: Korean Won in millions): Financial assets: Due from banks Derivatives Other financial assets at amortized cost Total Financial liabilities: Debentures Other financial liabilities Total December 31, 2019 Financial assets at FVTPL Financial assets at amortized cost Total - 9,434 - 9,434 1,129,738 - 1,129,738 9,434 139,465 1,269,203 139,465 1,278,637 December 31, 2019 Financial liabilities at amortized cost 947,679 10,745 958,424 Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial Review150 - 22 - (7) Income or expense from financial assets and liabilities by each category are as follows (Unit: Korean Won in millions): For the period from January 11, 2019(date of incorporation) to December 31, 2019 Interest income(expense) - 7,741 (7,701) 40 Reversal of (provision for) credit losses Others Total - (263) - (263) 9,434 - - 9,434 9,434 7,478 (7,701) 9,211 Financial assets at FVTPL Loans and other financial assets at amortized cost Financial liabilities at amortized cost Total 9. INVESTMENTS IN SUBSIDIARIES (1) Investments in subsidiaries are as follows (Unit: Korean Won in millions): Subsidiaries (*1) Location Capital stock Main business December 31, 2019 Percentage of ownership (%)(*2) Number of shares Woori Bank Woori Card Co., Ltd. Woori Investment Bank Co., Ltd. Woori FIS Co., Ltd. Woori Finance Research Institute Co., Ltd. Woori Credit Information Co., Ltd. Woori Fund Service Co., Ltd. Woori Asset Trust Co., Ltd Woori Asset Management Corp. Woori Private Equity Asset Management Co., Ltd. Woori Global Asset Management Co., Ltd. Korea Korea Korea Korea Korea Korea Korea Korea Korea Korea 3,381,400 Finance 676,000,000 896,300 Finance 179,266,200 337,100 Other credit finance System software 24,500 development & maintenance 403,404,538 4,900,000 3,000 Other service business 600,000 5,000 Credit information 1,008,000 10,000 15,300 20,000 30,000 Finance Finance Finance Finance 2,000,000 1,560,000 67.2 2,920,000 6,000,000 73.0 100 Korea 20,000 Finance 4,000,000 100 (*1) Only subsidiaries invested directly by the company are included. (*2) The percentage is based on the effective interest rate relative to the number of outstanding shares. 100 100 59.8 100 100 100 100 Financial statements date of use December 31,2019 December 31,2019 December 31,2019 December 31,2019 December 31,2019 December 31,2019 December 31,2019 December 31,2019 December 31,2019 December 31,2019 December 31,2019 WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 23 - 151 (2) Changes in the carrying value of investments in subsidiaries are as follows (Unit: Korean Won in millions): For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Beginning balance Acquisition Disposal Ending balance Woori Bank(*1) Woori Card Co., Ltd.(*2) Woori Investment Bank Co., Ltd.(*2) Woori FIS Co., Ltd.(*1) Woori Finance Research Institute Co., Ltd.(*1) Woori Credit Information Co., Ltd.(*1) Woori Fund Service Co., Ltd.(*1) Woori Asset Trust Co., Ltd(*5) Woori Asset Management Corp.(*3) Woori Private Equity Asset Management Co., Ltd.(*1) Woori Global Asset Management Co., Ltd.(*4) Total 17,921,151 - - 21,754 1,677 16,466 13,939 - - 7,797 1,118,367 392,795 - - - - 224,198 122,449 - - 17,982,784 33,000 1,890,809 - - - - - - - - - - - - 17,921,151 1,118,367 392,795 21,754 1,677 16,466 13,939 224,198 122,449 7,797 33,000 19,873,593 (*1) The Company acquired through the comprehensive stock transfer when established. (*2) Woori Card Co., Ltd. And Woori investment Bank Co., Ltd. were transferred from second-tier subsidiaries into subsidiaries in September, 2019. (*3) The company newly acquired 73% interest in Tongyang Asset Management Corporation and changed the name as Woori Asset Management Corporation. (*4) The remaining payment was completed in August, 2019 after the request for the change of major shareholder was approved by the Financial Service Commission in July, 2019. The name has changed to Woori Global Asset Management Co., Ltd after acquiring. (*5) The name has changed to Woori Asset Trust Co., Ltd., after acquiring 67.2% interest of Kukje Trust Co. in December 2019. 10. PREMISES AND EQUIPMENT (1) Details of premises and equipment are as follows (Unit: Korean Won in millions): Premises and equipment (ownership) Right-of-use asset Total Building December 31, 2019 Properties for business use Leasehold Improvement - 1,436 1,436 3,767 384 4,151 1,796 - 1,796 Total 5,563 1,820 7,383 (2) Premises and equipment (ownership) 2.1 Details of premises and equipment (ownership) are as follows (Unit: Korean Won in millions): Acquisition cost Accumulated depreciation Net carrying value Properties for business use 4,538 (771) 3,767 December 31, 2019 Leasehold Improvement Total 2,184 (388) 1,796 6,722 (1,159) 5,563 Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial Review152 - 24 - 2.2 Details of changes in premises and equipment (ownership) are as follows (Unit: Korean Won in millions): For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Properties for business use - 4,538 (771) 3,767 - 2,184 (388) 1,796 Leasehold Improvement - 6,722 (1,159) 5,563 Total Beginning balance Acquisition Depreciation Ending balance (3) Right-of-use asset 3.1 Details of right-of-use asset are as follows (Unit: Korean Won in millions): Acquisition cost Accumulated depreciation Net carrying value Building 2,871 (1,435) 1,436 December 31, 2019 Properties for business use 568 (184) 384 Total 3,439 (1,619) 1,820 3.2 Details of changes in right-of-use asset are as follows (Unit: Korean Won in millions): Beginning balance New contract Depreciation Ending balance For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Building - 2,871 (1,435) 1,436 Properties for business use - 568 (184) 384 Total - 3,439 (1,619) 1,820 11. INTANGIBLE ASSETS (1) Details of intangible assets are as follows (Unit: Korean Won in millions): Acquisition cost Accumulated amortization Net carrying value Software December 31, 2019 Development Cost Total 2,729 (1,144) 1,585 1,901 (176) 1,725 4,630 (1,320) 3,310 (2) Details of changes in intangible assets are as follows (Unit: Korean Won in millions): For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Development Cost Software Total Beginning balance Acquisition Amortization Ending balance - 2,729 (1,144) 1,585 - 1,901 (176) 1,725 - 4,630 (1,320) 3,310 WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 25 - 153 12. DEBENTURES Details of debentures are as follows (Unit: Korean Won in millions): Debentures in local currency: Others Deduction: Discounts on bond Total 13. PROVISIONS December 31, 2019 Interest rate (%) Amount 2.13%~2.55% 950,000 (2,321) 947,679 (1) Details of provisions are as follows (Unit: Korean Won in millions): Asset retirement obligation December 31, 2019 (2) Changes in asset retirement obligation are as follows (Unit: Korean Won in millions): For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Beginning balance Provisions provided Amortization Ending balance 600 - 588 12 600 The amount of the asset retirement obligation is the present value of the best estimate of expected future expenditure to settle the obligation – arising from leased premises as of December 31, 2019, discounted by appropriate discount rate. Expenditures on the asset retirement obligation are expected to take place at the end of the lease contract for leased assets and the average value of the actual recovery construction cost of the subsidiaries where the restoration work took place over the past three years and the average inflation rate of the previous 3-year period were used to calculate the expected expenditures. Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial Review154 - 26 - 14. NET DEFINED BENEFIT LIABILITY The characteristics of the Company’s defined benefit retirement pension plans 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 actuarial assumptions (projected unit credit method which considers the increase of projected earnings) that give the best estimate of the future cash flows that will arise under the plan liabilities. The Company 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 a discount rate calculated based on blue chip corporate bonds earnings. A deficit may occur if the rate of return on plan assets falls short of the discount rate. Decrease in profitability of blue chip bonds A decrease in profitability of blue chip bonds will be partially 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 Most 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 defined benefit retirement pension plans if an inflation rate increases. (1) Details of net defined benefit liability are as follows (Unit: Korean Won in millions): Present value of defined benefit obligation Fair value of plan assets Net defined benefit liability December 31, 2019 14,174 (10,692) 3,482 (2) Changes in the carrying value of defined benefit obligation are as follows (Unit: Korean Won in millions): For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Beginning balance Succession from transferred-out company(to transferred-in company) (*) Effect of new/transfer Current service cost Interest cost Remeasurements Financial assumptions Demographic assumptions Experience adjustments Retirement benefit paid Others Ending balance - 8,276 3,360 1,415 253 (457) 542 762 (54) 77 14,174 (*) 601 million won that succeeded to the transferred in company regarding to employees transferred during the current term has been deducted. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 27 - 155 (3) Changes in the plan assets are as follows (Unit: Korean Won in millions): Beginning balance Succession from transferred-out company (*) Interest income Remeasurements Employer’s contributions Ending balance For the period from January 11, 2019 (date of incorporation) to December 31, 2019 - 8,877 129 (24) 1,710 10,692 (*) 601 million won is supposed to succeed to the transferred-in company regarding to employees transferred during the current term. (4) Plan assets consist of fixed deposits and etc. as of December 31, 2019 and the realized return on plan assets amount to 105 million Won for the period from January 11, 2019 (date of incorporation) to December 31, 2019. Meanwhile, the contribution expected to be paid in the next accounting year amounts to 1,629 million Won. (5) Amounts related to the defined benefit plan that are recognized in the separate statements of net income and total comprehensive income are as follows (Unit: Korean Won in millions): Current service cost Effect of new/transfer Net interest income Cost recognized in net income Remeasurements(*) Cost recognized in total comprehensive income (*) This is an amount before considering the tax effects. For the period from January 11, 2019 (date of incorporation) to December 31, 2019 1,415 3,360 124 4,899 871 5,770 (6) Key actuarial assumptions used in defined benefit liability measurement are as follows: Discount rate Future wage growth rate Mortality rate Retirement rate December 31, 2019 2.40% 5.27% Issued by Korea Insurance Development Institute Issued by Korea Insurance Development Institute The weighted average maturity of the defined benefit obligation is 10.98 years. (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, 2019 (1,367) 1,596 1,535 (1,345) Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial Review156 - 28 - 15. OTHER FINANCIAL LIABILITIES AND OTHER LIABILITIES Other financial liabilities and other liabilities are as follows (Unit: Korean Won in millions): December 31, 2019 Other financial liabilities: Accounts payable Accrued expenses Lease liabilities Other miscellaneous financial liabilities Sub-total Other liabilities: Other miscellaneous liabilities Total 16. DERIVATIVES 2,424 6,651 1,568 102 10,745 4,142 14,887 Details of derivative assets as of December 31, 2019 are as follows (Unit: Korean Won in millions): Stock forwards Contract price 117,535 Assets For trading 9,434 Derivatives held for trading are classified to financial assets at FVTPL in the statements of financial position (see Note 6). 17. EQUITY (1) Details of equity are as follows (Unit: Korean Won in millions): Capital stock Hybrid security Capital surplus (*) Capital adjustment Accumulated other comprehensive income Retained Earnings Total equity December 31, 2019 3,611,338 997,544 14,874,084 - (631) 623,930 20,106,265 (*) The amount is paid-in capital in excess of par value due to comprehensive stock transfer at the date of establishment and due to the issuance of new shares at the time of stock exchange with Woori Card shareholders during the current term. (2) The number of shares authorized and others are as follows: Shares of common stock authorized Par value Shares of common stock issued Capital December 31, 2019 4,000,000,000 5,000 won 722,267,683 3,611,338 million Won (3) The Company issued 42,103,377 new shares in the stock exchange process with the shareholders of Woori Card during the current term, which changed the total number of issued shares from 680,164,306 as of the date of establishment to 722,267,683 as of the end of the current term. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 29 - 157 (4) Hybrid security Details of bond-type hybrid tier 1 securities classified as equity are as follows (Unit: Korean Won in millions) Type Securities in local currency Issue Date 2019-07-18 2019-10-11 Maturity - - Interest Rate (%) 3.49 3.32 Issue Cost Total December 31, 2019 500,000 500,000 (2,456) 997,544 The hybrid security has no fixed maturity but can be called in advance after 5 years from the date of issuance. (5) Accumulated other comprehensive income Changes in the accumulated other comprehensive income are as follows (Unit: Korean Won in millions): For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Beginning balance Decrease Income tax effect Ending balance - (871) 240 (631) Remeasurement loss related to defined benefit plan (6) Regulatory Reserve for Credit loss In accordance with Paragraphs 1 and 3 of Article 27 of the Regulation on the Supervision of Financial Holding Companies, the Company discloses the regulatory reserve for credit loss. 6.1 Balance of the planned regulatory reserve for credit loss is as follows (Unit: Korean Won in millions): Regulatory reserve for credit loss Planned provision of regulatory reserve for credit loss Ending balance of regulatory reserve for credit loss December 31, 2019 - 692 692 6.2 Planned reserves provided, adjusted net income after the planned reserves provided and adjusted EPS after the planned reserves provided are as follows (Unit: Korean Won in millions, except for EPS amount): Net income Regulatory reserve for credit loss to be reserved Adjusted net income after the provision of regulatory reserve Adjusted EPS after the provision of regulatory reserve (Unit: Korean Won) (*) (*) The dividends of hybrid security are excluded. For the period from January 11, 2019 (date of incorporation) to December 31, 2019 628,293 692 627,601 899 Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial Review158 - 30 - (7) Statement of appropriations of retained earnings (plan) is as follows (Unit: Korean Won in millions): For the period from January 11, 2019 (date of incorporation) to December 31, 2019 (Expected date of disposal: March 25, 2020) Unappropriated retained earnings: Dividend on hybrid equity securities Net income Appropriation of retained earnings: Legal reserve Regulatory reserve for credit loss Cash dividend (dividend per share (%)) 2019: 700 won (14%), Unappropriated retained earnings to be carried forward to next year (8) Details of treasury stocks are as follows (Unit: Shares, Korean Won in millions): (4,363) 628,293 623,930 62,830 692 505,587 569,109 54,821 Beginning Repurchase(*) Retirement Ending December 31, 2019 Number of shares Book value - 2 - 2 - - - - (*) Treasury stocks have been occurred for the provision for odd-lot payment incurred during the partial stock replacement of the shareholders who possess physical stock certificate. 18. NET INTEREST INCOME (1) Interest income recognized is as follows (Unit: Korean Won in millions): Loans and other financial assets at amortized cost: Interest on due from banks Interest on other receivables Total For the period from January 11, 2019 (date of incorporation) to December 31, 2019 7,723 18 7,741 (2) Interest expense recognized is as follows (Unit: Korean Won in millions): Interest on borrowings Interest on debentures Interest on lease liabilities Other interest expense Total For the period from January 11, 2019 (date of incorporation) to December 31, 2019 495 7,149 45 12 7,701 WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 31 - 159 19. NET FEES AND COMMISSIONS LOSS (1) There is no fees and commissions income for the period from January 11, 2019 (date of incorporation) to December 31, 2019. (2) Details of fees and commissions expense incurred are as follows (Unit: Korean Won in millions): Fees and commissions paid Others Total 20. DIVIDEND INCOME For the period from January 11, 2019 (date of incorporation) to December 31, 2019 8,202 7,631 15,833 Details of dividend income recognized are as follows (Unit: Korean Won in millions): Dividend income recognized from investments in subsidiaries 676,000 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 21. NET GAIN OR LOSS ON FINANCIAL INSTRUMENTS AT FVTPL (1) Details of gain or loss related to net gain or loss on financial instruments at FVTPL are as follows (Unit: Korean Won in millions): Gains on financial instruments at fair value through profit or loss mandatorily measured at fair value Total For the period from January 11, 2019 (date of incorporation) to December 31, 2019 9,434 9,434 (2) Details of net gain or loss on financial instrument at FVTPL are as follows (Unit: Korean Won in millions): Derivatives (for trading) Equity forward Gain on valuation For the period from January 11, 2019 (date of incorporation) to December 31, 2019 9,434 22. IMPAIRMENT LOSS DUE TO CREDIT LOSS Impairment loss due to credit loss are as follows (Unit: Korean Won in millions): Impairment loss due to credit loss on loans and other financial assets at amortized cost For the period from January 11, 2019 (date of incorporation) to December 31, 2019 263 Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial Review160 - 32 - 23. GENERAL AND ADMINISTRATIVE EXPENSES (1) Details of general and administrative expenses are as follows (Unit: Korean Won in millions): For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Employee benefits Short-term employee benefits Salaries Employee fringe benefits Retirement benefit service costs Share-based payment Sub-total Depreciation and amortization Other general and administrative expenses Rent Taxes and public dues Service charges Computer and IT related Telephone and communication Operating promotion Advertising Printing Traveling Supplies Insurance premium Reimbursement Vehicle maintenance Others Sub-total Total (2) Performance condition share-based payment 16,706 5,340 4,899 819 27,764 4,098 714 375 2,290 1,654 482 645 65 76 373 131 280 847 129 18 8,079 39,941 Details of performance condition share-based payment granted to executives as of December 31, 2019 are as follows. 2.1 Share-based payment Subject to Type of payment Performance evaluation period Base date for payment Number of shares measured as of the closing date (*) Shares granted for the year 2019 Cash-settled January 11, 2019(date of incorporation) ~ December 31, 2022 January 1, 2023 78,023 (*) The number of payable stocks is granted at the initial contract date and the payment rate is determined based on the achievement of the pre-determined performance targets. Performance is evaluated as long-term performance indication including relative shareholder return, net income, return on equity (ROE), non-performing loan ratio and job performance. 2.2 The Company accounts for performance condition share-based payment according to the cash-settled method and the fair value of the liabilities is reflected in the compensation costs by re-measuring per every closing period. As of December 31, 2019, expenses and the book value of the liabilities related to the performance condition share-based payment recognized by the Company is 819 million Won. WOORI FINANCIAL GROUP ANNUAL REPORT 2019 - 33 - 161 24. NON-OPERATING LOSS (1) Details of 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 period from January 11, 2019 (date of incorporation) to December 31, 2019 (2) Details of other non-operating income recognized are as follows (Unit: Korean Won in millions): Others For the period from January 11, 2019 (date of incorporation) to December 31, 2019 (3) Details of other non-operating expenses recognized are as follows (Unit: Korean Won in millions): For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Donation 25. INCOME TAX EXPENSE (1) Details of income tax expense are as follows (Unit: Korean Won in millions): 5 (755) (750) 5 755 For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Current tax expense: Current tax expense in respect of the current period Sub-total Deferred tax expense: Deferred tax assets (liabilities) relating to the origination and reversal of temporary differences Income tax expense relating to items that are recognized directly in equity Income tax expense - - 154 240 394 Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial Review162 - 34 - (2) The relationship between income before income tax expense deduction and income tax expense in the current comprehensive income statement is as follows: Net income before income tax expense Tax calculated at statutory tax rate (*) Adjustments: Effects of income that is exempt from taxation Effect of expenses that are not deductible in determining taxable profit Effect of corporate tax dues to consolidate tax plans Others Income tax expense Effective tax rate Sub-total For the period from January 11, 2019 (date of incorporation) to December 31, 2019 628,687 165,527 (179,186) 1,190 15,839 24 (162,133) 394 0.1% (*) The corporate tax rate is 11% up to 200 million Won in tax basis, 22% over 200 million Won to 20 billion Won, 24.2% over 20 billion Won to 300 billion Won and 27.5% over 300 billion Won. (3) Details of changes in deferred income tax assets and liabilities for the period from January 11, 2019(date of incorporation) to December 31, 2019 are as follows (Unit: Korean Won in millions): For the period from January 11, 2019 (date of incorporation) to December 31, 2019 Beginning balance Recognized as income (expense) Recognized as other comprehensive income (expense) Ending Balance Gain (loss) on valuation of derivatives Provision for loan losses Defined benefit liability Deposits with employee retirement insurance trust Provisions Share based payment Others Net deferred tax assets(liabilitie s) in total - - - - - - - - (2,594) 72 1,389 (736) 165 225 1,085 (394) - - 233 7 - - - 240 (2,594) 72 1,622 (729) 165 225 1,085 (154) (4) Unrealizable temporary differences are as follows (Unit: Korean Won in millions): Deductible temporary differences Taxable temporary differences Total For the period from January 11, 2019 (date of incorporation) to December 31, 2019 3,222 (7,916,351) (7,913,129) No deferred income tax asset has been recognized for the deductible temporary difference of 3,222million Won associated with investments in subsidiaries as of December 31, 2019, because it is not probable that the temporary differences will be reversed in the foreseeable future. WOORI FINANCIAL GROUP ANNUAL REPORT 2019 - 35 - 163 No deferred income tax liability has been recognized for the taxable temporary difference of 7,916,351 million Won associated with investment in subsidiaries as of December 31, 2019, due to the following reasons: - The Company is able to control the temporary difference of extinguishment. - It is probable that the temporary difference will not be reversed in the foreseeable future. (5) Details of accumulated deferred tax charged directly to other equity are as follows (Unit: Korean Won in millions): Remeasurement of the net defined benefit liability For the period from January 11, 2019 (date of incorporation) to December 31, 2019 240 (6) Current tax assets and liabilities are as follows (Unit: Korean Won in millions) Current tax assets Current tax liabilities 26. EARNINGS PER SHARE December 31, 2019 - 133,526 (1) Basic earnings per share is calculated by dividing net income by weighted-average number of common shares outstanding (Unit: Korean Won in millions, except for earnings per share and number of shares): Net income for the period attributable to owners Dividends to hybrid securities Net income attributable to common shareholders Weighted-average number of common shares outstanding (Unit: shares in million) Basic earnings per share (Unit: Korean Won) For the period from January 11, 2019 (date of incorporation) to December 31, 2019 628,293 (4,363) 623,930 694 900 (2) Weighted-average number of common shares outstanding as of December 31, 2019 is as follows. For the period from January 11,2019 (date of incorporation) to December 31, 2019 Period Number of shares Dates Accumulated number of shares outstanding during period 2019-01-11 ~ 2019-12-31 680,164,306 355 241,458,328,630 Common shares at the time of incorporation Stock issuance (Comprehensive stock exchange) Purchase of treasury stock Purchase of treasury stock 2019-09-10 ~ 2019-12-31 2019-08-26 ~ 2019-12-31 2019-12-13 ~ 2019-12-31 42,103,377 (1) (1) 113 128 19 Sub-total (①) Weighted average number of common shares outstanding (②=(①/355) 4,757,681,601 (128) (19) 246,216,010,084 693,566,226 Diluted earnings per share is equal to basic earnings per share because there is no dilution effect for the period from January 11, 2019 (date of incorporation) to December 31, 2019. Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial Review164 - 36 - 27. CONTINGENT LIABILITIES AND COMMITMENTS (1) As of December 31, 2019, the Company has no litigation cases in progress. (2) Details of agreements with financial institutions as of December 31, 2019 are as follows (Unit: Korea Won in millions) Loan Financial institutions Standard Chartered Bank Korea Ltd. Kookmin Bank Total (3) Other agreements December 31, 2019 Line of credit Loan balance 65,000 35,000 100,000 - - - The Company decided to enter into a stock sales agreement with a major shareholder of Kukje Trust Co., Ltd. to acquire 44.5% interest (58.6% of voting rights) during July, 2019, and to acquire additional 21.3% interest (28.0% of voting rights) after a certain period. As a result, the Company acquired the interest of the first sales agreement in December 2019 and is planning to acquire the interest of the second sales agreement after a certain period. The Company recognized 9,434 million Won of derivative assets according to the agreement as of December 31, 2019 (see Note 16). 28. RELATED PARTY TRANSACTIONS Related parties of the Company as of December 31, 2019 and its assets and liabilities recognized as of December 31, 2019, major transactions with related parties for the period from January 11, 2019 (date of incorporation) to December 31, 2019 and compensation to key management are as follows: (1) Related parties as of December 31, 2019 are as follows: Subsidiaries Related parties Woori Bank, Woori Card Co., Ltd., Woori Investment Bank Co., Ltd., Woori FIS Co., Ltd., Woori Finance Research Institute Co., Ltd., Woori Credit Information Co., Ltd., Woori Fund Service Co., Ltd., Woori Asset Trust Corp. Ltd., Woori Asset Management Corp., Woori Private Equity Asset Management Co., Ltd., Woori Global Asset Management Co., Ltd., Woori America Bank, PT Bank Woori Saudara Indonesia 1906 Tbk, Woori Global Markets Asia Limited, Woori Bank China Limited, AO Woori Bank, Banco Woori Bank do Brasil S.A., Korea BTL Infrastructure Fund, Woori Finance Cambodia PLC., Woori Finance Myanmar Co., Ltd., Wealth Development Bank, Woori Bank Vietnam Limited, WB Finance Co., Ltd., Woori Bank Europe, TUTU Finance-WCI Myanmar Co., Ltd., Woori Bank Principal and Interest Guaranteed Trust and Woori Bank Principal Guaranteed Trust (“Consolidated trusts”), Kumho Trust First Co., Ltd. and 62 SPCs, Heungkuk Woori Tech Company Private Placement Investment Trust No. 1 and 12 beneficiary certificates Associates Woori Service Networks Co., Ltd., Korea Credit Bureau Co., Ltd., Korea Finance Security Co., Ltd., Lotte card Co., Ltd, Chin Hung International Inc., 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 31 associates) WOORI FINANCIAL GROUP ANNUAL REPORT 2019 - 37 - 165 (2) Assets and liabilities from transactions with related parties are as follows (Unit: Korean Won in millions): Title of account Cash and cash equivalents Other financial assets Allowance for credit losses Other financial liabilities December 31, 2019 43,670 1,229,181 (263) 601 Related party Woori Bank Woori Card Co., Ltd. Woori FIS Co., Ltd. Woori Finance Research Institute Co., Ltd. Woori Credit Information Co., Ltd. Woori Fund Service Co., Ltd. Other financial assets Other financial liabilities Other financial assets Other financial liabilities Other financial assets Other financial liabilities Other financial assets Other financial assets 37,754 267 1,386 190 21 1,320 568 556 64 Woori Service Networks Co., Ltd. Other financial liabilities (3) Gains or losses from transactions with related parties are as follows (Unit: Korean Won in millions): Related party Woori Bank Title of account Interest income Dividend income Interest expenses(*) Fees and commissions expense Impairment losses on credit loss General and administrative expenses(*) Woori FIS Co., Ltd. General and administrative expenses Woori Finance Research Institute Co., Ltd. Fees and commissions expenses Woori Service Networks Co., Ltd. General and administrative expenses For the period from January 11, 2019 (date of incorporation) to December 31, 2019 7,741 676,000 47 4 263 2,365 1,492 5,400 775 (*) The depreciation of right-of-use assets and interest expense of lease liabilities arising from lease transactions during the current term are included. (4) The details of the right-of-use assets and lease liabilities due to lease transactions with related parties as of the end of the current tem are as follows (Unit: Korea Won in millions): Related party Woori Bank Title of account Right-of-use assets(*) Lease liabilities (*) Asset retirement obligations due to lease transactions are included. For the period from January 11, 2019 (date of incorporation) to December 31, 2019 1,436 1,164 (5) There is no major borrowing and loan transactions with the related parties during the period from January 11, 2019 (date of incorporation) to December 31, 2019. Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial Review166 - 38 - (6) There are no guarantees provided to the related parties. The unused commitments provided from the related parties are as follows (Unit: Korean Won in millions): Woori Card Co., Ltd. December 31, 2019 Warranty 495 Unused commitments (7) Details of compensation to key management are as follows (Unit: Korean Won in millions): Short-term employee benefits Retirement benefit service costs Share-based payment Total For the period from January 11, 2019 (date of incorporation) to December 31, 2019 3,683 419 529 4,631 Key management includes registered executives and non-registered executives. As of December 31, 2019, there is no assets, liabilities, allowance and impairment loss due to credit losses from transactions with key management. (8) Details of equity transactions with related parties for the period from January 11,2019 (date of incorporation) to December 31, 2019 are as follows (Unit: Korean Won in millions): Company Transaction details December 31, 2019 Purchase of investment interest Woori Bank (Subsidiaries) Purchase of investment interest Woori Bank (Subsidiaries) Purchase of investment interest Woori Bank (Subsidiaries) Woori Card Co. ltd stocks (Investments in subsidiaries) Woori investment bank stocks (Investments in subsidiaries) Kukje Asset Trust Co. stocks (Investments in subsidiaries) (*) (*) After the acquisition of the shares, the name has changed to Woori Asset Trust Co., Ltd. 1,118,367 392,795 23,550 WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 39 - 167 29. LEASES (1) Details of lease liability are as follows (Unit: Korean Won in millions): Lease payments Within one year After one year but within five years December 31, 2019 1,341 249 (2) Total cash outflows from lease for the period from January 11, 2019 (date of incorporation) to December 31, 2019 are as follows (Unit: Korean Won in millions): Cash outflows from lease For the period from January 11, 2019 (date of incorporation) to December 31, 2019 1,289 (3) The Company recognized the amount of 95 million Won as the lease payments for low-value assets for the period from January 11, 2019 (date of incorporations) to December 31, 2019. There are no lease payments that are not included in total lease payments considered for lease liability measurement as they are short- term leases. 30. EVENTS AFTER THE REPORTING PERIOD The Coronavirus disease (COVID-19) outbreak in January, 2020 is having a negative impact on the global economy, including Korea. As a result, the macroeconomic environment is unstable overall. The Company is closing monitoring the situation; however, the impact on the Company due to the Coronavirus cannot be estimated as of the financial statements approval for the issuance date. Woori OverviewBusiness OperationsSeparate Financial StatementsFinancial ReviewDeloitte 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 168 INDEPENDENT AUDITORS’ REPORT INDEPENDENT AUDITORS’ REPORT English Translation of a Report Originally Issued in Korean on March 16, 2020 To the Shareholders and the Board of Directors of Woori Financial Group Inc. Report on the Audited Consolidated Financial Statements Audit Opinion We have audited the accompanying consolidated financial statements of Woori Financial Group and its subsidiaries (the “Group”), which comprise the consolidated statement of financial position as of December 31, 2019 and December 31, 2018, respectively, and the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows, for the years then ended, and a summary of significant accounting policies and other explanatory information. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2019 and December 31, 2018, respectively, and its financial performance and its cash flows for the years then ended in accordance with Korean International Financial Reporting Standards (“K-IFRS”). Basis for Audit Opinion We conducted our audits in accordance with the Korean Standards on Auditing (“KSAs”). Our responsibilities under those standards are further described in the Auditors Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements, including those related to independence, that are relevant to our audit of the consolidated financial statements in the Republic of Korea as required by prevailing audit regulations. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters The key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our audit opinion thereon, and we do not provide a separate opinion on these matters. WOORI FINANCIAL GROUP ANNUAL REPORT 2019 169 Allowance for credit loss in accordance with K-IFRS 1109 ‘Financial Instruments’ Key audit matter description As described in notes 2, 3, 4 and 10, the Group estimates and records an allowance for loans based on expected credit losses. In order to estimate expected credit losses, the Group segregated its portfolio in retail, corporate and credit card loans. Loans measured at amortized cost are KRW 272,607,264 million, with loan loss allowances of KRW 1,575,020 million, as of December 31, 2019. Both the individual and collective impairment methodologies must consider historical losses adjusted for forward looking information and include multiple scenarios for macroeconomic factors. The allowance for certain loans is measured, at least in part, based on the valuation of collaterals which must take into account an expectation of when and for how much the collateral will be sold. There was a significant amount of judgment required by management when determining the appropriateness of the forward looking and macroeconomic information used in the calculation of the expected losses in its loan portfolio. Given the level of subjectivity and judgment, auditing the estimated allowance for loan losses involved especially complex and subjective judgment. How the scope of our audit responded to the key audit matter Our audit procedures related to the assumptions and unobservable inputs used by management for the estimate of impaired loans included the following: • We tested the design and operating effectiveness of controls over the appropriateness of the cash-flows estimated to be collected in individually significant loans, including the estimates of collateral values. • We tested the design and operating effectiveness of the controls over the appropriateness of the models used to determine the calculation of the allowance for loan losses for collectively assessed loans and most importantly the determination of the relevant model and assumptions to incorporate forward looking and macro-economic information. • We used our credit specialists to assist us in challenging the reasonableness of the methodologies and inputs used in the calculation of the allowance for loan losses for collectively assessed loans, most importantly in determining the appropriateness of forward looking and macro-economic scenarios used by management. • We reperformed the client's estimates of future operating cash flows from borrowers with significant loans outstanding to determine the available cash flows to repay the loans. In addition, we challenged these estimates by searching for contradictory evidence available at the balance sheet date. • We selected samples of loans subject to individual assessments and performed the following:  Verified the appropriateness of the process of calculating future cash flows from borrowers with significant loans outstanding to determine the available cash flows to repay the loans.  With assistance of our appraisal specialists and using property auctions price information sources independently from the Group, we evaluated the reasonableness of cash flow estimates based on the future sale of collateral. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review170 Responsibilities of Management and the Those Charged with Governance for the Consolidated Financial Statements Management is responsible for the preparation of the accompanying consolidated financial statements in accordance with K-IFRS, and for such internal control as they determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management of the Group is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those Charged with Governance is responsible for overseeing the Group’s financial reporting process. Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with KSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with KSAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit 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 Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of the management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We are solely responsible for our audit opinion. WOORI FINANCIAL GROUP ANNUAL REPORT 2019171 We communicate with the those Charged with Governance of the Group regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the those Charged with Governance of the Group with a statement that we have complied with relevant ethical requirements, including those related to independence, and to communicate with them all matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those Charged with Governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter. As described in the Note 43, Woori Financial Group Inc. was established on January 11, 2019 as a comprehensive transfer with shareholders of Woori Bank, Woori Finance Research Institute Co., Ltd., Woori FIS Co., Ltd., Woori Fund Service Co., Ltd., Woori Credit Information Co., Ltd., and Woori Private Equity Asset Management Co., Ltd. Under the deal, Woori Bank and its subsidiaries were incorporated into wholly- owned subsidiaries of Woori Financial Group Inc., while Woori Financial Group Inc. was listed on the Korea Exchange on February 13, 2019, replacing Woori Bank's shares in the company. American Depository Shares (ADS) has also been traded on the New York Stock Exchange as the underlying common stock since the same date. Therefore, consolidated financial statements for the comparing period ended 31 December 2018 are consolidated financial statements of Woori Bank, which have been adjusted as before the classification of assets held for sale for the Woori Finance Research Institute Co., Ltd., Woori FIS Co., Ltd., Woori Fund Service Co., Ltd., Woori Credit Information Co., Ltd., and Woori Private Equity Asset Management Co., Ltd. except Woori Bank. In accordance with the Korean Standard on Auditing, We audited the consolidated statement of financial position as of December 31, 2018, consolidated statement of comprehensive income, consolidated statement changes in equity and consolidated statement of cash flows for the fiscal year ending the same date. The audit report of Woori Bank as of December 31, 2018 was issued with an unqualified opinion on March 19, 2019. The engagement partner on the audit resulting in this independent auditor’s report is Tae Jin Jo March 16, 2020 Notice to Readers This report is effective as of March 16, 2020 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 OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review172 WOORI FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION WOORI FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2019 AND 2018 AS OF DECEMBER 31, 2019 AND 2018 Cash and cash equivalents (Note 6) Financial assets at fair value through profit or loss (“FVTPL”) (Notes 4, 7, 11, 12, 18 and 26) ASSETS Financial assets at fair value through other comprehensive income(“FVTOCI”) (Notes 4, 8, 11, 12, and 18) Securities at amortized cost (Notes 4, 9, 11, 12 and 18) Loans and other financial assets at amortized cost (Notes 4, 10, 11, 12, 18 and 41) 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 distribution (sale) (Note 17) Net defined benefit asset (Note 24) Current tax assets (Note 38) Deferred tax assets (Note 38) Derivative assets (Designated for hedging) (Notes 4,11,12 and 26) Other assets (Notes 19 and 41) Total assets LIABILITIES Financial liabilities at FVTPL (Notes 4, 11, 12, 20 and 26) Deposits due to customers (Notes 4,11,21 and 41) Borrowings (Notes 4, 11, 12 and 22) Debentures (Notes 4, 11 and 22) Provisions (Notes 23, 40 and 41) Net defined benefit liability (Note 24) Current tax liabilities (Note 38) Deferred tax liabilities (Note 38) Derivative liabilities (Designated for hedging) (Notes 4,11,12 and 26) Other financial liabilities (Notes 4,11,12, 25 and 41) Other liabilities (Notes 25 and 41) Total liabilities (Continued) December 31, 2019 (Korean Won in millions) December 31, 2018(Note 43) 6,392,566 6,747,894 8,069,144 6,126,316 27,730,531 20,320,539 293,717,693 806,360 280,239 3,364,716 844,110 10,556 2,582 47,367 39,544 121,131 233,646 361,980,724 2,958,302 264,685,578 18,998,920 30,858,055 443,980 92,470 182,690 134,322 6,837 17,706,767 420,471 336,488,392 18,063,423 22,932,559 282,457,578 361,766 378,196 2,450,492 597,520 17,912 - 20,730 59,641 35,503 197,653 340,447,183 2,282,686 248,690,939 16,202,986 28,735,862 391,313 173,109 159,078 18,156 51,408 21,442,524 346,078 318,494,139 WOORI FINANCIAL GROUP ANNUAL REPORT 2019 173 WOORI FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION WOORI FINANCIAL GROUP INC.AND SUBSIDIARIES AS OF DECEMBER 31, 2019 AND 2018 (CONTINUED) CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS OF DECEMBER 31, 2019 AND 2018 (CONTINUED) December 31, December 31, 2018(Note 43) 2019 (Korean Won in millions) EQUITY Owners’ equity (Note 28) Capital stock Hybrid securities Capital surplus Other equity Retained earnings Regulatory reserve for credit loss as of December 31, 2019 and 2018 is 2,356,246 million Won and 2,578,457 million Won, respectively Regulatory reserve for credit loss to be reserved as of December 31, 2019 and 2018 is 191,301 million Won and (-) 222,211 million Won, respectively Planned provision of regulatory reserve for credit loss as of December 31, 2019 and 2018 is 191,301 million Won and (-) 222,211 million Won, respectively Non-controlling interests Total equity Total liabilities and equity See accompanying notes 21,510,370 3,611,338 997,544 626,295 (2,249,322) 21,739,931 3,381,392 3,161,963 285,889 (2,213,970) 18,524,515 3,981,962 25,492,332 361,980,724 17,124,657 213,113 21,953,044 340,447,183 Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review 174 WOORI FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 WOORI FINANCIAL GROUP INC.AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 Interest income Financial assets at FVTPL Financial assets at FVTOCI Financial assets at amortized cost Interest expense Net interest income (Notes 11, 30 and 41) Fees and commissions income Fees and commissions expense Net fees and commissions income (Notes 11, 31 and 41) Dividend income (Note 32) Net gain on financial instruments at FVTPL (Notes 11 and 33) Net gain on financial assets at FVTOCI (Notes 11 and 34) Net gain arising on financial assets at amortized cost Net gain on disposals of securities at amortized cost Net gain on disposals of loans and other financial assets at amortized cost Impairment losses due to credit loss (Notes 11, 35 and 41) General and administrative expenses (Notes 36 and 41) Other net operating expenses (Notes 36 and 41) Operating income Share of gain of joint ventures and associates Other non-operating income (expense) Non-operating income (expense) (Note 13 and 37) 2019 2018(Note 43) (Korean Won in millions, except for per share data) 10,576,770 50,619 474,751 10,051,400 (4,683,064) 5,893,706 1,709,326 (606,698) 1,102,628 107,959 25,455 11,015 102,115 - 102,115 (374,244) (3,766,077) (302,581) 2,799,976 83,997 (160,924) (76,927) 9,684,499 54,243 280,371 9,349,885 (4,033,548) 5,650,951 1,680,764 (610,790) 1,069,974 90,552 214,443 2,047 79,532 431 79,101 (329,574) (3,624,033) (394,591) 2,759,301 3,019 42,552 45,571 Net income before income tax expense 2,723,049 2,804,872 Income tax expense (Note 38) (685,453) (753,223) (Continued) WOORI FINANCIAL GROUP ANNUAL REPORT 2019 175 WOORI FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME WOORI FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR YEARS ENDED DECEMBER 31, 2019 AND 2018 (CONTINUED) FOR YEARS ENDED DECEMBER 31, 2019 AND 2018 (CONTINUED) Net income (Net income after the provision of regulatory reserve for credit loss for the years ended December 31, 2019 and 2018, is 1,846,295 million Won and 2,010,774 million Won, respectively) (Note 28) Items that will not be reclassified to profit or loss: Net loss on valuation of equity securities at FVTOCI Net gain on valuation of financial liabilities designated at FVTPL due to own credit risk Remeasurement gain (loss) related to defined benefit plan Items that may be reclassified to profit or loss: Net gain on valuation of debt securities at FVTOCI Share of other comprehensive gain of joint ventures and associates Net gain(loss) on foreign currency translation of foreign operations Net loss on valuation of cash flow hedge Other comprehensive income on valuation of assets held for sale Other comprehensive income(loss), net of tax 2019 2018(Note 43) (Korean Won in millions, except for per share data) 2,037,596 2,051,649 (58,129) - (34,648) (92,777) 43,988 613 101,781 (1,823) - 144,559 51,782 (30,855) 100 (84,629) (115,384) 33,360 2,958 (4,379) (4,646) (4,145) 23,148 (92,236) Total comprehensive income 2,089,378 1,959,413 Net income attributable to: Net income attributable to shareholders Net income attributable to non-controlling interests Total comprehensive income attributable to: Comprehensive income attributable to shareholders Comprehensive income attributable to non-controlling interests Earnings per share (Note 39) 1,872,207 165,389 2,033,182 18,467 1,914,393 1,943,885 174,985 15,528 Basic and diluted earnings per share (In Korean Won) 2,727 2,796 See accompanying notes Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review 176 WOORI FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR YEARS ENDED DECEMBER 31, 2019 AND 2018 WOORI FINANCIAL GROUP INC.AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR YEARS ENDED DECEMBER 31, 2019 AND 2018 January 1, 2018 Cumulative effect of change in accounting policy Adjusted balance, beginning of period Net income Dividends to common stocks Change in capital of subsidiaries Net gain on valuation of financial liabilities designated as at FVTPL due to own credit risk Changes in other comprehensive income due to redemption of financial liabilities designated as at FVTPL Net gain (loss) on valuation of financial assets at FVTOCI Changes in other comprehensive income due to disposal of equity securities at FVTOCI Changes in capital due to equity method Loss on foreign currency translation of foreign operations Loss on valuation of cash flow hedge Remeasurement loss related to defined benefit plan Capital related to assets held for distribution (sale) (Note 43) Dividends to hybrid securities Issuance of hybrid securities Redemption of hybrid securities Appropriation of retained earnings December 31, 2018 January 1, 2019 Exchange of non-controlling interests in hybrid securities Net income Dividends to common shares Changes in subsidiaries’ capital Net loss on valuation of financial assets at FVTOCI Changes in other comprehensive income due to disposal of equity securities at FVTOCI Changes in capital due to equity method Gain on foreign currency translation of foreign operations Loss on valuation of cash flow hedge Remeasurement loss related to defined benefit plan Comprehensive stock exchange(Note 1) Acquisition of subsidiaries New stocks issue cost Net increase of treasury stocks Dividends to hybrid securities Issuance of hybrid securities Redemption of hybrid securities Appropriation of retained earnings Other changes in consolidated capital December 31, 2019 Capital Stock Hybrid securities (Korean Won in millions) 3,017,888 3,381,392 Capital surplus Other equity Retained earnings Shareholder ’s equity in total Non- controlling interests Total equity 285,880 (1,939,274) 15,620,006 20,365,892 199,008 20,564,900 - 3,381,392 - - - - 3,017,888 - - - - 285,880 - - 9 (392,176) (2,331,450) - - - 177,091 (215,085) 15,797,097 20,150,807 2,033,182 (336,636) 9 2,033,182 (336,636) - 723 199,731 18,467 (2,128) (18) (214,362) 20,350,538 2,051,649 (338,764) (9) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 3,381,392 - - 398,707 (254,632) - 3,161,963 - - - - - 285,889 100 (4) 2,733 (1,009) 2,958 (1,929) (4,646) (84,368) (4,145) - - (368) 208,158 (2,213,970) - 4 - 1,009 (10,647) - - - 100 - - - 100 - 2,733 (228) 2,505 - (7,689) (1,929) (4,646) - - (2,450) - - (7,689) (4,379) (4,646) (84,368) (261) (84,629) - (151,194) - - (208,158) (4,145) (151,194) 398,707 (255,000) - 17,124,657 21,739,931 - - - - - 213,113 (4,145) (151,194) 398,707 (255,000) - 21,953,044 3,381,392 3,161,963 285,889 (2,213,970) 17,124,657 21,739,931 213,113 21,953,044 - - - - - - - - - - 229,946 - - - - - - - - 3,611,338 (3,161,963) - - - - - - 438 - - - - - 1,872,207 (437,626) - (3,161,963) 1,872,207 (437,626) 438 3,161,963 165,389 (2,014) (50) - 2,037,596 (439,640) 388 - - - - - - - - - - - 997,544 - - - 997,544 - (14,101) - (14,101) (40) (14,141) - 1,153 - - 29,368 613 91,748 (1,823) (29,368) - - - - 1,766 91,748 (1,823) - 351,663 - (12,848) - - - - - - 626,295 (34,251) - - - 4,245 - - (277) 368 (111,242) (2,249,322) - - - - - (4,362) - - (368) (625) 18,524,515 (34,251) 581,609 - (12,848) 4,245 (4,362) 997,544 (277) - (111,867) 21,510,370 - - - 1,766 10,033 - 101,781 (1,823) (397) - 69,534 - - (134,421) 658,470 (159,618) - - 3,981,962 (34,648) 581,609 69,534 (12,848) 4,245 (138,783) 1,656,014 (159,895) - (111,867) 25,492,332 See accompanying notes WOORI FINANCIAL GROUP ANNUAL REPORT 2019177 WOORI FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS WOORI FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 Cash flows from operating activities: Net income Adjustments to net income: Income tax expense Interest income Interest expense Dividend income Additions of expenses not involving cash outflows: Impairment loss due to credit loss Loss on financial assets at FVTOCI Loss on derivatives (designated for hedge) Loss on fair value hedge Loss on other provisions Loss on valuation of investments in joint ventures and associates Loss on disposal of investments in joint ventures and associates Retirement benefit Depreciation and amortization Loss on disposal of premises and equipment, intangible assets and other assets Impairment loss on premises and equipment, intangible assets and other assets Deductions of income not involving cash inflows: Gain on valuation of financial assets at FVTPL Gain on redemption of debentures Gain on securities at FVTOCI Gain on securities at amortized cost Gain on derivatives (designated for hedge) Gain on fair value hedge Gain on other provisions Gain on valuation of investments in joint ventures and associates Gain on disposal of investments in joint ventures and associates Gain on disposal of premises and equipment, intangible assets and other assets Reversal of impairment loss on premises and equipment, intangible assets and other assets Changes in operating assets and liabilities: Financial instruments at FVTPL Loans and other financial assets at amortized cost Other assets Deposits due to customers Provisions Net defined benefit liability Other financial liabilities Other liabilities Cash received from operating activities: Interest income received Interest expense paid Dividends received Income tax paid Net cash provided by operating activities (Continued) 2019 2018(Note 43) (Korean Won in millions) 2,037,596 2,051,649 685,453 (10,576,770) 4,683,064 (107,959) (5,316,212) 753,223 (9,684,499) 4,033,548 (90,552) (4,988,280) 374,244 1,375 3,686 86,214 129,682 19,778 - 165,125 505,718 3,433 28,295 1,317,550 246,175 - 12,390 - 126,651 231 3,302 103,775 - 1,632 103 494,259 (506,772) (11,265,714) 86,237 15,407,222 (63,751) (293,008) (4,719,399) 30,693 (1,324,492) 10,478,357 (4,383,916) 107,940 (552,215) 5,650,166 1,870,349 329,574 1,053 36,483 17,299 28,350 22,772 2,931 142,712 272,550 1,160 87 854,971 215,711 1,597 3,100 431 35,810 42,797 2,014 25,791 50,511 30,278 761 408,801 670,872 (15,718,714) 32,328 13,995,747 (11,920) (135,313) 7,411,617 96,900 6,341,517 9,617,201 (3,847,275) 90,651 (551,560) 5,309,017 9,160,073 Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review 178 WOORI FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS WOORI FINANCIAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (CONTINUED) FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 (CONTINUED) Cash flows from investing activities: Cash in-flows from investing activities: Disposal of financial assets at FVTPL Disposal of financial assets at FVTOCI Redemption of securities at amortized cost Disposal of investments in joint ventures and associates Disposal of investment properties Disposal of premises and equipment Disposal of intangible assets Disposal of assets held for distribution (sale) Cash out-flows from investing activities: Net cash out-flows of business combination Acquisition of financial assets at FVTPL Acquisition of financial assets at FVTOCI Acquisition of securities at amortized cost Acquisition of investments in joint ventures and associates Acquisition of investment properties Acquisition of premises and equipment Acquisition of intangible assets Net cash used in investing activities Cash flows from financing activities: Cash in-flows from financing activities: Increase in borrowings Issuance of debentures Issuance of hybrid securities Retirement of treasury stocks Cash out-flows from financing activities: Cash out-flows from hedging activities Decrease in borrowings Redemption of debentures Redemption of lease liabilities New stock issue cost Acquisition of treasury stocks Dividends paid Redemption of hybrid securities Dividends paid to hybrid securities Dividends paid to non-controlling interest Capital reduction with consideration for non-controlling interest Net cash provided by financing activities 2019 2018(Note 43) (Korean Won in millions) 11,357,056 14,303,197 8,709,947 30,098 193 7,735 939 5,608 34,414,773 296,813 11,823,630 23,775,062 6,092,078 389,096 70,346 429,547 126,342 43,002,914 (8,588,141) 14,467,287 25,510,713 1,656,014 760,101 42,394,115 5,520 11,385,530 23,651,950 217,867 17,337 184,164 437,626 160,000 161,052 2,014 50 36,223,110 6,171,005 11,919,335 9,146,307 9,426,757 51,435 3,512 5,545 9,199 80,347 30,642,437 134,967 12,322,160 13,275,429 15,622,847 48,272 15,195 118,668 176,067 41,713,605 (11,071,168) 9,606,126 21,505,849 398,707 - 31,510,682 - 8,349,005 20,903,518 - - - 336,636 255,000 147,625 2,128 - 29,993,912 1,516,770 Net decrease in cash and cash equivalents (546,787) (394,325) Cash and cash equivalents, beginning of the period 6,747,894 6,908,286 Effects of exchange rate changes on cash and cash equivalents 191,459 233,933 Cash and cash equivalents, end of the period (Note 6) 6,392,566 6,747,894 See accompanying notes WOORI FINANCIAL GROUP ANNUAL REPORT 2019 179 WOORI FINANCIAL GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 WOORI FINANCIAL GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018 1. GENERAL (1) Summary of the parent company Woori Financial Group, Inc. (hereinafter referred to the “Group” ) is primarily aimed at controlling subsidiaries that operate in the financial industry or those that are closely related to the financial industry through the ownership of shares and was established on January 11, 2019 under the Financial Holding Company Act through the comprehensive transfer with shareholders of Woori Bank, Woori FIS Co., Ltd., Woori Finance Research Institute Co., Ltd., Woori Credit Information Co., Ltd., Woori Fund Services Co., Ltd. and Woori Private Equity Asset Management Co. Ltd. The headquarters of the company is located at 51, Sogong-ro, Jung-gu, Seoul, Korea, and the capital is 3,611,338 million Won as of the end of the current term while the Korea Deposit Insurance Corp. (KDIC), the company’s largest shareholder, owns 124,604,797 shares (17.25%) of the company’s stocks issued. The company’s stocks were listed on the Korea Exchange on February 13, 2019, and its American Depository Shares (ADS) are also being traded as the underlying common stock on the New York Stock Exchange since the same date. The details of stock transfer from the company and subsidiaries as of incorporation are as follows (Unit: Number of shares) Stock transfer company Woori Bank Woori FIS Co., Ltd. Woori Finance Research Institute Co., Ltd. Woori Credit Information Co., Ltd. Woori Fund Service Co., Ltd. Woori Private Equity Asset Management Co., Ltd. Total number of issued shares Exchange ratio per share Number of Parent company’s stocks 676,000,000 4,900,000 600,000 1,008,000 2,000,000 6,000,000 1.0000000 0.2999708 0.1888165 1.1037292 0.4709031 0.0877992 676,000,000 1,469,857 113,289 1,112,559 941,806 526,795 As of August 1, 2019, the parent company acquired a 73% interest in Tongyang Asset Management Co. and changed the name to Woori Asset Management Corp. Also, as of August 1, 2019, the parent company gained 100% control of ABL Asset Management Co., Ltd., added it as a consolidated subsidiary and changed the name to Woori Global Asset Management Co., Ltd. on December 6, 2019. The parent company paid 598,391 million Won in cash and 42,103,377 new shares of the parent company to acquire 100% interest of Woori Card Co., Ltd. from its subsidiary Woori Bank on September 10, 2019. On the same date, the company also acquired 59.83% interest of Woori Investment Bank Co., Ltd. from Woori Bank with 392,795 million Won in cash. As of December 30, 2019, the parent acquired a 67.2% interest (excluding treasury stocks, 51% interest including treasury stocks) in Woori Asset Trust Co., Ltd (formerly Kukje Asset Trust Co., Ltd) and added it as a consolidated subsidiary at the end of 2019. (2) The companies and subsidiaries (hereinafter ‘consolidated company’) as of December 31, 2019 and 2018 are as follows: Subsidiaries Woori Financial Group Inc. Woori Bank Woori Card Co., Ltd. Woori Investment Bank Co., Ltd. Woori FIS Co., Ltd. Main business Percentage of ownership (%) December 31, 2019 December 31, 2018 Financial statements date of use Location Bank Finance Other credit finance business System software development & maintenance 100.0 100.0 59.8 100.0 - - - - Korea Korea Korea December 31 December 31 December 31 Korea December 31 Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review180 - 2 - Subsidiaries Main business Percentage of ownership (%) December 31, 2019 December 31, 2018 Woori Finance Research Institute Co., Ltd. Woori Credit Information Co., Ltd. Woori Fund Service Co., Ltd. Woori Asset Trust Co., Ltd. (*1) Woori Asset Management Corp. Woori Private Equity Asset Management Co., Ltd. Woori Global Asset Management Co., Ltd. Woori Bank Woori Card Co., Ltd. Woori Investment Bank Co., Ltd. Woori FIS Co., Ltd. Woori Finance Research Institute Co., Ltd. Woori Credit Information Co., Ltd. Woori Fund Service Co., Ltd. Woori Private Equity Asset Management 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 Finance Cambodia PLC. Woori Finance Myanmar Co., Ltd. Wealth Development Bank Woori Bank Vietnam Limited WB Finance Co., Ltd. Woori Bank Europe Kumho Trust First Co., Ltd. (*2) Asiana Saigon Inc. (*2) KAMCO Value Recreation First Securitization Specialty Co., Ltd. (*2) Hermes STX Co., Ltd. (*2) BWL First Co., LLC (*2) 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 WEBST 1st Co., Ltd. (*2) Wibihansoop 1st Co., Ltd. (*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) Uri Display 2nd Co., Ltd. (*2) Woori the Colony Unjung Securitization Specialty Co., Ltd. (*2) Woori Dream 1st Co., Ltd. (*2) Woori Dream 2nd Co., Ltd. (*2) Woori H 1st Co., Ltd. (*2) Woori HS 1st Co., Ltd. Woori HS 2nd Co., Ltd. (*2) Woori Sinnonhyeon 1st Inc. (*2) Woori K 1st Co., Ltd. (*2) Uri S 1st Co., Ltd. (*2) Smart Casting Inc. (*2) Uri Display 3rd Co., Ltd. (*2) Other service business Credit information Finance Real-estate Finance Finance Finance Finance Other credit finance business System software development & maintenance Other service business Credit information Finance Finance Finance Finance Finance Finance Finance Finance Finance Finance Finance Finance Finance Finance Finance Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization 100.0 100.0 100.0 67.2 73.0 100.0 100.0 - - - - - - - 100.0 100.0 100.0 100.0 79.9 100.0 99.9 100.0 100.0 51.0 100.0 100.0 100.0 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 - 0.0 0.0 0.0 0.0 0.0 0.0 Financial statements date of use December 31 December 31 December 31 December 31 December 31 Location Korea Korea Korea Korea Korea Korea December 31 Korea December 31 - - - - - - - 100.0 59.8 Korea Korea December 31 December 31 100.0 Korea December 31 100.0 100.0 100.0 Korea Korea Korea December 31 December 31 December 31 Korea America December 31 100.0 December 31 100.0 100.0 Hong Kong December 31 December 31 100.0 December 31 100.0 China Russia Brazil Korea 79.9 100.0 99.9 Indonesia December 31 December 31 December 31 100.0 Cambodia December 31 100.0 Myanmar December 31 51.0 Philippines December 31 Vietnam December 31 100.0 100.0 Cambodia December 31 Germany December 31 100.0 December 31 0.0 December 31 0.0 Korea Korea 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 0.0 0.0 0.0 0.0 0.0 0.0 - Korea Korea Korea Korea Korea Korea Korea Korea 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 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 December 31 WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 3 - Main business Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Securities investment and others Securities investment and others Securities investment and others Securities investment and others Securities investment and others Securities investment and others Securities investment and others Securities investment and others Trust Trust Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization Asset securitization 181 Percentage of ownership (%) December 31, 2019 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 December 31, 2018 - - - - - - - - - - - - - - - - - - - Financial statements date of use 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 Location Korea Korea Korea Korea Korea Korea Korea Korea Korea Korea Korea Korea Marshall islands Korea Korea Korea Korea Korea Korea 100.0 100.0 Korea December 31 98.5 97.3 98.5 Korea December 31 97.3 England December 31 75.0 99.0 99.4 99.9 99.3 0.0 0.0 54.6 0.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 0.0 0.0 75.0 Korea December 31 - - - - 0.0 0.0 - - 5.0 5.0 5.0 5.0 5.0 5.0 - - - Korea December 31 Korea December 31 Korea December 31 Korea Korea December 31 December 31 Korea December 31 Luxembourg December 31 Belgium December 31 Korea December 31 Korea December 31 Korea December 31 Korea December 31 Korea December 31 Korea December 31 Korea Korea Korea December 31 December 31 December 31 Finance 100.0 100.0 Myanmar December 31 Asset securitization Asset securitization 0.5 0.5 0.5 0.5 Korea December 31 Korea December 31 Subsidiaries TY 1st Co., Ltd. (*2) Woori HJ 2nd Co., Ltd. (*2) Woori-HJ 3rd Co., Ltd. (*2) Uri K 2nd Co., Ltd. (*2) Woori KC No.1 Co., Ltd. (*2) Woori Lake 1st., Ltd. (*2) Woori QSell 2nd Co., Ltd. (*2) Quantum Jump the 1st Co., Ltd. (*2) Quantum Jump the 2nd Co., Ltd. (*2) Woori BK the 1st Co., Ltd. (*2) Woori-HC 1st Co., Ltd. (*2) Wivi Synergy 1st Co., Ltd. (*2) ATLANTIC TRANSPORTATION 1 S.A. (*2) Woori Gongdeok First Co., Ltd. (*2) HD Project Co., Ltd. (*2) Woori HW 1st Co., Ltd. (*2) Woori HC 2nd Co., Ltd. (*2) Woori Dream 3rd Co., Ltd. (*2) Woori SJS 1st Co., Ltd. (*2) G5 Pro Short-term Bond Investment Fund 13 (*3) Heungkuk Global Private Placement Investment Trust No. 1 (*3) AI Partners UK Water Supply Private Placement Investment Trust No.2 (*3) Consus Sakhalin Real Estate Investment Trust 1st (*3) Multi Asset Global Real Estate Investment Trust No. 5-2 (*3) Igis Australia Investment Trust No. 209-1 (*3) Woori Global Development Infrastructure Synergy Company Private Placement Investment Trust No.1 (*3) IGIS Global Private Placement Real Estate Fund No. 316-1 (*3) Principal Guaranteed Trust (*4) Principal and Interest Guaranteed Trust (*4) Multi Asset Global Real Estate Investment Trust No. 5-2: MAGI No.5 LuxCo S.a.r.l. (*2) MAGI No.5 LuxCo S.a.r.l.: ADP 16 Brussels (*2) Woori Investment Bank Co., Ltd.: Dongwoo First Securitization Specialty Co., Ltd. (*2) Seari First Securitization Specialty Co., Ltd. (*2) Seari Second Securitization Specialty Co., Ltd. (*2) Namjong 1st Securitization Specialty Co., Ltd. (*2) Bukgeum First Securitization Specialty Co., Ltd. (*2) Bukgeum Second Securitization Specialty Co., Ltd. (*2) WS1909 Securitization Specialty Co., Ltd. (*2) One Punch Korea the 1st Co., Ltd. (*2). One Punch blue the 1st 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) Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review182 - 4 - Subsidiaries Woori Card one of 2018-1 Securitization Specialty Co., Ltd. (*2) WOORI CARD 2019-1 ASSET SECURITIZATION SPECIALTY CO., LTD. (*2) Woori Private Equity Asset Management Co., Ltd. and Woori Investment Bank Co., Ltd.: Japanese Hotel Real Estate Private Equity Fund 1 (*3) Woori Asset Management Corp.: Woori china convertible bond fund (*3) Woori Global Asset Management Co.,Ltd.: WOORIG China Value Equity (C/C(F)) (*3) Woori Bank, Woori Investment Bank Co., Ltd and Woori Private Equity Asset Management Co., Ltd.: Woori Innovative Growth Professional Investment Type Private Investment Trust No.1(*3) Woori bank and Woori Investment Bank Co., Ltd.: Heungkuk Woori Tech Company Private Placement Investment Trust No. 1 (*3) Main business Asset securitization Asset securitization Securities investment and others Securities investment and others Securities investment and others Securities investment and others Securities investment and others Percentage of ownership (%) December 31, 2019 December 31, 2018 Financial statements date of use Location 0.5 0.5 45.5 98.6 95.1 60.0 0.5 Korea December 31 - - - - - Korea December 31 Korea December 31 Korea December 31 Korea December 31 Korea December 31 100.0 98.0 Korea December 31 (*1) As of December 31, 2018, Woori bank held 8.6% interest and hold 67.2% interest as of December 31, 2019 as acquiring 58.6% interests additionally during current period. (*2) The entity is a structured entity for the purpose of asset securitization. Although the Group is not a majority shareholder, the Group 1) has the power over the investee, 2) is exposed to 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. (*3) The entity is a structured entity for the purpose of investment in securities. Although the Group is not a majority shareholder, the Group 1) has the power over the investee, 2) is exposed to 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. (*4) The entity is a ‘money trust’ under the Financial Investment Services and Capital Markets Act. Although the Group is not a majority shareholder, the Group 1) has the power over the investee, 2) is exposed to 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. (3) The Group has not consolidated the following entities as of December 31, 2019 and 2018 despite having more than 50% ownership interest: As of December 31, 2019 Subsidiaries Location Korea Golden Bridge NHN Online Private Equity Investment (*) Korea Mirae Asset Maps Clean Water Private Equity Investment Trust 7th (*) Korea Kiwoom Yonsei Private Equity Investment Trust (*) Korea IGIS Europe Private Placement Real Estate Fund No. 163-2 (*) Korea IGIS Global Private Placement Real Estate Fund No. 148-1 (*) Korea IGIS Global Private Placement Real Estate Fund No. 148-2 (*) Korea Mirae Asset Seoul Ring Expressway Private Special Asset Fund No. 1 (*) Hangkang Sewage Treatment Plant Fund (*) Korea KIM Pocheon-Hwado Highway Infra Private Placement Special Asset Fund (*) Korea Main Business Securities Investment Securities Investment Securities Investment Securities Investment Securities Investment Securities Investment Securities Investment Securities Investment Securities Investment Percentage of ownership (%) 60.0 59.7 88.9 97.9 75.0 75.0 66.7 55.6 55.2 (*) Since the investee is a private equity investment fund, the Group does not have the power over the fund’s activities even though it holds more than 50% of ownership interest. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 5 - 183 Subsidiaries Golden Bridge NHN Online Private Equity Investment (*) Mirae Asset Seobu Underground Expressway Professional 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 Europe Private Placement Real Estate Fund No. 163-2 (*) IGIS Global Private Placement Real Estate Fund No. 148-1 (*) IGIS Global Private Placement Real Estate Fund No. 148-2 (*) KB Nongso Sewage Treatment Equipment Private Special Asset (*) Mirae Asset Seoul Ring Expressway Private Special Asset Fund No. 1 (*) Hangkang Sewage Treatment Plant Fund (*) Consus KyungJu Green Private Placement Real Estate Fund No. 1 (*) As of December 31, 2018 Location Korea Korea Korea Korea Korea Korea Korea Korea Korea Korea Korea Korea Main Business Securities Investment Securities Investment Securities investment Securities investment Securities investment Securities investment Securities investment Securities investment Securities investment Securities investment Securities investment Securities investment Percentage of ownership (%) 60.0 65.8 59.7 88.9 89.6 97.9 75.0 75.0 50.0 66.2 55.6 52.4 (*) Since the investee is a private equity investment fund, the Group does not have the power over the fund’s activities even though it holds more than 50% of ownership interest. (4) The summarized financial information of the major subsidiaries are as follows. The financial information of each subsidiary was prepared on the basis of consolidated financial statements. (Unit: Korean Won in millions): As of and for the year ended December 31, 2019 Woori Bank (*1) Woori Card Co., Ltd. Woori Investment Bank Co., Ltd. Woori FIS Co., Ltd. Woori Finance Research Institute Co., Ltd. Woori Credit Information Co., Ltd. Woori Fund Service Co., Ltd. Woori Asset Trust Co., Ltd. (*2) Woori Asset Management Corp. (*2) Woori Private Equity Asset Management Co., Ltd. Woori Global Asset Management Co., Ltd. (*2) Assets 348,181,658 10,087,342 3,398,960 91,079 5,447 37,872 16,852 139,839 113,037 38,243 32,807 Liabilities 325,526,568 8,299,175 3,031,622 55,112 1,999 7,948 2,109 45,410 6,301 2,985 3,230 Net income (loss) attributable to owners 1,505,547 114,196 53,358 3,107 160 1,698 1,735 - 1,720 (2,087) (1,360) Comprehensive income (loss) attributable to owners 1,531,793 111,782 52,095 3,119 117 1,389 1,735 - 2,544 (2,124) (1,360) Operating revenue 22,240,947 1,368,234 204,655 244,923 5,452 39,118 11,071 - 9,204 4,152 3,588 (*1) The amount is prepared based on the consolidated financial statements of Woori Bank (reflecting the classification of profit or loss of the discontinued operation). (*2) The income or loss information of Woori Asset Management Corp. and Woori Global Asset Management Co., Ltd. are prepared based on the income or loss from August 1, 2019, the date on which the power was obtained, to December 31, 2019. In addition, the Group acquired Woori Asset Trust Co., Ltd on December 30, 2019, thus the income or loss information of Woori Asset Trust Co., Ltd are not included. 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. As of and for the year ended December 31, 2018 Assets 96,260 38,820 3,891 9,987,057 2,682,660 34,921 2,182,454 517,627 5,470,927 305,521 2,355,975 179,130 Liabilities 63,412 1,439 560 8,305,093 2,367,418 6,386 1,878,117 396,216 4,953,813 256,260 1,853,768 149,146 Operating revenue 271,651 1,713 4,708 1,371,301 205,446 36,883 90,975 18,748 366,973 19,433 192,719 13,971 Net income (loss) attributable to owners Comprehensive income (loss) attributable to owners 2,840 (2,794) 7 114,767 25,552 1,657 20,510 5,144 21,879 5,163 40,385 1,262 269 (2,843) (109) 106,517 25,533 1,411 32,335 9,647 19,194 (3,234) 27,109 (2,326) Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review184 - 6 - 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 WB Finance Co., Ltd. Woori Bank Europe Money trust under the FISCM Act Structured entity for the securitization of financial assets Structured entity for the investments in securities Assets 777,437 14,448 93,239 19,340 218,134 954,580 268,794 58,399 1,582,765 1,369,745 63,676 As of and for the year ended December 31, 2018 Liabilities Operating revenue Net income (loss) attributable to owners Comprehensive income (loss) attributable to owners 299 1,440 71,133 6,886 184,344 720,554 225,655 311 1,552,594 1,786,869 142 29,760 10,052 11,038 4,496 13,668 48,716 24,310 5 54,860 53,578 1,826 26,057 1,597 2,826 640 80 10,710 2,421 (5,959) 259 4,990 (1,299) 26,057 1,597 3,676 (1,256) (451) 13,618 2,329 (5,974) 259 (5,681) (3,009) (*) The financial statements of the major subsidiaries as of December 31, 2018 are prepared based on the Woori Bank which was the controlling company at the end of the previous term. (5) The financial support that the Group provides to consolidated structured entities is as follows: - Structured entity for asset securitization The structured entity which 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 provision of 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 funding to the structured entity by the Group, 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 solely principal to some of its trust products. Due to the financial guarantees, the Group may be obliged 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. As of December 31, 2019, the Group provides 2,241,640 million Won of credit facilities for the structured entities mentioned above. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 7 - 185 (6) The Group has entered into various agreements with structured entities such as asset securitization, structured finance, investment fund, and monetary trust. The characteristics and the nature of risks related to unconsolidated structured entities over which the Group does not have control in accordance with K- IFRS 1110 are as follows: The ownership interests on unconsolidated structured entities that the Group hold are classified into asset securitization vehicles, structured finance, investment fund and real-estate trust, based on the nature and the purpose of the structured entities. Unconsolidated structured entities classified as ‘asset securitization vehicles’ are entities that issue asset- backed securities, pay the principal and interest or distributes dividends on asset-backed securities through borrowings or profits from the management, operation and sale of securitized assets. The Group transfers related risks by the purchase commitments of asset-backed securities or issuance of asset-backed securities through credit grants, and the structured entities recognize related interest or fee revenue. There are entities that provide additional funding and conditional debt acquisition commitments before the Group’s financial support, but the Group is still exposed to losses arising from the purchase of financial assets issued by the structured entities when it fails to renew the securities. Unconsolidated structured entities classified as ‘structured financing’ include real estate project financing investment vehicle, social overhead capital companies, and special purpose vehicles for ship (aircraft) financing. Each entity is incorporated as a separate company with a limited purpose in order to efficiently pursue business goals. ‘Structured financing’ is a financing method for large-scale risky business, with investments made based on feasibility of the specific business or project, instead of credit of business owner or physical collaterals. The investors receive profits from the operation of the business. The Group recognizes interest revenue, profit or loss from assessment or transactions of financial instruments, or dividend income. With regard to uncertainties involving structured financing, there are entities that provide financial support such as additional fund, guarantees and prioritized credit grants prior to the Group’s intervention, but the Group is exposed to possible losses due to loss of principal from reduction in investment value or irrecoverable loans arising from failure to collect scheduled cash flows and cessation of projects. Unconsolidated structured entities classified as ‘investment funds’ include investment trusts and private equity funds. An investment trust orders the investment and operation of funds to the trust manager in accordance with trust contract with profits distributed to the investors. Private equity funds finances money required to acquire equity securities to enable direction of management and/or improvement of ownership structure, with profit distributed to the investors. The Group recognizes pro rata amount of valuation gain or loss on investment and dividend income as an investor and may be exposed to losses due to reduction in investment value. ‘Real estate trust’ is to be entrusted the underlying property for the purpose of managing, disposing, operating or developing from the consignor who owns the property and distributes the proceeds achieved through the trust to the beneficiary. When the consignee does not fulfill his or her important obligations in the trust contract or it is, in fact, difficult to run the business, the Group may be exposed to the threat of compensating the loss. The total assets of the unconsolidated structured entity held by the Group, the carrying amount of the items recognized in the financial statements, the maximum loss exposure, and the losses from the unconsolidated structured entity are as follows. The maximum loss exposure includes the amount of investment recognized in the financial statements and the amount that is likely to be confirmed in the future when satisfies certain conditions by contracts such as purchase arrangements, credit offerings. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review186 - 8 - Total asset of the unconsolidated structured entities Assets recognized in the consolidated financial statements related to the unconsolidated structured entities Financial assets at FVTPL Financial assets at FVTOCI Financial assets at amortized cost 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 (provisions) The maximum exposure to risks Investment assets 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 Financial assets at FVTPL Financial assets at FVTOCI Financial assets at amortized cost 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 (provisions) The maximum exposure to risks Investments Credit facilities Loss recognized on unconsolidated structured entities Asset securitization vehicle Structured Finance Investment Funds Real-estate trust December 31, 2019 8,230,254 62,879,421 18,265,273 152,257 5,128,616 324,414 2,006,230 2,796,695 - 1,277 184 - 184 5,561,394 5,128,616 432,778 2,982,217 28,834 42,305 2,897,620 7,475 5,983 1,291 15 1,276 3,532,539 2,982,217 550,322 1,411,639 1,109,621 - 120,072 181,946 - - - - 1,457,398 1,411,639 45,759 - 4,660 34,312 57,928 655 - 57,273 - - 2,808 - 2,808 77,117 57,928 19,189 5,218 Asset securitization vehicle December 31, 2018 Structured finance Investment funds 6,796,235 58,161,494 11,138,822 2,571,835 285,156 281,919 2,003,921 - 839 1,260 116 1,144 3,252,329 2,571,835 680,494 5,764 2,831,842 70,219 48,961 2,511,055 197,393 4,214 905 248 657 3,408,271 2,831,842 576,429 11,609 1,530,767 1,197,844 - 71,150 261,773 - - - - 1,587,325 1,530,767 56,558 13,868 WOORI FINANCIAL GROUP ANNUAL REPORT 2019 - 9 - 187 (7) As of December 31, 2019 and 2018, the share of non-controlling interests on the net income and equity of subsidiaries in which non-controlling interests are significant are as follows: (Unit: Korean Won in millions): 1) Accumulated non-controlling interests at the end of the reporting period Woori Bank (*) Woori Investment Bank Woori Asset Trust Co., Ltd Woori Asset Management Corp PT Bank Woori Saudara Indonesia 1906 Tbk Wealth Development Bank (*) Hybrid securities issued by Woori Bank 2) Net income attributable to non-controlling interests December 31, 2019 December 31, 2018 3,660,814 151,170 40,161 29,800 83,315 18,524 - 130,088 - - 68,250 16,557 Woori Bank (*) Woori Investment Bank Woori Asset Trust Co., Ltd Woori Asset Management Corp PT Bank Woori Saudara Indonesia 1906 Tbk Wealth Development Bank For the year ended December 31, 2019 For the year ended December 31, 2018 134,421 21,588 - 408 8,502 427 - 10,262 - - 8,126 39 (*)Distribution of the hybrid securities issued by Woori Bank 3) Dividends to non-controlling interests PT Bank Woori Saudara Indonesia 1906 Tbk 1,981 2,082 For the year ended December 31, 2019 For the year ended December 31, 2018 Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review 188 - 10 - 2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (1) Basis of presentation The Group’s consolidated financial statements are prepared in accordance with Korean International Financial Reporting Standards (“K-IFRS”) The significant accounting policies applied in the preparation of consolidated financial statements as of and for the year ended December 31, 2019 are stated below, and the accounting policies applied are identical to ones used in the preparation of Woori Bank’s previous period consolidated financial statements, except for the effects of adopting new standards or interpretations as explained below. The consolidated financial statements, as described in following paragraphs of accounting policy, are prepared at the end of each reporting period in historical cost basis, except for certain non-current assets and financial assets that are either revalued or measured in fair value. Historical cost is generally measured at the fair value of consideration given to acquire assets. The consolidated financial statements of the Group were approved for the issuance on March 3, 2020 by the Board of Directors, and the final approval will be made in the annual general shareholders’ meeting on March 25, 2020. 1) The standards and interpretations that are newly adopted by the Group during the current period, and the changes in accounting policies thereof are as follows: ① K-IFRS 1109 ‘Financial Instruments,’ K-IFRS 1107 ‘Financial Instruments: Disclosure’ amendments The Group has adopted the amendments of K-IFRS 1109 and 1107 for the first time in the current year. The amendments mainly deal with the addition of temporary exceptions from applying specific hedge accounting requirements while the uncertainty arises from interest rate benchmark reform. The amendment requires that for the purpose of determining whether a forecast transaction (or a component thereof) is highly probable, an entity shall assume that the interest rate benchmark on which the hedged cash flows (contractually or non-contractually specified) are based is not altered as a result of interest rate benchmark reform. When applying the prospective assessment, the amendment further requires that an entity shall assume that the hedged risk or the interest rate benchmark on which the hedged item or the hedging instrument is based is not altered as a result of the reform. Additionally, for a hedge of a non-contractually specified benchmark component of interest rate risk, an entity shall apply the requirement that the risk component shall be separately identifiable only at the inception of the hedging relationship. Meanwhile, an entity shall prospectively cease applying the temporary exceptions to a hedged item at the earlier of: (a)when the uncertainty arising from interest rate benchmark reform is no longer present with respect to the timing and the amount of the interest rate benchmark-based cash flows of the hedged item; and (b)when the hedging relationship that the hedged item is part of is discontinued. Note 26 sets out details of the hedge accounting applied by the Group. These amendments will be effective from January 1, 2020 but the Group has applied such amendments in current year as the early adoption is permitted. ② K-IFRS 1116 Leases The Group initially applied K-IFRS 1116 on January 1, 2019. K-IFRS 1116 introduces an accounting model for the single lessee and as a result, the Group, as a lessee, recognizes right-of-use assets which represent a lessee’s right to use an underlying asset and lease liabilities which represent an obligation to make lease payments. An accounting model for the lessor is similar to the previous accounting policy. The Group recognized the cumulative effects due to the initial application of K-IFRS 1116 on January 1, 2019, which is the date of initial application. Therefore, the comparative financial information applies K- IFRS 1017 and K-IFRS 2104 as reported previously, and was not restated. The details of the changes to the accounting policy are described below. WOORI FINANCIAL GROUP ANNUAL REPORT 2019 - 11 - 189 i) Definition of lease Previously, the Group determined whether an arrangement is, or contains, a lease on the arrangement date by applying K-IFRS 2104 ‘Determining whether an arrangement contains a lease’ which focused on ‘risks and consideration’. The Group has started to determine whether the contract is, or contains, a lease, based on the new definition of a lease. Under K-IFRS 1116, a contract determines whether a lease includes control of the use of an underlying asset that is identified in exchange for consideration. On the date of initial application for K-IFRS 1116, the Group elected to apply a practical expedient which does not require the Group to reassess whether the contract is a lease. The Group applied K-IFRS 1116 only to the contracts that were previously identified as a lease and did not reassess the contracts that were not identified as a lease in line with K-IFRS 1017 and K-IFRS 2104. Therefore, the definition of lease under K-IFRS 1116 is only applicable to contracts that are entered into or modified after January 1, 2019. For the agreed or revalued date of the contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease and non-lease components. The Group elected not to recognize right-to-use assets and lease liabilities for certain leases of low-value assets (e.g. IT facilities) and short-term leases (less than one year). The Group will recognize the related lease payments as expenses equally over the lease period. IFRS Interpretations Committee published its interpretation of ‘Lease Period and Lease Improvement Useful Life’ as of December 16, 2019. The Interpretation Committee discussed a question about how to determine the lease term for cancellable or renewable leases and according to the interpretation, the lease term will depend on both the termination penalties in the contract and the broader economics of the contract. Agenda decisions issued by the Interpretations Committee do not have an application date, but are expected to be implemented as soon as possible. The Group is currently assessing the impact of the agenda decision and does not expect a material impact to the financial statements. ii) Lessee The Group leases various assets, including buildings, vehicles and IT equipment. Previously, the Group classified its leases either as operating leases or as finance leases based on whether the lease substantially transfers the risk and reward of owning the underlying assets. According to K-IFRS 1116, the Group recognizes right-of-use assets and lease liabilities for most of its leases, which means most of its leases are presented in the statement of financial position. For the right-of-use assets that do not satisfy the definition of an investment property, the Group presents those assets as the same item as the item that the corresponding underlying asset would have been presented for. Right-of-use assets that meet the definition of investment properties would be presented as investment properties. The Group presents lease liability as other financial liabilities in the consolidated statement of financial position. iii) Regulation on lease terms On the date of initial application, a lease classified as an operating lease in accordance with K-IFRS 1017 is measured at present value of the remaining lease payments discounted at the incremental borrowing rate of the subsidiary as of January 1, 2019. However, the Group chose an exception that does not apply the lessee’s recognition, measurement and presentation on low value asset leases. The right-of-use asset is measured as follows: - The same amount as lease liability (pre-paid or incurred (unpaid) lease payments are adjusted). The Group applies this method to all leases. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review190 - 12 - When the Group applies K-IFRS 1116 to the leases classified as operating leases in accordance with K- IFRS 1017, following practical expedients are used: - Opening direct costs are excluded from the measurement of the right-of-use asset at the date of initial application. - An entity should apply K-IFRS 1037 ‘Provisions, Contingent Liabilities and Contingent Assets’ right before the date of initial application to determine whether a lease is a loss-bearing contract and therefore conduct an impairment review. - The right-of-use assets and lease liabilities are not recognized for short-term leases (residual term less than a year) - If the contract includes a lease extension or exit option, use hindsight to determine the lease term. iv) Impacts to the financial statements a) Impacts at date of initial application At the date of initial application of K-IFRS 1116, the Group additionally recognized the right-of-use assets and lease liabilities, and the impacts as of January 1, 2019 are as follows (Unit: Korean Won in millions): Right-of-use assets presented as premises and equipment(*) Lease liability(*) January 1, 2019 435,791 377,030 (*) The differences have occurred due to prepaid, unpaid lease payment, transfer, etc. and there is no effect on retained earnings. When measuring lease liabilities for leases that were previously classified as operating lease, the Group used its incremental borrowing rate as of January 1, 2019 as the discount rate. The applied weighted-average incremental borrowing rate is 2.0~5.6%. Operating leases as of December 31, 2018 - Application of exemption rule for low value assets leases - Application of exemption rule for leases with remaining terms are less than 12 months at the time of transition Operating lease agreement after subtraction of exemption rule applied items as of December 31, 2018 Amount discounted with incremental borrowing rate at the date of initial application(January 1, 2019) Lease liabilities recognized at the date of initial application(January 1, 2019) January 1, 2019 398,147 (616) (187) 397,344 377,030 377,030 b) Impacts during the transition The Group recognized depreciation expenses and interest expenses instead of the operating lease expenses for the leases in line with K-IFRS 1116. The Group recognized depreciation expenses of 229,727 million Won and interest expenses of 9,086 million Won for the lease for the year ended December 31, 2019. ③ It is believed that the following issued, revised standards will not have a significant impact on the Group. - K-IFRS 2123 Uncertainty over Income Tax Treatments (Issued) - K-IFRS 1109 Financial Instrument (Revised) - K-IFRS 1028 Investment in Associates and Joint Ventures (Revised) - K-IFRS 1019 Employee Benefits (Revised) - K-IFRS 1115 Revenue from Contracts with Customers (Revised) - Annual Improvements to IFRSs 2015-2017 Cycle The annual improvements include partial amendments of K-IFRS 1012 ‘Income Tax,’ K-IFRS 1023 ‘Borrowing Cost,’ K-IFRS 1103 ‘Business Combination’ and K-IFRS 1111 ‘Joint Arrangements’. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 13 - 191 2) - - - The details of K-IFRSs that have been issued and published as of the date of issue approval of financial statements but have not yet reached the effective date, and which the Group has not applied at an earlier date are as follows: Revised Conceptual Framework for Financial Reporting Revised K-IFRS 1103 ‘Business Combinations’ Revised K-IFRS 1001 ‘Financial Statements Presentation’ and K-IFRS 1008 ‘Change and Error of Accounting Policy and Accounting Estimates’ It will be applied to period beginning on or after January 1, 2020. It is believed that revised standards listed above, will not have a significant impact on the company 3) The standards and interpretations that are newly adopted by the Group during the previous period, and the changes in accounting policies thereof are as follows: - Adoption of K-IFRS 1109 – Financial instruments The Group initially applied K-IFRS 1109 and related amendments made to other standards during the previous period, with January 1, 2018 as the date of initial application. K-IFRS 1109 introduces new rules on: 1) classification and measurement of financial assets and financial liabilities, 2) impairment of financial assets, and 3) hedge accounting. Additionally, the Group adopted consequential amendments to K-IFRS 1037 Financial Instruments: Disclosures that were applied to the disclosures for 2018. a) Classification and measurement of financial assets All financial assets included in the scope of K-IFRS 1109 are subsequently measured at amortized cost or fair value based on the Group’s business model for the management of financial assets and the nature of the contractual cash flows of the financial assets. Debt instruments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods (Financial assets at amortized cost). Debt instruments that are held within a business model whose objective is achieved both by collecting contractual cash flows and selling financial assets, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at fair value through other comprehensive income (Financial assets at fair value through other comprehensive income (“FVTOCI”)). All other debt instruments and equity instruments are measured at their fair value at the end of subsequent accounting periods, and any change in the fair value is recognized as profit or loss (Financial assets at fair value through profit or loss (“FVTPL”)). Notwithstanding the foregoing, the Group may make the following irrevocable choice or designation at the time of initial recognition of a financial asset. The Group may make an irrevocable election to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument within the scope of this standard that is neither held for trading nor is a contingent consideration recognized by an acquirer in a business combination to which K-IFRS 1103 applies. At initial recognition, financial assets at amortized cost or FVTOCI may be irrevocably designated as financial assets at fair value through profit or loss mandatorily measured at fair value if doing so eliminates or significantly reduces a measurement or recognition inconsistency. As of the date of initial application of K-IFRS 1109, there are no debt instruments classified either as financial assets at amortized cost or FVTOCI that are designated as financial assets at fair value through profit or loss. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review192 - 14 - When debt instruments measured at FVTOCI are derecognized, the cumulative gain or loss recognized in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment. On the other hand, for equity instruments designated as financial assets at fair value through other comprehensive income, cumulative gains or losses previously recognized in other comprehensive income are subsequently reclassified to retained earnings. Debt instruments measured subsequently at amortized cost or at FVTOCI are subject to impairment. The classification and measurement of financial assets and liabilities in accordance with K-IFRS 1109 and K- IFRS 1039 as of January 1, 2018 are as follows (Unit: Korean Won in millions): Classification in accordance with K-IFRS 1039 Classification in accordance with K-IFRS 1109 Amount in accordance with K-IFRS 1039 Reclassificat -ion Remeasure- ment(*2) Amount in accordance with K-IFRS 1109 Deposit Loans and receivables Deposit Financial assets at Loan and other financial assets at amortized cost Financial assets at FVTPL FVTPL Debt securities Financial assets at Financial assets at FVTPL FVTPL(*1) Equity securities Financial assets at Financial assets at Derivative assets Financial assets at Financial assets at FVTPL FVTPL(*1) Equity securities FVTPL AFS financial assets Equity securities AFS financial assets FVTPL(*1) Financial assets at FVTPL(*1) Financial assets at FVTOCI Debt securities AFS financial Financial assets at Debt securities AFS financial Financial assets at assets FVTPL Debt securities AFS financial assets assets FVTOCI Securities at amortized cost Debt securities HTM financial Securities at Loans Loans assets Loans and receivables Loans and receivables Derivative assets (Designated for hedging) Other financial Derivative assets (Designated for hedging) Loans and assets receivables amortized cost Financial assets at FVTPL (*1) Loan and other financial assets at amortized cost Derivative assets (Designated for hedging) Loan and other financial assets at amortized cost Total financial assets 8,870,835 25,972 2,654,027 47,304 - - - - 3,115,775 (2,137) 1,273,498 1,219 850,207 46,855 12,874,209 308,181 16,749,296 - - - - - 279,032 918 253,014,491 59,272 6,772,088 306,941,042 - - - - - - - - - - - - - 8,870,835 25,972 2,654,027 47,304 3,113,638 1,274,717 850,207 46,855 12,874,209 14,119 322,300 - 50 16,749,296 280,000 - 253,014,491 - 59,272 - 14,169 6,772,088 306,955,211 WOORI FINANCIAL GROUP ANNUAL REPORT 2019 - 15 - 193 Deposit due to customers Deposit due to customers Borrowings Debentures Debentures Equity-linked securities Derivatives liabilities Derivatives liabilities (Designated for hedging) Other financial liabilities Provision for financial guarantee Classification in Classification in accordance with K-IFRS 1039 Financial liabilities accordance with K-IFRS 1109 Financial liabilities at at FVTPL FVTPL Financial liabilities at amortized cost Financial liabilities at amortized cost Financial liabilities Financial liabilities at amortized cost Financial liabilities at amortized cost Financial liabilities at at FVTPL FVTPL Financial liabilities at amortized cost Financial liabilities Financial liabilities at amortized cost Financial liabilities at at FVTPL FVTPL Financial liabilities Financial liabilities at at FVTPL Derivatives liabilities (Designated for hedging) Financial liabilities at amortized cost Provision FVTPL Derivatives liabilities (Designated for hedging) Financial liabilities at amortized cost Financial liabilities at amortized cost Total financial liabilities Amount in accordance with K-IFRS 1039 Reclassifica- tion Remeasure- ment(*2) Amount in accordance with K-IFRS 1109 25,964 234,695,084 14,784,706 91,739 27,869,651 160,057 3,150,149 67,754 13,892,461 71,697 294,809,262 - - - - - - - - - - - - - - - - - - - - - - 25,964 234,695,084 14,784,706 91,739 27,869,651 160,057 3,150,149 67,754 13,892,461 71,697 294,809,262 (*1) Under K-IFRS 1039, the embedded derivatives out of hybrid financial instruments were accounted for as derivative assets or liabilities if the criteria for separation of the embedded derivatives were met; and the host contracts in those instruments were recorded as available-for-sale financial assets or loans and receivables respectively. However, since K-IFRS 1109 requires financial instruments to be accounted for based on the terms of the entire financial instrument, hybrid financial assets are revalued and classified as financial assets at fair value through profit or loss. (*2) The remeasurement effect due to expected credit losses is not included (The remeasurement effect of expected credit losses is as follows: b) Impairment of financial assets). At the date of the initial application of K-IFRS 1109, there were no financial assets or liabilities measured at FVTPL that were reclassified to FVTOCI or amortized cost category. The financial assets at FVTPL or FVTOCI that are reclassified to the amortized cost measurement category as of the date of initial application of K-IFRS 1109, and the related valuation gain or loss and fair value of the financial assets as of December 31, 2018 had it not been reclassified, are as follows (Unit: Korean Won in millions): Account subject Category before the adoption of K-IFRS 1109 Amount of valuation gain/loss had it not been reclassified Fair value Debt securities(*) AFS financial assets 2 257,665 (*) Those financial assets that are removed from the books as of December 31, 2018 are not presented in the table above. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review 194 - 16 - b) Impairment of financial assets The impairment model under K-IFRS 1109 reflects expected credit losses, as opposed to incurred credit losses under K-IFRS 1039. Under the impairment approach in K-IFRS 1109, it is no longer necessary for a credit event to have occurred before credit losses are recognized. Instead, the Group accounts for expected credit losses and changes in those expected credit losses. The amount of expected credit losses should be updated at each reporting date to reflect changes in credit risk since initial recognition. The Group is required to recognize the expected credit losses for financial instruments measured at amortized cost or FVTOCI (debt instrument), and unused loan commitments and financial guarantee contracts that are subject to the impairment provisions of K-IFRS 1109. In particular, K-IFRS 1109 requires the Group to measure the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses (ECL) if the credit risk on that financial instrument has increased significantly since initial recognition, or if the financial instrument is a purchased or originated credit-impaired financial asset. If the credit risk of a financial instruments does not increase significantly after initial recognition (excluding “purchased or originated credit-impaired loans” - for financial assets already impaired at initial recognition), the Group measures the loss allowance on the financial instruments at the amount equivalent to the expected 12-month credit loss. Management assessed the impairment of the Group's financial assets, lending arrangements and financial guarantees at the date of initial application by using reasonable and supportive measures that can be used without undue cost or effort in determining the credit risk of the financial instruments at initial recognition in accordance with K-IFRS 1109 and in comparing above credit risk with the credit risk at the date of initial application. As of January 1, 2018, the results of the assessment are as follows (Unit: Korean Won in millions): Classification in accordance with K-IFRS 1039 Classification in accordance with K-IFRS 1109 Loss allowance in accordance with K-IFRS 1039(A) Loss allowance in accordance with K-IFRS 1109 (B) Increases (B-A) HTM securities HTM financial Loans and receivables Loans and other financial assets at amortized cost AFS financial assets assets Loans and receivables Financial assets at FVTOCI Securities at amortized cost Loans and other financial assets at amortized cost Deposit Debt securities AFS securities Loans and other financial assets Payment guarantee Loan commitment Total c) Classification and measurement of financial liabilities 2,458 3,092 634 - - 4,236 5,078 4,236 5,078 1,827,785 2,076,873 249,088 183,247 192,924 9,677 66,115 2,079,605 104,985 2,387,188 38,870 307,583 One of the major changes related to the classification and measurement of financial liabilities as a result of the adoption of K-IFRS 1109 is the accounting for change in the fair value of financial liabilities designated as at fair value through profit or loss due to the changes in issuer’s own credit risk. The Group recognizes the effect of changes in the credit risk of financial liabilities designated as at FVTOCI in other comprehensive income, except for cases where it creates or enlarges accounting mismatch of the profit or loss. Changes in fair value due to credit risk of financial liabilities are not subsequently reclassified to profit or loss, but are reclassified as retained earnings when financial liabilities are derecognized. WOORI FINANCIAL GROUP ANNUAL REPORT 2019 - 17 - 195 In accordance with K-IFRS 1039, the entire of changes in fair value of financial liabilities designated as at FVTPL are recognized in profit or loss. As of January 1, 2018, the Group designated 251,796 million Korean Won of FVTPL out of 294,813,795 million of financial liabilities to be measured at FVTPL, and recognized 133 million Korean Won as accumulated other comprehensive loss in relation to the changes in own credit risk of financial liabilities. d) Hedge accounting The new hedge accounting model maintains three types of hedge accounting. However, it introduced more flexibility in the types of transactions that are eligible for hedge accounting and expanded the types of hedging instruments and non-financial hedge items that qualify for hedge accounting. The standard related to the evaluation of hedge accounting has been amended as a whole, where it is now replaced by the principle of "economic relationship" between the hedged item and the hedging instrument. Retrospective assessment of the hedging effectiveness is no longer required. Additional disclosure requirements have been introduced in relation to the Group's risk management activities. In accordance with the transitional provisions of K-IFRS 1109 on hedge accounting, the Group adopted the hedge accounting provisions of K-IFRS 1109 prospectively from January 1, 2018. As of the date of initial application, the Group concluded that the hedging relationship in accordance with K-IFRS 1039 is appropriate for hedge accounting under K-IFRS 1109, thus the hedging relationship is considered to exist continually. Since the major conditions for hedging instruments and the hedged items are consistent, all hedging relationships are consistent within the effectiveness assessment requirements of K-IFRS 1109. The Group has not designated a hedging relationship in accordance with K-IFRS 1109 in which the hedge relationship would not have met the requirements for hedge accounting under K-IFRS 1039. e) Effect on equity as a result of adoption of K-IFRS 1109 The effect on equity due to the adoption of K-IFRS 1109 as of January 1, 2018 is as follows (Unit: Korean Won in millions): - Impact on accumulated other comprehensive loss due to financial assets at FVTOCI, etc. Balance as of December 31, 2017 (prior to K-IFRS 1109) Adjustments Reclassification of available-for-sale financial assets to financial assets at FVTPL Recognition of expected credit losses of debt securities at FVTOCI Reclassification of available for sale financial assets(equity securities) to financial assets at FVTOCI Effect on changes in credit risk of financial liabilities at fair value through profit or loss designated as upon initial recognition Others Income tax effect Balance as of January 1, 2018 (based on K-IFRS 1109) Amount (89,724) (392,176) (152,124) 4,293 (397,508) (133) 3,500 149,796 (481,900) Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review196 - 18 - - Retained earnings impact Balance as of December 31, 2017 (prior to K-IFRS 1109) Adjustments Reclassification of available-for-sale financial assets to financial assets at FVTPL Recognition of expected credit losses of debt instruments at FVTOCI Reclassification of available-for-sale financial assets(equity securities) to financial assets at FVTOCI Effect on revaluation of financial assets at amortized cost from loan and receivables or AFS financial assets Recognition of expected credit losses of financial assets at amortized cost which were previously loan and receivables Effect on provision for guarantees and unused loan commitments on liabilities Effect on changes in credit risk of financial liabilities at fair value through profit or loss designated as upon initial recognition Others Income tax effect Balance as of January 1, 2018 (based on K-IFRS 1109) (2) Basis of consolidated financial statement presentation Amount 15,620,006 177,091 152,124 (4,293) 397,508 282 (240,683) (48,548) 133 (4,950) (74,482) 15,797,097 The consolidated financial statements incorporate the financial statements of the Group and the entities (including structured entities) controlled by the Group (and its subsidiaries, which 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. The carrying amount of the non-controlling interest after the acquisition is the amount initially recognized plus the amount of proportionate interest of the non-controlling interest in the changes in equity since the acquisition. 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. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 19 - 197 Non-controlling interest of a subsidiary are separately identified from the equity of the Group. 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. The carrying amount of the non-controlling interest after the acquisition is the amount initially recognized with the amount entitled to the proportionate interest of the non-controlling interest when there are changes in equity since the acquisition. 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. 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 parent company. 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 1109 Financial Instruments 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 as the sum of the acquisition-date fair values of the assets transferred by the Group in exchange for control of the acquiree, liabilities assumed by the Group for the former owners of the acquiree and the equity interests issued by the Group. Acquisition-related costs are generally recognized in profit or loss as incurred. At the acquisition date, the acquiree’s identifiable acquires assets, liabilities and contingent liabilities that meet the condition for recognition under K-IFRS 1103 are recognized at their fair value, except for the followings: • 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 are measured in accordance with K-IFRS 1105 ‘Non-current Assets Held for Sale and Discontinued Operations’ 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. 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. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review198 - 20 - 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 other than the above is remeasured at subsequent reporting dates 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(or other comprehensive income, if applicable). 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 recognized, identical to the treatment assuming interests are sold directly. In case where i) a common entity ultimately controls over all participating entities, or businesses, in a 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, and 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 in 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. If the initial accounting for a business combination is not completed by the end of the reporting period in which the business combination occurred, the Group reports in consolidated financial statements the provisional amount of items that have not been accounted for. If there is new information about the facts and circumstances that existed as of the acquisition date during the measurement period (see above), the Group retrospectively adjusts the provisional amounts recognized at the acquisition date or recognizes additional assets and liabilities to reflect the information that would have affected the measurement of the amount recognized at the acquisition date if it had already known at the acquisition date. (4) Investments in joint ventures and associates An associate is an entity over which the Group has significant influence, and that is not a subsidiary or a joint venture. 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 assets and liabilities 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. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 21 - 199 Investment in joint ventures and associates are accounted for and applied with the equity method from the time the investee becomes an associate or a joint venture. 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 exists after the review, it is recognized immediately in net income. The requirements of K-IFRS 1028 - Investments in Associates and Joint Ventures 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 ceases to use the equity method from the time it fails meet the definition of an associate or a joint venture. 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 1109 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 or a joint venture 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 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. The Group applies K-IFRS 1109 ‘Financial Instruments’, including the impairment requirements, to its long- term investment interests in associates and joint ventures that form part of its net investment without applying the equity method. In addition, when applying K-IFRS 1109 to long-term investments, the Group does not consider adjustments to the carrying amount required by K-IFRS 1028. Examples of such adjustments include an impairment assessment or an adjustment to the carrying amount of the long-term investment interest resulting from the allocation of losses to the investee in accordance with K-IFRS 1028. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review200 - 22 - (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: - its assets, including its share of any assets held jointly; - its liabilities, including its share of any liabilities incurred jointly; - its revenue from the sale of its share of the output arising from the joint operation; - its share of the revenue from the sale of the output by the joint operation; - 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 K-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. 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 proportional share of profit or loss until the asset is sold to a third party. (6) Revenue recognition K-IFRS 1115 requires the recognition of revenues based on transaction price allocated to the performance obligation when or as the Group performs that obligation to the customer. Since revenues other than those from contracts with customers, such as interest revenue and loan origination fee (cost), are measured through effective interest rate method. 1) Revenues from contracts with customers The Group recognizes revenue when the Group satisfies a performance obligation by transferring a promised good or service to a customer. When a performance obligation is satisfied, the Group shall recognizes as a revenue the amount of the transaction price that is allocated to that performance obligation. The transaction price is the amount of consideration to which the Group expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties. The Group is recognizing revenue by major sources as shown below: ① Fees and commission received for brokerage The fees and commission received for agency are the amount of consideration or fee expected to be entitled to receive in return for providing goods or services to the other parties with the Group acting as an agency, such as in the case of sales of bancassurance and beneficiary certificates. The majority of these fees and commission received for brokerage are from the business activities relevant to Banking segment. WOORI FINANCIAL GROUP ANNUAL REPORT 2019 - 23 - 201 ② Fees and commission received related to credit The fees and commission received related to credit mainly include the lending fees received from the loan activity and the fees received in the L/C transactions. Except for the fees and commission accounted for in calculating the effective interest rate, it is generally recognized when the performance obligation has been performed. The majority of these fees and commission received related to credit are from the business activities relevant to Banking, Credit card and Investment banking segment. ③ Fees and commission received for electronic finance The fees and commission received for electronic finance include fees received in return for providing various kinds of electronic financial services through firm-banking and CMS. These fees are recognized as revenue immediately upon the completion of services. The majority of these fees and commission received for electronic finance are from the business activities relevant to Banking and Investment banking segment. ④ Fees and commission received on foreign exchange handling The fees and commission received on foreign exchange handling consist of various fees incurred when transferring foreign currency. The point of processing the customer's request is the time when performance obligation is satisfied, and revenue is immediately recognized when fees and commission are received after requests are processed. The business activities relevant to these fees and commission received on foreign exchange handling are substantially attributable to Banking segment. ⑤ Fees and commission received on foreign exchange The fees and commission received on foreign exchange consist of fees related to the issuance of various certificates, such as exchange, import and export performance certificates, purchase certificates, etc. The point of processing the customer's request is the time when performance obligation is satisfied, and revenue is immediately recognized when fees and commission are received after requests are processed. The business activities relevant to these fees and commission received on foreign exchange are substantially attributable to Banking segment. ⑥ Fees and commission received for guarantee The fees and commission received for guarantee include the fees received for the various warranties. The activities related to the warranty consist mainly of performance obligations satisfied over time and fees and commission are recognized over the guarantee period. The business activities relevant to these fees and commission received for guarantee are substantially attributable to Banking segment. ⑦ Fees and commission received on credit card The fees and commission received on credit card consist mainly of merchant account fees and annual fees. The Group recognizes merchant account fees by multiplying agreed commission rate to the amount paid by using the credit card. The annual fees are performance obligation satisfied over time and are recognized over agreed periods after the annual fees are paid in advance. The business activities relevant to these fees and commission received on credit card are substantially attributable to Credit cards segment. ⑧ Fees and commission received on securities business The fees and commission received on securities business consist mainly of fees and commission for the sale of beneficiary certificates, and these fees are recognized when the beneficiary certificates are sold to customers. The business activities relevant to these fees and commission received on securities business are substantially attributable to Banking and Investment banking segment. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review 202 - 24 - ⑨ Fees and commission from trust management The fees and commission from trust management consist of fees and commission received in return for the operation and management services for entrusted assets. These operation and management services are performance obligations satisfied over time, and revenue is recognized over the service period. Among the fees and commission from trust management, variable considerations such as profit commission that are affected by the value of entrusted assets and base return of the future periods are recognized as revenue when limitations to the estimates are lifted. The majority of these fees and commission received for brokerage are from the business activities relevant to Banking segment. ⑩ Fees and commission received on credit Information The fees and commission received on credit Information are composed of the fees and commission received by performing credit investigation and proxy collection services. Credit investigation fees and commission are the amount received in return for verifying the information requested by the customer and are recognized as revenue at the time the verification is completed. Proxy collection service fees are recognized by multiplying the applicable rate to the collected amount at the time when collection services are completed. The majority of these fees and commission received for brokerage are from the business activities relevant to other segment. ⑪ Other fees Other fees are usually fees related to remittances, but include fees related to various other services provided to customers by the Group. These fees are recognized when transactions occur at the customers' request and services are provided, at the same time when commission are received. These other fees occur across all operating segments. 2) Revenues from sources other than contracts with customers ① Interest income Interest income on financial assets measured at FVTOCI and financial assets at amortized costs is measured using the effective interest method. The effective interest method is a method of calculating the amortized cost of a debt instrument 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 unamortized cost over the expected period, or shorter if appropriate. Future cash flows include commissions and cost of reward points(limited to the primary component of effective interest rate) and other premiums or discounts that are paid or received between the contractual parties when calculating the effective interest rate, but does not include expected credit losses. All contractual terms of a financial instrument are considered when estimating future cash flows. For purchased or originated credit-impaired financial assets, interest revenue is recognized by applying the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition. Even if the financial asset is no longer impaired in the subsequent periods due to credit improvement, the basis of interest revenue calculation is not changed from amortized cost to unamortized cost of the financial assets. ② Loan origination fees and costs The commission fees earned on loans, which is part of the effective interest of loans, is accounted for as deferred origination fees. Incremental costs related to the origination of loans are accounted for as deferred origination fees and is being added or deducted to/from interest income on loans using effective interest rate method. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 25 - 203 (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. The effective portion of the changes in fair value of a derivative that qualifies as a cash flow hedge and the foreign exchange differences on monetary items that form part of net investment in foreign operations are recognized in equity. Assets and liabilities of the foreign operations subject to consolidation are translated into Korean Won at foreign exchange rates at the end of the reporting period. Except for situations in which it is required to use exchange rates at the date of transaction due to significant changes in exchange rates during the period, items that belong to profit or loss shall be measured by average exchange rate, with foreign exchange differences recognized as other comprehensive income and added to equity (allocated to non-controlling interests, if appropriate). When foreign operations are disposed, the controlling interest’s share of accumulated foreign exchange differences related to such foreign operations will be reclassified to profit or loss, while non-controlling interest’s corresponding share will not be reclassified. Adjustments to fair value of identifiable assets and liabilities, and goodwill arising from the acquisition of foreign operations will be treated as assets and liabilities of the corresponding foreign operation, and is translated using foreign exchange rates at the end of the period. The foreign exchange differences are recognized in other comprehensive income. (8) Cash and cash equivalents The Group is classifying cash on hand, demand deposits, interest-earning deposits with original maturities of up to three months on acquisition date, and highly liquid investments that are readily convertible to known amounts of cash and subject to an insignificant risk of changes in value as cash and cash equivalents. (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 FVTPL, financial assets at FVTOCI, and financial assets at amortized cost according to its business model and contractual cash flows. a) Business model The Group evaluates the way business is being managed, and the purpose of the business model for managing a financial asset best reflects the way information is provided to the management at its portfolio level. Such information considers the following: - The accounting policies and purpose specified for the portfolio, the actual operation of such policies. This includes strategy of the management focusing on the receipt of contractual interest revenue, maintaining a certain level of interest income, matching the duration of financial assets and the duration of corresponding liabilities to obtain the asset, and outflow or realization of expected cash flows from disposal of assets - The way the performance of a financial asset held under the business model is evaluated, and the way such evaluation is being reported to the management - The risk affecting the performance of the business model (and financial assets held under the business model), and the way such risk is being managed - The compensation plan for the management (e.g. whether the management is being compensated based on the fair value of assets or based on contractual cash flows received) - Frequency, amount, timing and reason for sale of financial assets in the past, and forecast of future sale activities. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review204 - 26 - b) Contractual cash flows The principal is defined to be the fair value of a financial assets at initial recognition. Interest is not only composed of consideration for the time value of money, consideration for the credit risk related to remaining principal at a certain period of time, and consideration for other cost (e.g. liquidity risk and cost of operation) and fundamental risk associated with lending, but also profit. When evaluating whether contractual cash flows are solely payments of principal and interests, the Group considers the contractual terms of the financial instrument. When a financial asset contains contractual conditions that modify the timing and amount of contractual cash flows, it is required to determine whether contractual cash flows that arise during the remaining life of the financial instrument due to such contractual condition are solely payments of principal and interest. The Group considers the following elements when evaluating the above: - Conditions that lead to modification of timing or amount of cash flows - Contractual terms that adjust contractual nominal interest, including floating rate features - Early payment features and maturity extension features - Contractual terms that limit the Group’s claim on cash flows arising from certain assets (e.g. non-recourse feature) ① Financial assets at FVTPL The Group is classifying those financial assets that are not classified as either financial assets at amortized cost or financial assets at FVTOCI, and those designated to be measured at FVTPL, as financial assets at FVTPL. Financial assets at FVTPL are measured at fair value, and related profit or loss is recognized in net income. Transaction costs related to acquisition at initial recognition is recognized in net income immediately upon its occurrence. It is possible to designate a financial asset as financial asset at FVTPL if at initial recognition: (a) it is possible to remove or significantly reduce recognition or measurement mismatch that may otherwise have occurred if not for its designation as financial asset at FVTPL; (b) the financial asset forms part of the Group’s financial instrument group (a group composed of a combination of financial asset or liability), is measured at fair value and is being evaluated for its performance, and such information is provided internally; and (c) the financial asset is part of a contract that contains one or more of embedded derivatives, and is a hybrid contract in which designation as financial asset at FVTPL is allowed under K-IFRS 1109 ‘Financial Instruments’. However, the designation is irrevocable. ② Financial assets at FVTOCI When financial assets are held under a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and when contractual cash flows from such financial assets are solely payments of principal and interest, the financial assets are classified as financial assets at FVTOCI. Also, for investments in equity instruments that are not held for short-term trade, an irrevocable election is available at initial recognition to present subsequent changes in fair value as other comprehensive income. At initial recognition, financial assets at FVTOCI is measured at its fair value plus any direct transaction cost, and is subsequently measured in fair value. However, for equity instruments that do not have a quotation in an active market and in which fair value cannot be measured reliably, they are measured at cost. The income tax effects related to the changes in fair value except for profit or loss items such as impairment losses (reversals), interest revenue calculated by using effective interest method, and foreign exchange gain or loss about debt instrument are recognized as other comprehensive income until the asset’s disposal. Upon derecognition, the accumulated other comprehensive income is reclassified from equity to net income for FVTOCI (debt instrument), and reclassified within the equity for FVTOCI (equity instruments). WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 27 - 205 ③ Financial assets at amortized cost When financial assets are held under a business model whose objective is to hold financial assets in order to collect contractual cash flows, and when contractual cash flows from such financial assets are solely payments of principal and interest, the financial assets are classified as financial assets at amortized cost. At initial recognition, financial assets at amortized cost are recognized at fair value plus any direct transaction cost. Financial assets at amortized cost is presented at amortized cost using effective interest method, less any loss allowance. 2) Financial liabilities At initial recognition, financial liabilities are classified into either financial liabilities at FVTPL or financial liabilities at amortized cost. Financial liabilities are usually classified as financial liabilities at FVTPL when they are acquired with a purpose to repurchase them within a short period of time, when they are part of a certain financial instrument portfolio that is actually and recently being managed with a purpose of short-term profit and joint management by the Group at initial recognition, and when they are derivatives that do not qualify as hedging instruments. Financial liabilities at FVTPL are measured at fair value plus direct transaction cost at initial recognition, and are subsequently measured at fair value. Profit or loss arising from financial liabilities at FVTPL is recognized in net income when occurred. It is possible to designate a financial liability as financial liability at FVTPL if at initial recognition: (a) it is possible to remove or significantly reduce recognition or measurement mismatch that may otherwise have occurred if not for its designation as financial liability at FVTPL; (b) the financial asset forms part of the Group’s financial instrument group (a group composed of a combination of financial asset or liability) according to the Group’s documented risk management or investment strategy, is measured at fair value and is being evaluated for its performance, and such information is provided internally; and (c) the financial liability is part of a contract that contains one or more of embedded derivatives, and is a hybrid contract in which designation as financial liability at FVTPL is allowed under K-IFRS 1109 ‘Financial Instruments’. Financial liabilities designated as at FVTPL are initially recognized at fair value, with any direct transaction cost recognized in profit or loss, and are subsequently measured at fair value. Any profit or loss from financial liabilities at FVTPL are recognized in profit or loss. Financial liabilities not classified as financial liabilities at FVTPL are measured at amortized cost. The Group is classifying liabilities such as deposits due to customers, borrowings and debentures as financial liabilities at amortized cost. 3) Reclassification Financial assets are not reclassified after initial recognition unless the Group modifies the business model used to manage financial assets. When the Group modifies the business model used to manage financial assets, all affected financial assets are reclassified on the first day of the first reporting period after the modification. 4) Derecognition Financial assets are derecognized when contractual rights to cash flows from the financial assets are expired, or when substantially all of risk and reward for holding financial assets is transferred to another entity as a result of a sale of financial assets. If the Group does not have and does not transfer substantially all of the risk and reward of holding financial assets with control of the transferred financial assets retained, the Group recognizes financial assets to the extent of its continuing involvement. If the Group holds substantially all the risk and reward of holding a financial asset, it continues to recognize that asset and proceeds are accounted for as collateralized borrowings. When a financial asset is fully derecognized, the difference between the book value and the sum of proceeds and accumulated other comprehensive income is recognized as profit or loss in case of FVTOCI (debt instruments), and as retained earnings for FVTOCI (equity instruments). Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review206 - 28 - In case when a financial asset is not fully derecognized, the Group allocates the book value into amounts retained in the books and removed from the books, based on the relative fair value of each portion at the date of sale, and based on the degree of continuing involvement. For the derecognized portion of the financial assets, the difference between its book value and the sum of proceeds and the portion of accumulated other comprehensive income attributable to that portion will be recognized in profit or loss in case of debt instruments and recognized in retained earnings in case of equity instruments. The accumulated other comprehensive income is distributed to the portion of book value retained in the books, and to the portion of book value removed from the books. The Group derecognizes financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss. When the Group exchanges with the existing lender one debt instrument into another one with the substantially different terms, such exchange is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, the Group accounts for substantial modification of terms of an existing liability or part of it as an extinguishment of the original financial liability and the recognition of a new liability. It is assumed that the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective rate is at least 10 percent different from the discounted present value of the remaining cash flows of the original financial liability 5) Fair value of financial instruments Financial assets at FVTPL and financial assets at FVTOCI are measured and presented in consolidated financial statements at their fair values, and all derivatives are also subject to fair value measurement. Fair value is defined as the price that would be received to exchange an asset or paid to transfer a liability in a recent transaction between independent parties that are reasonable and willing. Fair value is the transaction price of identical financial assets or financial liabilities generated in an active market. An active market is a market where trade volume is sufficient and objective price information is available due to the fact that bid and ask price differences are small. When trade volume of a financial instrument is low, when transaction prices within the market show large differences among them, or when it cannot be concluded that a financial instrument is being traded within an active market due to disclosures being extremely shallow, fair value is measured using valuation techniques based on alternative market information or using internal valuation techniques based on general and observable information obtained from objective sources. Market information includes maturity and characteristics, duration, similar yield curve, and variability measurement of financial instruments of similar nature. Fair value amount contains unique assumptions on each entity (the Group concluded that it is using assumptions applied in valuing financial instruments in the market, or risk-adjusted assumptions in case marketability does not exist). The market approach and income approach, which are valuation techniques used to estimate the fair value of financial instruments, both require significant judgment. Market approach measures fair value using either a recent transaction price that includes the financial instrument, or observable information on comparable firm or assets. Income approach measures fair value through discounting future cash flows with a discount rate reflecting market expectations, and revenue, operating income, depreciation, capital expenditures, income tax, working capital and estimated residual value of financial investments are being considered when deriving future cash flows. Valuation techniques such as the above include estimates based on the financial instruments’ complexity and usefulness of observable information in the market. The valuation techniques used in the evaluation of financial instruments are explained below. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 29 - 207 a) Financial assets at FVTPL and Financial assets at FVTOCI The fair value of equity securities included in financial assets at FVTPL and financial assets at FVTOCI category is recognized in the statement of financial position at its available market price. Debt securities traded in the over-the-counter market are generally recognized at an amount computed by an independent appraiser. When the Group uses the fair value determined by independent appraisers, the Group usually obtains three values from three different appraisers for each financial instrument, and selects the minimum amount without making additional adjustments. For equity securities without marketability, the Group uses the amount determined by the independent appraiser. The Group verifies the prices obtained from appraisers in various ways, including the evaluation of independent appraisers’ competency, indirect verification through comparison between appraisers’ price and other available market information, and reperformed by employees who have knowledge of valuation models and assumptions that appraisers used. b) Derivatives The Group’s transactions involving derivatives such as futures and exchange traded options are measured at market value. For exchange traded derivatives classified as level 2 in the fair value hierarchy, the fair value is estimated using internal valuation techniques. If there are no publicly available market prices because they are traded over-the-counter, fair value is measured through internal valuation techniques. When using internal valuation techniques to derive fair value, the types of derivatives, base interest rate or characteristics of prices, or stock market indices are considered. When variables used in the internal valuation techniques are not observable information in the market, such variables may contain significant estimates. c) Adjustment of valuation amount The Group is exposed to credit risk when a counterparty to a derivative contract does not perform its contractual obligation, and the exposure amount is equal to the amount of derivative asset recognized in the statement of financial position. When the Group earns income through valuation of derivatives, such income is recognized as derivative asset in the statement of financial position. Some of the derivatives are traded in the market, but most of the derivatives are measured at estimated fair value derived from internal valuation models that use observable information in the market. As such, in order to estimate the fair value there should be an adjustment made to incorporate counterparty’s credit risk, and credit risk adjustment is being considered when valuing derivative assets such as over-the counter derivatives. The amount of financial liabilities is also adjusted by the Group’s own credit risk when valuing them. The amount of adjustment is derived from counterparty’s probability of default and loss given default. This adjustment considers contractual matters that are designed to reduce the Group’s exposure to each counterparty’s credit risk. When derivatives are under master netting arrangement, the exposure used in the computation of credit risk adjustment is a net amount after adding/deducting cash collateral received (or paid) from loss(or gain) position derivatives with the same counterparty. 6) Expected credit losses on financial assets The Group recognizes loss allowance on expected credit losses for the following assets: - Financial assets at amortized cost - Debt instruments measured at FVTOCI - Contract assets as defined by K-IFRS 1115 Expected credit losses are weighted-average value of a range of possible results, considering the time value of money, and are measured by incorporating information on current conditions and forecasts of future economic conditions that are available without undue cost or effort. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review208 - 30 - The methods to measure expected credit losses are classified into following three categories in accordance with K-IFRS: - General approach: Financial assets that does not belong to below two models and unused loan commitments - Simplified approach: When financial assets are either trade receivables, contract assets or lease receivables - Credit impairment model: Purchased or originated credit-impaired financial assets The measurement of loss allowance under general approach is differentiated depending on whether the credit risk has increased significantly after initial recognition. That is, loss allowance is measured based on 12-month expected credit loss when the credit risk has not increased significantly after initial recognition, while loss allowance is measured at lifetime expected credit loss when credit risk has increased significantly. Lifetime is the expected remaining life of the financial instrument up to the maturity date of the contract. The measurement of loss allowance under simplified approach is always based on lifetime expected credit loss, and loss allowance under credit impairment model is measured as the cumulative change in lifetime expected credit loss since initial recognition. a) Measurement of expected credit losses on financial asset at amortized cost The expected credit losses on financial assets at amortized cost is measured by the difference between the contractual cash flows during the period and the present value of expected cash flows. Expected cash inflows are computed for individually significant financial assets in order to calculate expected credit losses. When financial assets that are not individually significant, they are included in a group of financial assets with similar credit risk characteristics and expected credit losses of the group are calculated collectively. Expected credit losses are deducted through loss allowance account, and when the financial asset is determined to be uncollectible, the loss allowance is written off from the books along with the related financial asset. When loan receivable previously written off is subsequently collected, the related loss allowance is increased and changes in loss allowance are recognized in profit or loss. b) Measurement of expected credit losses on financial asset at FVTOCI The measurement method of expected credit loss is identical to financial asset at amortized cost, but changes in the loss allowance is recognized in other comprehensive income. When financial assets at FVTOCI is disposed or repaid, the related loss allowance is reclassified from other comprehensive income to net income. (10) Offsetting financial instruments Financial assets and liabilities are presented as a net amount in the statements of financial position when the Group has an enforceable legal right 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, and the book value of a portion of an asset that are replaced by a subsequent expenditure is removed from the books. Routine maintenance and repairs are expensed as incurred. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 31 - 209 While land is not depreciated, all other investment properties are depreciated based on the depreciation method and useful lives of premises and equipment. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, and when it is deemed appropriate to change them, the effect of any change is accounted for as a change in accounting estimates. 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 the 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 accumulated depreciation and accumulated impairment losses. The cost of an item of premises and equipment is expenditure directly attributable to their purchase or construction, which includes any cost 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 costs of dismantling and removing the item and restoring the site on which it is located. Subsequent costs are recognized in the carrying amount of an asset or as a separate asset (if appropriate) if it is probable that future economic benefit 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 by applying the following estimated economic useful lives on the amount of cost or revalued amount less residual value. Buildings used for business purpose Structures in leased office Properties for business purpose Right-of-use 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 changes in the estimates are deemed appropriate, the changes are accounted for as a change in an accounting estimate. When there is an indicator of impairment and the carrying amount of a premises and equipment item exceeds the estimated recoverable amount, the carrying amount of such asset is reduced to the recoverable amount. (13) Intangible assets and goodwill The Group is recognizing intangible assets measured at the manufacturing cost or acquisition cost plus additional incidental expenses less accumulated amortization and accumulated impairment losses. The Group’s intangible asset are amortized over the following economic lives using the straight-line method. The estimated useful life and amortization method are reviewed at the end of each reporting period. If changes in the estimates are deemed appropriate, 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 10 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. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review210 - 32 - Goodwill acquired in a business combination is included in intangible assets. Goodwill is not amortized, but is subject to an impairment test at the cash-generating unit level every year, and whenever there is an indicator that goodwill is impaired. Goodwill resulting from an acquisition of a business is carried at cost as established at the date of acquisition of the business less accumulated impairment losses, if any. Goodwill is allocated to each of the Group’s cash-generating unit (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit on a pro rata basis based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognized directly in profit or loss. An impairment loss recognized for goodwill is not reversed in subsequent periods. (14) Impairment of non-monetary assets Intangible assets with indefinite useful lives 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 by estimating the recoverable amount when there is an objective indication that the carrying amount may not be recoverable. Recoverable amount is the higher of value in use or 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. (15) Leases As the Group applied IFRS 16 using the revised retrospective method, the comparative financial information has not been prepared. The Group also applied K-IFRS 1017 and 2104. The accounting policies in accordance with K-IFRS 1017 and 2104 are separately disclosed. 1) Accounting policy applied as of January 1, 2019. The Group determines whether the agreement is a lease or includes a lease at the time of the agreement. In exchange for consideration in the contract, if the control over the use of the identified asset is transferred for a period of time, the contract is a lease or includes a lease. In determining whether a contract transfers control of the use of the identified asset, the Group uses the definition of a lease in IFRS 16. This accounting policy applies to contracts entered into as of January 1, 2019. ① The Group as a lessee The Group recognizes the right-of-use asset and the lease liability at the commencement date of the lease. The right-of-use asset is measured at cost, which comprises the amount of the initial measurement of the lease liability, lease payments made at or before the commencement date(less any lease incentives received), initial direct costs, and an estimate of costs to be incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located. The right-of-use asset is subsequently depreciated on a straight-line basis from the commencement of the lease to the end of the lease term. However, if the lease transfers ownership of the underlying asset to the lessee by the end of the lease term or if the cost of the right-of-use asset reflects that the lessee will exercise a purchase option, the lessee depreciates the right-of-use asset same as a fixed asset from the commencement date to the end of the useful life of the underlying asset. The right-of-use asset may be reduced by an impairment of the underlying asset or adjusted by 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. The lease payments are discounted using the interest rate implicit in the lease, if that cannot be readily determined, the Group uses its incremental borrowing rate. The Group generally uses the incremental borrowing rate. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 33 - 211 The lease payments included in the measurement of the lease liability comprise the following: - - Fixed payments (including in-substance fixed payments) Variable lease payments that depend on an index(or a rate), initially measured using the index or rate as at the commencement date Amounts expected to be payable by the lessee under residual value guarantees The exercise price of a purchase option if the lessee is reasonably certain to exercise that option, lease payments of the extended period if the lessee is reasonably certain to exercise extension option, and payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease - - The lease liability is subsequently increased be the interest expense recognized for the lease liability and decreased by reflecting the payment of the lease payments. The lease liability is remeasured if the future lease payments change depending on changes in the index(or a rate), changes in the expected amount to be paid under the residual value guarantee, and changes in the assessment of whether the purchase or extension option is reasonably certain to be exercised or not to exercise the terminate option. When remeasuring a lease liability, the related right-of-use asset is adjusted and if the carrying amount of the right-of-use asset decreases to zero, the remeasurement amount is recognized in profit or loss. The Group applies its judgment when determining the lease term for some lease contracts that include the extension option. The assessment of whether the Group is reasonably certain to exercise the option significantly affects the lease term and therefore has a significant impact on the amount of lease liabilities and the right-of-use asset. In the statement of financial position, the Group classified the right-of-use assets that do not meet the definition of investment property as ‘premises and equipment’ and the lease liabilities as ‘other financial liabilities.’ The Group has chosen a practical expedient that does not recognize the right-of-use asset and lease liabilities for short-term leases with a lease term less than 12 months and leases for which the underlying asset is of low value. The Group recognizes the lease payments associated with those leases as an expense on a straight-line basis over the lease term. ② The Group as a lessor At the date of the agreement or the effective date of the modification containing the lease element, the Group allocates the consideration of the contract to each lease element on the basis of its relative stand- alone price. As a lessor, the Group classifies its leases as either an operating lease or a finance lease at the commencement date. The Group subsequently judges whether the lease transfers substantially all the risks and rewards incidental to ownership of an underlying asset. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset, otherwise a lease is classified as an operating lease. If the agreement contains both lease and non-lease elements, the Group applies K-IFRS 1115 to allocate the consideration of the contract. The Group applies the derecognition and impairment provisions of K-IFRS 1109 to its net investment in the lease. The Group also carries out regular review of the unguaranteed residual value used to calculate total lease investment. The Group recognizes lease payments from operating lease as income on a straight-line basis. The accounting policy that the Group has applied as a lessor is not different from K-IFRS 1116. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review212 - 34 - 2) Accounting policy applied until January 1, 2019 The Group classifies a lease as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset to the lessee, and all lease contracts other than finance leases are classified as operating leases. ① The Group as a lessee In case of finance leases, the lesser amount of the present value of the minimum lease payments at the commencement date of the lease term or the fair value of the leased asset are recognized as financial lease assets and liabilities in the statement of financial position. Lease payments are allocated as interest expense and repayment of the lease liability so that the same period interest rate is calculated for the balance of the liability. Adjustment to the lease payments are accounted for as expenses during the period. The operating lease payments are recognized as an expense on a straight-line basis if there is no other systematic basis that is more representative of the pattern in which benefit from the use of underlying asset. Adjustment lease payments from the operating leases are accounted for as expenses during the period in which they are incurred. ② The Group as a lessor The Group recognizes a finance lease receivable equal to the present value of the minimum lease and the non-guaranteed residual value, which is the net investment of the finance lease. The accounting for recognizing interest income by reporting period is carried out on a financial lease receivable after the commencement date of the lease term by applying a method in which a certain interest rate of the Group’s net investment in the lease is calculated. The Group recognizes income from lease payments of operating lease on a straight line basis over the lease term, and the direct costs of the lease incurred during the negotiation and contract phase of the operating lease is added to the carrying value of the lease asset and recognized as an expense over the lease term on a straight-line basis. Operating lease assets are included in other assets and are depreciated over their economic useful life. (16) Derivative instruments Derivative instruments are classified as forwards, futures, options and swaps, depending on the types of transactions and are classified at the point of transaction as either trading or hedging based on its purpose. Derivatives are initially recognized at fair value at the date of contract and are subsequently measured at 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 or effective as a hedging instrument. If derivatives have been designated as hedging instruments and if it is effective, the point of recognition of gain or loss depends on the characteristics of hedging relationship. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 35 - 213 Derivatives that have positive (+) fair values are recognized as financial assets and those that have negative (-) fair values are recognized as financial liabilities. Derivatives are not offset in the consolidated financial statements unless they have legally enforceable right to set off or are intended to set off. 1) Embedded derivatives Embedded derivatives are components of a hybrid financial instrument that includes a non-derivative host contract. It has an effect of modifying part of cash flows of the hybrid financial instrument similar to an independent derivative. Embedded derivatives that are part of a hybrid contract of which the host contract is a financial asset within the scope of K-IFRS 1109 is not separated. The classification is done by considering the hybrid contract as a whole, and subsequent measurement is either at amortized cost or fair value. If embedded derivatives are part of a hybrid contract of which the host contract is not a financial asset within the scope of K-IFRS 1109 (e.g. financial liability), then these are treated as separate derivatives if embedded derivatives meet the definition of a derivative, characteristics & risk of the embedded derivatives are not closely related to that of host contract, and if the host contract is not measured at FVTPL. 2) Hedge accounting The Group is applying K-IFRS 1109 in regard to hedge accounting. The Group is designating certain derivatives as hedging instrument against fair value changes in relation to the interest rate risk, foreign currency translation and interest rate risk, and foreign currency translation risk. The Group is documenting the relationship between hedging instruments and hedged items at the commencement of hedging in accordance with their purpose and strategy. Also, the Group documents at the commencement and subsequent dates whether the hedging instrument effectively counters the changes in fair value of hedged items. A hedging instrument is effective only when it meets all the following criteria: ㆍ When there is an economic relationship between the hedged items and hedging instruments. ㆍ When the effect of credit risk is not stronger than the change in value due to the economic relationship between the hedged items and hedging instruments. ㆍ When the hedge ratio of hedging relationship is equal to the proportion of the number of items that the group actually hedges and the number of hedging instruments that the Group actually uses to hedge the number of hedged items. When a hedging relationship no longer meets the hedging effectiveness requirements related to hedge ratio, but when the purpose of risk management on designated hedging relationship is still maintained, the hedge ratio of the hedging relationship is adjusted so that hedging relationship may meet the requirements again (Hedge ratio readjustment). The Group has designated derivatives as hedging instrument except for the portion on foreign currency basis spread. The fair value change due to foreign currency basis spread is recognized in other comprehensive income and is accumulated in equity. If the hedged item is related to transactions, the accumulated other comprehensive income is reclassified to profit or loss when the hedged item affects the profit or loss. However, when non-monetary items are subsequently recognized due to hedged items, the accumulated equity is removed from the equity directly, and is included in the initial book value of the recognized non-monetary items. Such transfers does not affect other comprehensive income. But if part or all of accumulated equity is not expected to be recovered in the future periods, the amount not expected to be recovered is immediately reclassified to profit or loss. If the hedged item is time-related, then the foreign currency basis spread on the day the derivative is designated as a hedging instrument that is related to the hedged item is reclassified to profit or loss over the term of the hedge. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review214 3) Fair value hedge - 36 - Gain or loss arising from valid hedging instrument is recognized in profit or loss. However, when the hedging instrument mitigates risks on equity instruments designated as financial assets at FVTOCI, related gain or loss is recognized in other comprehensive income. The book value of hedged items that are not measured in fair value is adjusted by the changes in fair value arising from the hedged risk, with resulting gain or loss reflected in net income. In case of debt instruments measured at FVTOCI, book value is an amount that is already adjusted to fair value and thus gain or loss arising from the hedged risk is recognized in profit or loss instead of other comprehensive income without adjustments in book value. When the hedged item is equity instruments measured at FVTOCI, the gain or loss arising from hedged risk is retained at other comprehensive income in order to match the gain or loss with hedging instruments. When gains or losses arising from the hedged risk are recognized in profit or loss of the current term, they are recognized as items related to the hedged items. Hedge accounting ceases to apply only when hedging relationship (or part of it) does not meet the requirements of hedge accounting (even after hedging relationship readjustment, if applicable). This treatment holds in case of lapse, disposal, expiry and exercise of hedging instruments, and this cease of treatment applies prospectively. The fair value adjustments made to book value of hedged item due to hedged risk is amortized from the date of discontinuance of hedge accounting and is recognized in profit or loss. 4) Cash flow hedge The Group recognizes the effective portion of changes in the fair value of derivatives and other valid hedging instruments that are designated and qualified as cash flow hedges in other comprehensive income to the extent of cumulative fair value changes of the hedged item from the starting date of hedge accounting and it is cumulated in the cash flow hedge reserve. 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 affects net income. However, when non-monetary assets or liabilities are subsequently recognized due to expected transactions involving hedged items, the valuation gain or loss accumulated in the equity as other comprehensive income is removed from the equity and included in the initial book value of the recognized non-monetary assets or liabilities. Such transfers does not affect other comprehensive income. Also, if the cash flow hedge reserve is loss and accumulated other comprehensive income is a loss and part or all of the losses are not expected to be recovered in the future periods, the said amount is immediately reclassified to profit or loss. Hedge accounting ceases to apply only when hedging relationship (or part of it) does not meet the requirements of hedge accounting (even after hedging relationship readjustment, if applicable). This treatment holds in case of lapse, disposal, expiry and exercise of hedging instruments, and this cease of treatment applies prospectively. At the point of cessation of cash flow hedge, the valuation gain or loss recognized as accumulated other comprehensive income continues to be recognized as equity, and is reclassified to profit or loss when the expected transaction is ultimately recognized as profit or loss. However, when transactions are no longer expected to occur, the valuation gain or loss of hedging instrument recognized as accumulated other comprehensive income is immediately reclassified to profit or loss. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 37 - 215 (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 Provisions are recognized if it has 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. A provision is not recognized for the future operating losses. The Group recognizes provisions related to the payment guarantees, loan commitment and litigations. Under the terms of lease agreement, the cost incurred by the Group to recover the leased asset to its original state are recognized as provisions at the commencement of the lease or during a specific period in which the obligation is incurred as a result of the using the asset. The provisions are measured as the best estimate of the expenditure required to recover the asset, which is regularly reviewed and sated to the new situation. 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. At the end of each reporting period, the remaining provision balance is reviewed an assessed to determine if the current best estimate is being recognized. (19) Equity instruments issued by the Group 1) 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. A financial liability is a contractual obligation to deliver cash or another financial asset to another entity. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. The compound financial instruments are financial instruments where it is neither a financial liability nor an equity instrument because it was designed to contain both equity and debt elements. If the Group reacquires its own equity instruments, the consideration paid including the direct transaction costs (net of tax expense) are presented as a deduction from total equity until such instruments are retired or reissued. When these instruments are reissued, the consideration received (net of direct transaction costs) is included in the shareholder’s equity. 2) Hybrid securities The Group classifies hybrid securities that have the unconditional right to avoid contractual obligations, such as to deliver cash or other financial assets in relation to financial instruments into equity instruments and presents as part of equity. Meanwhile, hybrid securities issued by subsidiaries of the group are classified as non-controlling interests according to the criteria, and the distribution paid is treated as net profit attributable to non-controlling interests in the consolidated comprehensive income statement. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review216 - 38 - (20) Financial guarantee contracts A financial guarantee contract is a contract where the issuer must pay a certain amount of money in order to compensate losses suffered by the creditor when debtor defaults on a debt instrument in accordance with original or modified contractual terms. A financial guarantee is initially measured at fair value and is subsequently measured at the higher of the amounts below unless it is designated to be measured at FVTPL or when it arises from disposal of an asset. - Loss allowance in accordance with K-IFRS 1109 - Initial book value less accumulated profit measured in accordance with K-IFRS 1115 (21) Employee benefits and pensions The Group recognizes the undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by the employees. Also, the Group recognizes expenses and liabilities in the case of accumulating compensated absences when the employees render services that entitle their right to future compensated absences. Similarly, the Group recognizes expenses and liabilities for customary profit distribution or bonuses when the employees render services, even though the Group does not have legal obligation to do so because it can be construed as constructive obligation. The Group is operating defined contribution plans and defined benefit plans. Contributions to defined contribution plans are recognized as an expense when employees have rendered services entitling them to receive the benefits. For defined benefit plans, the defined benefit liability is calculated through an actuarial assessment using the projected unit credit method every end of the reporting period, conducted by a professional actuaries. Remeasurement, comprising actuarial gains and losses, the return on plan assets (excluding the amount included in net interest from net defined benefit liability (asset)), and the effect of the changes to the asset ceiling is reflected immediately in the separate statement of financial position with a charge or credit recognized in other comprehensive income in the period in which they occur. Remeasurement recognized in the consolidated statement of comprehensive income is not reclassified to profit or loss in the subsequent periods. 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 and past service cost, as well as gains and losses on 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 recognized as an asset 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 the date when the Group is no longer able to cancel its proposal for termination benefits or the date when the Group has recognized the cost of restructuring that accompanies the payment of termination benefits. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 39 - 217 (22) Income taxes Income tax expense is composed of current tax and deferred tax. That is, income tax expense is composed of taxes payable or refundable during the period and deferred taxes calculated by applying asset-liability method to taxable and deductible temporary differences arising from operating loss and tax credit carryforwards. 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 recognized for the change in deferred tax assets or liabilities. Deferred tax assets and liabilities are measured as of the reporting date using the enacted or substantively enacted tax rates expected to apply in the period in which the liability is settled or asset is realized. Deferred tax assets, including the carryforwards 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 or when the entity intends to settle current tax liabilities and assets on a net basis with different taxable entities. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent 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 the initial recognition of 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 taxes are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity or when it arises from business combination. The tax uncertainty arises from the compensation claim filed by the Group, and refund litigation for the amount of tax levied by the tax authority due to differences in tax law analysis. In response, the Group paid taxes in accordance with K-IFRS 2123 due to the tax authority’s claim, but recognized as a corporate tax asset if it is highly probable of a refund in the future. (23) Criteria of calculating earnings per share (“EPS”) Basic EPS is a calculation of net income per each common stock. It is calculated by dividing net income attributable to ordinary shareholders 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. (24) Share-based payment For cash-settled share-based payment transactions that provide cash in return for the goods or services received, the Group measures the goods or services received, and the corresponding liability at the fair value and recognizes as employee benefit expenses and liabilities during the vesting period. The fair value of the liability is remeasured at the end of each reporting period and the settlement date until the liability is settled, and changes in fair value are recognized as employee benefits. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review218 - 40 - 3. SIGNIFICANT ACCOUNTING ESTIMATES AND ASSUMPTIONS The significant accounting estimates and assumptions are continuously being evaluated based on numerous factors including historical experiences and expectations of future events considered to be reasonably possible. Actual results can differ from those estimates based on such definitions. The accounting estimates and assumptions that contain significant risk of materially changing current book values of assets and liabilities in the next accounting periods are as follows: (1) Income taxes The Group has recognized current and deferred taxes based on best estimates of expected future income tax effect arising from the Group’s operations until the end of the current reporting period. However, actual tax payment may not be identical to the related assets and/or liabilities already recognized, and these differences may affect current taxes and deferred tax assets/liabilities at the time when income tax effects are finalized. 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. In this case the Group’s evaluation considers various factors such as estimated future taxable profit based on forecasted operating results, which are based on historical financial performance. The Group is reviewing the book value of deferred tax assets every end of the reporting period and in the event that the possibility of earning future taxable income changes, the deferred tax assets are adjusted up to taxable income sufficient to use deductible temporary differences. (2) Valuation of financial instruments Financial assets at FVTPL and FVTOCI are recognized in the consolidated financial statements at fair value. All derivatives are measured at fair value. Valuation techniques are required in order to determine fair values of financial instruments where observable market prices do not exist. Financial instruments that are not actively traded and have low price transparency 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. As described in Note 2-(9)-5), ‘Fair value of financial instruments’, when valuation techniques are used to determine the fair value of a financial instrument, various general and internally developed techniques are used, and various types of assumptions and variables are incorporated during the process. (3) Impairment of financial instruments K-IFRS 1109 requires entities to measure loss allowance equal to 12-month expected credit losses or lifetime expected credit losses after classifying financial assets into one of the three stages, which depends on the degree of increase in credit risk after their initial recognition. Stage 1 Allowance for expected credit losses 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 a 12-month period from the year-end. Stage 3 Stage 2 Credit risk has significantly increased since initial recognition Expected lifetime credit losses: Expected credit losses from all possible defaults during the expected lifetime of the financial instruments. Credit has been impaired (*) Credit risk may be considered not to have been significantly increased when credit risk is low at year-end. The Group has estimated the allowance for credit losses based on reasonable and supportable information that was available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. Probability of default (PD) and Loss given default (LGD) for each category of financial asset is being calculated by considering factors such as debtor type, credit rating and portfolio. The estimates are regularly being reviewed in order to reduce discrepancies with actual losses. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 41 - 219 In measuring the expected credit losses, the Group is using reasonable and supportable macroeconomic indicators such as economic growth rates, interest rates, market index rates, etc., in order to forecast future economic conditions. The Group is conducting the following procedures to estimate and apply future economic forecast information. - Development of prediction models by analyzing the correlation between default rates of corporate and retail exposures per year and macroeconomic indicators - Calculation of predicted default rate incorporating future economic forecasts by applying estimated macroeconomic indicators provided by verified institutions such as Bank of Korea and National Assembly Budget Office to the prediction model developed. At the end of every reporting period, the Group evaluates whether credit risk reflecting forward-looking information has significantly been increased since the date of initial recognition. When evaluating whether credit risk has significantly been increased, the changes in the probability of default over the financial instrument’s remaining life is used instead of changes in the amount of expected credit losses. The Group performs the above evaluation with distinctions made to corporate and retail exposures, and indicators of significant increase in credit risk are as follows: Corporate Exposures Asset quality level ‘Precautionary’ or lower More than 30 days past due ‘Warning’ level in early warning system Debtor experiencing financial difficulties (Capital impairment, Adverse opinion or Disclaimer of opinion by external auditors) Significant decrease in credit rating (*) Retail Exposures Asset quality level ‘Precautionary’ or lower More than 30 days past due Significant decrease in credit rating(*) (*) Determining whether there has been a significant decrease in the credit rating of corporate and retail exposures applies only to credit ratings that are measured through 12-month expected credit loss. The Woori Bank, which is an important subsidiary of the Group, has applied the above indicators of significant decrease in credit rating since initial recognition as follows, and the estimation method is regularly being monitored. Corporate Retail Credit rating AAA ~ A+ A- ~ BBB BBB- ~ BB+ BB ~ BB- 1 ~ 3 4 ~ 5 6 ~ 10 Significant increased indicator of the credit rating More than or equal to 4 steps More than or equal to 3 steps More than or equal to 2 steps More than or equal to 1 step More than or equal to 3 steps More than or equal to 2 steps More than or equal to 1 step The Group sees no significant increase in credit risk after initial recognition for debt securities, etc. with a credit rating of A + or higher, which are deemed to have low credit risk at the end of the reporting period The Group concludes that credit is impaired when financial assets are under conditions stated below: - When principal of loan is overdue for 90 days or longer due to significant deterioration in credit - For loans overdue for less than 90 days, when it is determined that not even a portion of the loan will be recovered unless claim actions such as disposal of collaterals are taken - When other objective indicators of impairment has been noted for the financial asset. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review220 - 42 - The Group determines which loan is subject to write-off in accordance with internal guidelines, and writes off loan receivables when it is determined that the loans are practically irrecoverable. For example, loans are practically irrecoverable when application is made for rehabilitation under the Debtor Rehabilitation and Bankruptcy Act and loans are confirmed as irrecoverable by the court’s decision to waive debtor’s obligation, or when it is impossible to recover the loan amount through legal means such as auctioning of debtor’s assets or through any other means of recovery available. Notwithstanding the write-off, the Group may still exercise its right of collection after the asset has been written off in accordance with its collection policies. (4) Defined benefit plan The Group operates a defined benefit pension plan. Defined benefit obligation is calculated at every end of the reporting period by performing actuarial valuation, and estimation of assumptions such as discount rate, expected wage growth rate and mortality rate is required to perform such actuarial valuation. The defined benefit plan, due to its long-term nature, contains significant uncertainties in its estimates. 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 allocation of risk capital 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 goal of credit risk management is to maintain the Group’s credit risk exposure to a permissible degree and to optimize its rate of return considering such credit risk. 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. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 43 - 221 2) Maximum exposure to credit risk The Group’s maximum exposure to credit risk shows the uncertainties related to the maximum possible variation of financial assets’ net value as a result of changes in the specific risk factors, prior to the consideration of collaterals that are recorded at net book value after allowances and other credit enhancements. However, the maximum exposure is the fair value amount (recorded on the books) for derivatives, maximum contractual obligation for payment guarantees and unused amount of commitments for loan commitment. The maximum exposure to credit risk is as follows (Unit: Korean Won in millions): Loans and other Korean treasury and government December 31, 2019 December 31, 2018 financial assets at amortized cost Financial assets at FVTPL (*) Financial assets at FVTOCI Securities at agencies Banks Corporates Consumers Sub-total Deposit Debt securities Loans Derivative assets Sub-total 14,797,040 18,597,206 101,041,110 159,282,337 293,717,693 27,901 2,337,085 212,473 2,921,903 5,499,362 13,547,154 22,283,842 96,627,671 149,998,911 282,457,578 26,935 1,824,155 385,450 2,026,079 4,262,619 Debt securities 26,795,161 17,112,249 amortized cost Derivative assets Debt securities Derivative assets (Designated for Off-balance accounts hedging) Guarantees Unused loan commitments Sub-total Total 20,320,539 22,932,559 121,131 12,618,917 103,651,674 116,270,591 462,724,477 35,503 12,666,417 97,796,704 110,463,121 437,263,629 (*) Puttable financial instruments are not included a) Credit risk exposure by geographical areas The following tables analyze credit risk exposure by geographical areas (Unit: Korean Won in millions): Loans and other financial assets at amortized cost Securities at amortized cost Financial assets at FVTPL Financial assets at FVTOCI Derivative assets (Designated for hedging) Off-balance accounts Total Korea China December 31, 2019 UK Japan USA Others (*) Total 268,316,454 20,104,604 5,488,229 24,553,655 5,108,144 - 10,409 332,319 5,077,666 66,747 - 144,601 1,844,374 1,172,209 - 724 2 - - 102,311 12,198,846 149,188 - 1,662,273 293,717,693 20,320,539 5,499,362 26,795,161 121,131 112,602,603 431,186,676 - 1,211,857 6,662,729 - 387,795 5,676,809 - 78,850 - 46,662 2,025,535 1,219,597 - 1,942,824 15,953,131 121,131 116,270,591 462,724,477 (*) Others consist of financial assets in Indonesia, Hong Kong, Singapore, and other countries. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review222 - 44 - Korea China December 31, 2018 UK Japan USA Others (*) Total Loans and other financial assets at amortized cost Securities at amortized cost Financial assets at FVTPL Financial assets at FVTOCI Derivative assets (Designated for hedging) Off-balance accounts Total 261,547,407 22,757,048 4,261,110 15,697,518 4,592,153 - 1,243 261,085 4,597,119 70,578 - 103,755 1,526,532 - - 24,960 893,354 - 266 2,247 9,301,013 104,933 - 1,022,684 282,457,578 22,932,559 4,262,619 17,112,249 35,503 107,632,858 411,931,444 - 801,978 5,656,459 - 343,323 5,114,775 - 136,727 1,688,219 - 35,000 930,867 - 1,513,235 11,941,865 35,503 110,463,121 437,263,629 (*) Others consist of financial assets in Indonesia, Hong Kong, Singapore, and other countries. 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, 2019 Loans and other financial assets at amortized cost Securities at amortized cost Financial assets at FVTPL Financial assets at FVTOCI Derivative assets (Designated for hedging) Off-balance accounts Total 51,233,088 8,545,838 162,780 85,609 - 17,813,366 77,840,681 32,983,972 - 128,666 139,098 36,141,770 10,979,001 4,084,698 18,968,456 3,291,001 364,591 39,193 10,047 155,120,055 - 15,430 9,241 14,947,807 431,109 1,068,595 7,582,710 293,717,693 20,320,539 5,499,362 26,795,161 - 23,841,881 57,093,617 121,131 10,015,897 80,310,953 - - 4,161,139 53,335,209 7,865,971 208,479,935 - 7,103,099 31,133,320 121,131 116,270,591 462,724,477 Service Manufacturing Finance and insurance Construction Individuals Others Total December 31, 2018 Loans and other financial assets at amortized cost Securities at amortized cost Financial assets at FVTPL Financial assets at FVTOCI Derivative assets (Designated for hedging) Off-balance accounts Total 48,319,987 1,157,512 120,659 382,409 - 17,645,104 67,625,671 34,972,072 - 153,159 109,749 40,338,823 13,414,743 3,117,845 13,017,646 3,295,967 527,847 16,118 224,665 145,715,074 - 7,614 5,535 9,815,655 7,832,457 847,224 3,372,245 282,457,578 22,932,559 4,262,619 17,112,249 - 22,300,388 57,535,368 35,503 9,654,685 79,579,245 - 4,146,708 8,211,305 - 49,948,865 195,677,088 - 6,767,371 28,634,952 35,503 110,463,121 437,263,629 WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 45 - 223 3) Credit risk exposure a) Financial assets The maximum exposure to credit risk by asset quality, except for financial assets at FVTPL and derivative asset (Designated for hedging) is as follows (Unit: Korean Won in millions): December 31, 2019 Stage 1 Stage 2 Above appropriate credit rating (*1) Less than a limited credit rating (*3) Above appropriate credit rating (*2) Less than a limited credit rating (*3) Stage 3 Total Loss allowance Total, net Loans and other financial assets at amortized cost Korean treasury and government agencies Banks Corporates General business Small- and medium- sized enterprise Project financing and others Consumers Securities at amortized cost Financial assets at FVTOCI (*4) Total 255,709,205 19,823,451 8,712,860 9,625,024 1,504,172 295,374,712 (1,657,019) 293,717,693 14,789,933 18,336,664 82,286,304 45,769,233 10,390 109,667 15,201,687 6,191,625 - 150,318 485,469 441,089 - - 3,267,311 1,620,761 1 21,907 792,375 544,238 14,800,324 18,618,556 102,033,146 54,566,946 (3,284) (21,350) (992,036) (678,237) 14,797,040 18,597,206 101,041,110 53,888,709 32,180,551 8,507,800 44,380 1,586,865 230,901 42,550,497 (287,027) 42,263,470 4,336,520 140,296,304 20,326,050 502,262 4,501,707 - - 8,077,073 - 59,685 6,357,713 - 17,236 689,889 - 4,915,703 159,922,686 20,326,050 (26,772) (640,349) (5,511) 4,888,931 159,282,337 20,320,539 26,684,601 302,719,856 110,560 19,934,011 - 8,712,860 - 9,625,024 - 1,504,172 26,795,161 342,495,923 (8,569) (1,671,099) 26,795,161 340,833,393 Loans and other financial assets at amortized cost Korean treasury and government agencies Banks Corporates General business Small- and medium-sized enterprise Project financing and others Consumers Securities at amortized cost Financial assets at FVTOCI (*4) Total Stage1 169,438,539 - 612,200 55,602,818 22,291,348 31,517,538 1,793,932 113,223,521 - - 169,438,539 December 31, 2019 Collateral value Stage2 14,451,806 - 2,028 2,335,496 1,023,766 1,311,730 - 12,114,282 - - 14,451,806 Stage3 692,139 - - 394,860 240,771 145,061 9,028 297,279 - - 692,139 Total 184,582,484 - 614,228 58,333,174 23,555,885 32,974,329 1,802,960 125,635,082 - - 184,582,484 (*1) Credit grade of corporates are AAA ~ BBB, and consumers are grades 1 ~ 6. (*2) Credit grade of corporates are A- ~ BBB, and consumers are grades 1 ~ 6. (*3) Credit grade of corporates are BBB- ~ C, and consumers are grades 7 ~ 10. (*4) Financial assets at FVTOCI has been disclosed as the amount before deducting loss allowance because loss allowance does not reduce the carrying amount. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review224 - 46 - December 31, 2018 Stage 1 Stage 2 Above appropriate credit rating (*1) Less than a limited credit rating (*3) Above appropriate credit rating (*2) Less than a limited credit rating (*3) Stage 3 Total Loss allowance Total, net Loans and other financial assets at amortized cost Korean treasury and government agencies Banks Corporates General business Small- and medium- sized enterprise Project financing and others Consumers Securities at amortized cost Financial assets at FVTOCI (*4) Total 252,921,186 17,624,416 6,330,382 5,739,850 1,693,148 284,308,982 (1,851,404) 282,457,578 13,549,305 22,163,951 77,160,502 43,173,952 1,009 105,583 15,550,301 6,474,057 1 27,777 655,907 526,303 - - 3,424,215 1,723,704 - 14,307 1,034,030 716,722 13,550,315 22,311,618 97,824,955 52,614,738 (3,161) (27,776) (1,197,284) (817,002) 13,547,154 22,283,842 96,627,671 51,797,736 29,510,917 8,527,542 107,998 1,547,761 277,825 39,972,043 (335,469) 39,636,574 4,475,633 140,047,428 22,939,039 548,702 1,967,523 - 21,606 5,646,697 195 152,750 2,315,635 - 39,483 644,811 250 5,238,174 150,622,094 22,939,484 (44,813) (623,183) (6,925) 5,193,361 149,998,911 22,932,559 16,940,654 292,800,879 146,442 17,770,858 25,153 6,355,730 - 5,739,850 - 1,693,398 17,112,249 324,360,715 (6,177) (1,864,506) 17,112,249 322,502,386 Loans and other financial assets at amortized cost Korean treasury and government agencies Banks Corporates General business Small- and medium-sized enterprise Project financing and others Consumers Securities at amortized cost Financial assets at FVTOCI (*4) Total Stage1 163,329,105 11,600 361,024 51,595,949 19,907,948 29,780,716 1,907,285 111,360,532 - - 163,329,105 December 31, 2018 Collateral value Stage2 Stage3 8,836,440 - 3,334 2,509,620 1,167,993 1,291,222 50,405 6,323,486 - - 8,836,440 698,593 - - 426,325 241,651 184,674 - 272,268 - - 698,593 Total 172,864,138 11,600 364,358 54,531,894 21,317,592 31,256,612 1,957,690 117,956,286 - - 172,864,138 (*1) Credit grade of corporates are AAA ~ BBB, and consumers are grades 1 ~ 6. (*2) Credit grade of corporates are A- ~ BBB, and consumers are grades 1 ~ 6. (*3) Credit grade of corporates are BBB- ~ C, and consumers are grades 7 ~ 10. (*4) Financial assets at FVTOCI has been disclosed as the amount before deducting loss allowance because loss allowance does not reduce the carrying amount. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 47 - 225 b) Guarantees and loan commitments The credit quality of the guarantees and loan commitments as of December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions): Stage 1 December 31, 2019 Stage 2 Above appropriate credit rating (*1) Less than a limited credit rating (*3) Above appropriate credit rating (*2) Less than a limited credit rating (*3) Stage3 Total 10,952,917 1,333,561 355 223,657 108,427 12,618,917 Financial assets Off-balance accounts Guarantees Loan Commitments Total 97,854,790 108,807,707 3,479,295 4,812,856 1,388,136 1,388,491 906,033 1,129,690 23,420 131,847 103,651,674 116,270,591 (*1) Credit grade of corporates are AAA ~ BBB, and consumers are grades 1 ~ 6. (*2) Credit grade of corporates are A- ~ BBB, and consumers are grades 1 ~ 6. (*3) Credit grade of corporate are BBB- ~ C, and consumers are grades 7 ~ 10. Stage 1 December 31, 2018 Stage 2 Above appropriate credit rating (*1) Less than a limited credit rating (*3) Above appropriate credit rating (*2) Less than a limited credit rating (*3) Stage3 Total 11,212,772 1,063,551 7,147 261,599 121,348 12,666,417 Financial assets Off-balance accounts Guarantees Loan commitments Total 91,734,567 102,947,339 3,632,586 4,696,137 1,529,330 1,536,477 880,518 1,142,117 19,703 141,051 97,796,704 110,463,121 (*1) Credit grade of corporates are AAA ~ BBB, and consumers are grades 1 ~ 6. (*2) Credit grade of corporates are A- ~ BBB, and consumers are grades 1 ~ 6. (*3) Credit grade of corporate are BBB- ~ C, and consumers are grades 7 ~ 10. 4) Collateral and other credit enhancements During the current period, there have been no significant changes in the value of collateral or other credit enhancements held by the Group and there have been no significant changes in collateral or other credit enhancements due to changes in the collateral policy of the Group. As of December 31, 2019, there are no financial assets that do not recognize the allowance for losses just because financial assets have collateral. 5) For the financial assets that record loss allowance as total expected credit loss, the amortized cost before the change in contractual cash flows is 18,735 million Won, and the net loss due to the change is 82 million Won. 6) As the Group manages receivables that have not lost the right of claim to the debtor for the grounds of incomplete statute limitation and uncollected receivables under the related laws as receivable charge- offs, the balance as of December 31, 2019 and 2018 are 9,667,169 million Won and 9,578,796 million Won. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review 226 (2) Market risk - 48 - Market risk is the possible risk of loss arising from trading position and non-trading position as a result of the volatility of market factors such as interest rates, stock prices and foreign exchange rates. 1) Market risk management Market risk management refers to the process of making and implementing decisions for the avoidance, acceptance or mitigation of risks by identifying the underlying source of the risks and measuring its level, and evaluating the appropriateness of the level of accepted market risks. a) Trading activities 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 managing internal risk. The Value at Risk (VaR) methodology is used to manage and measure market risk. Woori Bank, a subsidiary of the Group, uses the internal model approved by the Financial Supervisory Service to measure the VaR using the Historical Simulation Method based on a 99% confidence level and a 10-day retention period, and calculates the required capital risk for calculating the BIS ratio. For internal management purposes, limit management is performed on a daily basis measuring VaR based on a 99% confidence and 1 day retention period. In addition, Woori Bank perform a daily verification that compares VaR measurement and profit and loss to verify the suitability of the model. The minimum, maximum and average VaR of the Group for the year ended December 31, 2019 and 2018, respectively, and the VaR of the Group as of December 31, 2019 and 2018, respectively, are as follows (Unit: Korean Won in millions): Risk factor Interest rate Stock price Foreign currencies Commodity price Diversification Total VaR(*) December 31, 2019 5,052 3,730 5,028 - (6,233) 7,577 For the year ended December 31, 2019 Average Maximum Minimum 1,176 5,725 1,146 5,935 4,395 6,469 - 32 (2,339) (9,229) 4,378 8,932 3,406 3,203 5,033 1 (5,127) 6,516 December 31, 2018 3,107 2,353 4,972 - (4,445) 5,987 For the year ended December 31, 2018 Average Maximum Minimum 1,730 1,138 3,439 - (1,815) 4,492 3,702 2,669 4,678 3 (4,869) 6,183 5,528 5,081 6,136 24 (8,155) 8,614 (*) VaR (Value at Risk): Retention period of 1 day, Maximum expected losses under 99% level of confidence. b) Non-trading activities For non-trading sectors of the bank, consolidated trusts and subsidiaries of the Bank, the risk is managed and measured by △NII(change in Net Interest Income) and △EVE(change in Economic Value of Equity) through NII(Net Interest Income) and NPV(Net Present Value) simulation, and for the remaining subsidiaries, the risk is managed and measured with interest rate EaR(Earning at Risk, maximum of the expected change for profit or loss) and interest rate VaR that are in accordance with BIS Framework. NII is primarily an indicator of changes in profit from short-term changes in interest rates and is measured by deducting the interest expenses on the liability from the interest income from the asset. NPV is primarily an indicator of the risk of an economic value perspective resulting from unfavorable changes in interest rates and is measured by subtracting the present value of the liability from the present value of the asset. △NII represents a change in net interest income that may occur over a certain period (e.g., 1 year) due to unfavorable changes in interest rates, and △EVE indicates the economic value changes in equity capital that could be caused by changes in interest rates affecting the present value of asset, liabilities, and others. The interest rate EaR represents the maximum amount of decrease in net interest income that could result from unfavorable changes in interest rate over a certain period (e.g., 1 year), and the interest rate VaR represents the maximum expected loss that indicates how much net asset value can decrease at present or in the future due to unfavorable changes in interest rates. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 49 - 227 For assets and liabilities as of December 31, 2019 that include bank, consolidated trusts and subsidiaries of the bank, details of △EVE and △NII calculated based on interest rate risk in banking book (IRRBB) are as follows (Unit: Korean Won in millions): △EVE(*1) △NII(*2) December 31, 2019 490,981 162,023 (*1) (*2) EVE: change in Economic Value of Equity NII: change in Net Interest Income △ △ NII and NPV according to interest rate change scenario for assets and liabilities held by banks and connected trusts as of December 31, 2018 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 (*1) NII: Net Interest Income (*2) NPV: Net Portfolio Value December 31, 2018 NII (*1) NPV (*2) 4,895,332 4,887,799 5,575,470 4,329,543 6,603,132 3,508,859 7,560,155 3,352,267 24,636,678 24,225,946 24,415,761 24,907,344 24,232,738 25,245,667 24,079,415 25,680,084 For the remaining subsidiaries except the bank, consolidated trusts, and consolidated subsidiaries of the bank as of December 31, 2019, and for the subsidiaries other than the bank and consolidated trusts as of December 31, 2018, the interest rate EaR and VaR calculated based on the BIS Framework are as follows (Unit: Korean Won in millions): December 31, 2019 December 31, 2018 EaR (*1) VaR (*2) EaR (*1) VaR (*2) 92,439 87,872 248,364 141,484 (*1) EaR(Earning at Risk): Change of Maximum expected income and expense (*2) VaR(Value at Risk): Maximum expected losses Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review228 - 50 - 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), 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, 2019 10 to 12 months 7 to 9 months 1 to 5 years Over 5 years Total Asset: Loans and other financial assets at amortized cost 153,023,603 49,505,606 12,505,250 10,506,470 57,582,270 5,209,670 288,332,869 Financial assets at FVTPL Financial assets at FVTOCI Securities at 150,149 23,648 63,825 34,299 131,206 13,347 416,474 5,414,586 5,486,113 3,450,669 3,174,893 9,367,756 318,371 27,212,388 amortized cost Total 1,844,868 160,433,206 1,696,004 56,711,371 738,383 16,758,127 1,409,549 15,125,211 14,869,227 81,950,459 858,142 21,416,173 6,399,530 337,377,904 Liability: Deposits due to customers Borrowings Debentures Total 116,490,812 12,105,234 2,378,211 130,974,257 45,803,202 1,910,759 2,894,577 50,608,538 32,683,132 1,048,991 3,330,658 37,062,781 26,740,013 706,952 2,466,142 29,913,107 43,175,232 3,264,861 19,211,409 65,651,502 59,305 264,951,696 509,359 19,546,156 32,818,388 2,537,391 3,106,055 317,316,240 Within 3 months 4 to 6 months 7 to 9 months December 31, 2018 10 to 12 months 1 to 5 years Over 5 years Total Asset: Loans and other financial assets at amortized cost 159,894,065 45,387,214 8,878,060 9,903,959 46,459,450 4,201,379 274,724,127 Financial assets at FVTPL Financial assets at FVTOCI Securities at 371,984 32,278 24,951 64,838 145,121 27,536 666,708 2,579,442 1,775,435 1,486,953 2,223,494 9,289,742 185,320 17,540,386 amortized cost Total 2,449,416 165,294,907 2,251,180 49,446,107 1,735,698 12,125,662 1,946,948 14,139,239 15,177,608 71,071,921 402,671 23,963,521 4,816,906 316,894,742 Liability: Deposits due to customers Borrowings Debentures Total 100,232,916 9,971,680 2,153,916 112,358,512 44,207,416 1,924,390 2,416,483 48,548,289 29,419,951 670,404 2,201,070 32,291,425 35,427,657 518,167 2,584,230 38,530,054 40,130,055 2,723,156 18,955,400 61,808,611 72,276 249,490,271 16,434,161 626,364 2,403,077 30,714,176 3,101,717 296,638,608 WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 51 - 229 (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): USD JPY December 31, 2019 CNY EUR Foreign currency Korean Won equivalent Foreign currency Korean Won equivalent Foreign currency Korean Won equivalent Foreign currency Korean Won equivalent Others Korean Won equivalent Total Korean Won equivalent 22,916 26,531,794 150,462 1,600,140 31,393 5,203,131 2,258 2,929,312 5,272,352 41,536,729 165 190,733 5,322 56,602 25 4,155 105 135,827 64,185 451,502 2,679 3,102,752 - - 2,005 332,319 25 33,017 406,753 3,874,841 Asset Loans and other financial assets at amortized cost Financial assets at FVTPL Financial assets at FVTOCI Securities at amortized cost Total 319 26,079 369,677 30,194,956 - 155,784 - 1,656,742 - 33,423 - 5,539,605 40 2,428 52,139 3,150,295 97,092 5,840,382 518,908 46,381,980 Liability Financial liabilities at FVTPL Deposits due to customers Borrowings Debentures Other financial liabilities Total 251 291,102 4,415 46,957 - - 68 87,776 83,790 509,625 13,208 6,588 3,999 15,291,671 7,627,665 4,629,944 166,108 11,061 - 1,766,526 117,634 - 27,739 4,597,467 2,743 - 16 - 3,016 27,062 3,492,462 31,332,844 11,240 192,824 119,529 2,050,646 3,079 510,281 30,834 5,110,491 1,727 515 105 359 2,774 2,240,884 668,060 136,230 3,247,164 499,046 271,790 27,143,712 8,915,148 5,037,964 466,240 3,599,190 6,906 4,108,696 4,595,418 46,201,867 Off-balance accounts 7,030 8,139,395 34,316 364,946 4,525 749,973 560 726,323 634,870 10,615,507 USD JPY December 31, 2018 CNY EUR Foreign currency Korean Won equivalent Foreign currency Korean Won equivalent Foreign currency Korean Won equivalent Foreign currency Korean Won equivalent Others Korean Won equivalent Total Korean Won equivalent 20,406 22,816,027 167,419 1,696,255 29,880 4,863,230 1,994 2,550,147 4,742,340 36,667,999 74 82,197 1,425 14,434 - - 1,472 1,645,595 - - 1,604 261,085 59 - 75,169 79,584 251,384 - 729,581 2,636,261 52 22,004 58,489 24,602,308 - 168,844 - 1,710,689 - 31,484 - 5,124,315 - 2,053 - 2,625,316 175,552 5,727,057 234,041 39,789,685 118 131,927 1,956 19,815 - - 11,159 6,606 3,645 12,477,154 7,386,616 4,075,084 169,770 3,834 - 1,720,072 38,847 - 23,967 381 - 3,900,923 61,947 - 55 887 286 - 70,250 121,658 343,650 1,135,149 365,585 - 4,392,936 505,541 285,339 23,626,234 8,358,536 4,360,423 2,522 24,050 2,820,290 26,891,071 28,955 204,515 293,362 2,072,096 1,818 26,166 295,919 4,258,789 193 1,421 246,584 1,817,568 18,527 5,324,001 3,674,682 40,363,525 Asset Liability Loans and other financial assets at amortized cost Financial assets at FVTPL Financial assets at FVTOCI Securities at amortized cost Total Financial liabilities at FVTPL Deposits due to customers Borrowings Debentures Other financial liabilities Total Off-balance accounts 7,453 8,333,153 33,347 337,868 1,557 253,366 474 606,714 823,655 10,354,756 Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review 230 (4) Liquidity risk - 52 - 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): Financial liabilities at FVTPL Deposits due to customers Borrowings Debentures Lease liabilities Other financial liabilities Total Financial liabilities at FVTPL Deposits due to customers Borrowings Debentures Other financial liabilities Total Within 3 months 4 to 6 months December 31, 2019 10 to 12 months 7 to 9 months 1 to 5 years Over 5 years Total 115,156 - 166,474,535 36,697,168 8,596,202 2,948,384 2,378,211 2,894,577 46,072 42,549 60,981 11,242,367 188,852,543 42,643,659 - 24,634,859 2,162,846 3,330,658 37,420 119,633 30,285,416 - 31,233,844 1,880,424 2,466,142 35,210 10,344 35,625,964 - 6,590,119 3,682,214 19,211,409 232,985 71,561 29,788,288 - 115,156 1,877,594 267,508,119 520,936 19,791,006 2,537,391 32,818,388 40,698 434,934 14,165,526 2,660,640 7,637,259 334,833,129 Within 3 months 4 to 6 months December 31, 2018 10 to 12 months 7 to 9 Months 1 to 5 years Over 5 years Total 191,825 - 145,187,689 33,825,662 2,846,294 6,373,835 2,416,483 2,153,916 14,240,022 44,572 168,147,287 39,133,011 - 22,186,833 1,874,069 2,201,070 169,996 26,431,968 - 42,046,740 1,607,985 2,584,230 1,201 46,240,156 - 7,098,907 3,156,128 18,955,400 90,615 29,301,050 - 191,825 1,870,334 252,216,165 16,500,328 642,017 30,714,176 2,403,077 2,288,560 16,834,966 7,203,988 316,457,460 WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 53 - 231 b) Cash flows of principals and interests by expected maturities of non-derivative financial liabilities are as follows (Unit: Korean Won in millions): Financial liabilities at FVTPL Deposits due to customers Borrowings Debentures Lease liabilities Other financial liabilities Total Financial liabilities at FVTPL Deposits due to customers Borrowings Debentures Other financial liabilities Total Within 3 months 115,156 175,309,271 8,596,202 2,378,211 46,072 11,242,367 197,687,279 Within 3 months 191,825 163,787,990 6,373,835 2,153,916 14,240,022 186,747,588 4 to 6 months December 31, 2019 10 to 12 months 7 to 9 months 1 to 5 years - - 38,219,793 23,649,424 2,162,846 3,330,658 37,420 119,633 44,166,284 29,299,981 2,948,384 2,894,577 42,549 60,981 - 24,102,750 1,880,424 2,466,142 35,210 10,344 28,494,870 - 5,547,232 3,682,214 19,211,409 232,985 71,561 28,745,401 4 to 6 months December 31, 2018 10 to 12 months 7 to 9 months 1 to 5 years - - 38,126,886 20,993,436 1,874,069 2,201,070 169,996 43,434,235 25,238,571 2,846,294 2,416,483 44,572 - 23,262,092 1,607,985 2,584,230 1,201 27,455,508 - 5,230,533 3,156,128 18,955,400 90,615 27,432,676 Over 5 years - 150,233 520,936 2,537,391 40,698 2,660,640 5,909,898 Over 5 years - 17,649 642,017 2,403,077 2,288,560 5,351,303 Total 115,156 266,978,703 19,791,006 32,818,388 434,934 14,165,526 334,303,713 Total 191,825 251,418,586 16,500,328 30,714,176 16,834,966 315,659,881 3) Maturity analysis of derivative financial liabilities Derivatives held for trading purpose are not managed in accordance with their contractual maturity, since 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. Derivatives designated for hedging purpose are estimated by offsetting cash inflows and cash outflows. The cash flow by the maturity of derivative financial liabilities as of December 31, 2019 and 2018 is as follows (Unit: Korean Won in millions): December 31, 2019 December 31, 2018 Cash flow risk hedge Trading purpose Cash flow risk hedge Fair value risk hedge Trading purpose Within 3 months 1,839 2,843,195 (1,880) (3,835) 2,090,861 4 to 6 months (341) - (683) 9,448 - 7 to 9 months Remaining maturity 10 to 12 months (247) - 14,133 9,133 - (298) - 8,080 (3,541) - 1 to 5 years 6,249 - 14,103 6,991 - Over 5 years - - - - - Total 7,202 2,843,195 33,753 18,196 2,090,861 4) Maturity analysis of off-balance accounts (Guarantees and loan commitments) 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. 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, unused loan commitments, and other guarantees, however, under the terms of the guarantees and unused 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, 2019 December 31, 2018 12,618,917 103,651,674 12,666,417 97,796,704 Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review232 (5) Operational risk - 54 - 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 (“AMA”) 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 approved by the Financial Supervisory Service. 2) Operational risk measurement To quantify required capital for operational risk, the Group applies AMA using internal and external loss data, business environment and internal control factors, and scenario analysis. For the operational risk management for its subsidiaries, the Group adopted the Basic Indicator Approach. (6) Capital management The Group complies with the standard of capital adequacy provided by financial regulatory authorities. The capital adequacy standard is based on Basel published by Basel Ⅲ Committee on Banking Supervision in Bank for International Settlement in 2010 and was implemented in Korea in 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: Tier 1 common capital ratio of 7.00%, a Tier 1 capital ratio of 8.5% and a minimum total capital ratio of 10.5% as of December 31, 2019. Details of the Group’s capital adequacy ratio as of December 31, 2019 are as follows (Unit: Korean Won in millions): 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 December 31, 2019 19,135,300 3,340,252 4,639,519 27,115,071 209,802,895 5,586,757 12,656,301 228,045,953 8.39% 9.86% 11.89% WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 55 - 233 5. OPERATING SEGMENTS In evaluating the results of the Group and allocating resources, the Group’s Chief Operation Decision Maker (“CODM”) utilizes the information per type of customers. With the establishment of Woori Financial Group Inc. during the current term, the company reports to the CODM according to the organizational sectors below. This financial information of the segments is regularly reviewed by the CODM to make decisions about resources to be allocated to each segment and evaluate its performance. (1) Segment by type of organization The Group’s reporting segments consist of banking, credit card, comprehensive finance and other sectors, and the composition of such reporting segments was divided based on internal report data periodically reviewed by the management to evaluate the performance of the segment and make decisions on the resources to be distributed. Operational scope Banking Credit card Investment banking Others Loans/deposits and relevant services for Woori Bank and overseas subsidiaries’ customers Credit card, cash services, card loans and relevant work of Woori Card Co., Ltd. Securities operation, sale of financial instruments, project financing and other related activities for comprehensive financing of Woori Investment bank Co., Ltd. Woori Financial Group Inc., Woori FIS Co., Ltd., Woori Finance Research Institute, Woori Credit Information Co., Ltd., Woori Fund Services Inc., Woori Asset Management Corp., Ltd., Woori Private Equity Asset Management Co., Ltd., Woori Global Asset Management Co., Ltd. (2) The details of income (expense) by each segment are as follows (Unit: Korean Won in millions): Banking Credit card For the year ended December 31, 2019 Investment banking Others (*1) Sub-total Adjustments (*2) Total Net Interest income(expense) Non-interest income(expense) Impairment losses due to credit loss General and administrative expense(*3) Net operating 4,583,386 553,956 54,077 2,290 5,193,709 699,997 5,893,706 1,557,247 31,842 33,539 957,880 2,580,508 (1,533,917) 1,046,591 (32,621) (259,604) (572) (538) (293,335) (80,909) (374,244) (3,478,535) (190,062) (31,183) (323,528) (4,023,308) 257,231 (3,766,077) income(expense) 2,629,477 136,132 55,861 636,104 3,457,574 (657,598) 2,799,976 Non-operating income(expense) Net income(expense) before tax Tax income(expense) Net income(loss) (151,348) 13,889 (3,501) (1,545) (142,505) 65,578 (76,927) 2,478,129 (616,110) 1,862,019 150,021 (35,825) 114,196 52,360 998 53,358 634,559 (1,294) 633,265 3,315,069 (652,231) 2,662,838 (592,020) (33,222) (625,242) 2,723,049 (685,453) 2,037,596 (*1) Other subsidiaries include gains and losses from Woori Financial Group Inc., Woori FIS Co., Ltd., Woori Finance Research Co., Ltd., Woori Credit Information Co., Ltd., Woori Fund Service Inc., Woori Asset Management Corp., Woori Private Equity Asset Management Co., Ltd. and Woori Global Asset Management Co., Ltd. (*2) Adjustments were made for the presentation of profit or loss in accordance with the Accounting Standards from the reporting segments in accordance with the Managerial Accounting Standards. (*3) Depreciation and amortization 481,176 million Won are included in General and administrative expense. There are the Banking (435,227 million Won), Credit card (28,367 million Won), Investment banking (2,212 million Won), others (16,492 million Won) and adjustments ((-) 1,122 million Won) respectively. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review234 - 56 - Banking Credit card For the year ended December 31, 2018 (*1) Reporting segment total Investment Banking Others (*2) Adjustments (*3) Total Net Interest income(expense) Non-interest income(expense) Impairment losses due to credit loss General and administrative expense (*4) Net operating 4,453,511 509,999 43,081 1,142 5,007,732 643,219 5,650,951 1,517,141 59,971 19,814 297,196 1,894,122 (832,165) 1,061,957 4,913 (227,144) (3,898) (166) (226,296) (103,278) (329,574) (3,416,320) (170,765) (26,081) (292,826) (3,905,993) 281,960 (3,624,033) income(expense) 2,559,245 172,060 32,915 5,345 2,769,565 (10,264) 2,759,301 Non-operating income(expense) Net income(expense) before tax Tax income(expense) Net income(loss) 69,897 (5,547) (295) 199 64,255 (18,684) 45,571 2,629,142 (713,178) 1,915,964 166,513 (39,979) 126,534 32,621 743 33,364 5,545 (2,238) 3,307 2,833,821 (754,651) 2,079,169 (28,949) 1,428 (27,520) 2,804,872 (753,223) 2,051,649 (*1) For comparative display, the category information of each customer from the previous term has been reclassified to profit or loss by operating segment according to the organization. (*2) Other subsidiaries include gains and losses from Woori FIS Co., Ltd., Woori Finance Research Co., Ltd., Woori Credit Information Co., Ltd., Woori Fund Service Inc. and Woori Private Equity Asset Management Co., Ltd. (*3) Adjustments were made for the presentation of profit or loss in accordance with the Accounting Standards from the reporting segments in accordance with the Managerial Accounting Standards. (*4) Depreciation and amortization 216,735 million Won are included in General and administrative expense. There are the Banking (177,882 million Won), Credit card (11,477 million Won), Investment banking (977 million Won), others (26,398 million Won) and adjustments (1 million Won), respectively. (3) Operating profit or loss and major non-current assets from external customers for the period are as follows (Unit: Korean Won in millions): Operating income(expense) from external customers Major non-current assets (*) For the year ended December 31, 2019 Domestic Foreign Total 2,500,504 299,472 2,799,976 4,908,140 387,284 5,295,424 (*) Investments in joint ventures and associates, investment properties, premises and equipment and intangible assets and right-of-use assets are included in major non-current assets. Operating income(expense) from external customers Major non-current assets (*) For the year ended December 31, 2018 Domestic Foreign Total 2,505,813 253,488 2,759,301 3,551,924 236,050 3,787,974 (*) Investments in joint ventures and associates, investment properties, premises and equipment and intangible assets and right-of-use assets are included in major non-current assets. (4) Information about major customers The Group does not have any single customer that generates 10% or more of the Group’s total revenue as of December 31, 2019 and 2018. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 57 - 235 6. STATEMENTS OF CASH FLOWS (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, 2019 1,957,997 625,999 3,684,044 124,526 6,392,566 December 31, 2018 2,107,861 725,083 3,512,216 402,734 6,747,894 (2) Significant transactions of investing activities and financing activities not involving cash inflows and outflows are as follows (Unit: Korean Won in millions): For the years ended December 31 2018 2019 Changes in other comprehensive income related to valuation of financial assets at FVTOCI Changes in other comprehensive income related to valuation of equity method investments Changes in other comprehensive income related to valuation loss on cash flow hedge Changes in equity related to assets held for sale Changes in financial assets at FVTOCI as a result of debt-equity swap Changes in investments in associates due to accounts transfer Classified to premises and equipment from investment properties Changes in intangible assets related to account payables Classified to assets held for distribution (sale) from premises and equipment Increase in right-of-use assets and lease liabilities Changes in unpaid dividends on hybrid equity securities Comprehensive stock exchange (14,141) 613 (1,823) - 96,527 651 166,892 29,705 (95) 692,103 - 581,609 2,505 2,958 (4,646) (4,145) 14,378 (89,151) - - 6,243 - 3,569 - Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review236 - 58 - (3) Adjustments of liabilities from financing activities in current and prior year are as follows (Unit: Korean Won in millions): For the year ended December 31, 2019 Not involving cash inflows and outflows Variation of gains on valuation of hedged items Business Combination (Note 45) Beginning balance 16,202,986 28,735,862 377,030 45,315,878 Cash flow 3,081,757 1,858,762 (217,867) 4,722,652 Foreign Exchange (285,607) 155,433 (819) (130,993) Borrowings Debentures Lease liabilities(*) Total - - 5,552 5,552 (*) The amount of lease liability at the beginning of the current in applying K-IFRS 1116 is reflected. - 85,984 - 85,984 Others (216) 22,014 255,149 276,947 Ending balance 18,998,920 30,858,055 419,045 50,276,020 For the year ended December 31, 2018 Foreign Exchange Not involving cash inflows and outflows Variation of gains on valuation of hedged items - (25,498) (25,498) 161,078 267,339 428,417 Others 81 12,039 12,120 Ending balance 16,202,986 28,735,862 44,938,848 Borrowings Debentures Total Beginning balance 14,784,706 27,869,651 42,654,357 Cash flow 1,257,121 612,331 1,869,452 7. FINANCIAL ASSETS AT FVTPL (1) Details of financial assets at FVTPL as of December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions): Financial assets at fair value through profit or loss measured at fair value December 31, 2019 December 31, 2018 8,069,144 6,126,316 (2) Financial assets at fair value through profit or loss mandatorily measured at fair value and financial assets held for trading are as follows (Unit: Korean Won in millions): Deposits: Gold banking asset Securities: Debt securities Korean treasury and government agencies Financial institutions Corporates Others Equity securities Capital contributions Beneficiary certificates Loans Derivatives assets Sub-total Total December 31, 2019 December 31, 2018 27,901 26,935 872,954 600,303 762,265 101,563 688,350 515,199 1,366,233 4,906,867 212,473 2,921,903 8,069,144 516,173 533,393 774,589 - 455,666 422,614 985,417 3,687,852 385,450 2,026,079 6,126,316 (3) Financial assets at fair value through profit or loss designated as upon initial recognition is nil as of December 31, 2018 and 2019. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 59 - 237 8. FINANCIAL ASSETS AT FVTOCI (1) Details of financial assets at FVTOCI as of December 31, 2019 and 2018 is as follows (Unit: Korean Won in millions): Debt securities: Korean treasury and government agencies Financial institutions Corporates Bond denominated in foreign currencies Equity securities Securities loaned Sub-total Total December 31, 2019 December 31, 2018 1,152,711 17,769,924 3,917,004 3,874,785 26,714,424 935,370 80,737 27,730,531 1,358,378 11,252,790 1,824,843 2,636,209 17,072,220 951,174 40,029 18,063,423 (2) Details of equity securities designated as financial assets at FVTOCI as of December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions): Purpose of acquisition Investment for strategic business partnership purpose Debt-equity swap Others Total December 31, 2019 December 31, 2018 Remarks 678,846 256,480 44 935,370 662,934 287,990 250 951,174 Cooperative insurance, etc. (3) Changes in the loss allowance and gross carrying amount of financial assets at FVTOCI are as follows (Unit: Korean Won in millions): 1) Allowance for credit losses Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Net provision of loss allowance Disposal Others (*) Ending balance (*) Others consist of foreign currencies translation, etc. Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Net provision of loss allowance Others (*) Ending balance (*) Others consist of foreign currencies translation, etc. For the year ended December 31, 2019 Stage 1 Stage 2 Stage 3 Total (5,939) - - - (3,297) 615 52 (8,569) (238) - - - - 238 - - - - - - - - - - (6,177) - - - (3,297) 853 52 (8,569) For the year ended December 31, 2018 Stage 1 Stage 2 Stage 3 Total (4,107) - - - (1,918) 86 (5,939) (129) - - - (109) - (238) - - - - - - - (4,236) - - - (2,027) 86 (6,177) Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review238 - 60 - 2) Gross carrying amount For the year ended December 31, 2019 Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Acquisition Disposal / Redemption Gain (loss) on valuation Amortization based on effective interest method Business combination (Note 45) Others (*) Ending balance (*) Others consist of foreign currencies translation, etc. Stage 1 17,087,096 - - - 23,774,375 (14,224,358) 48,956 14,629 24,985 69,478 26,795,161 Stage 2 Stage 3 25,153 - - - - (25,000) (153) - - - - Total 17,112,249 - - - 23,774,375 (14,249,358) 48,803 14,629 24,985 69,478 26,795,161 - - - - - - - - - - - Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Acquisition Disposal / Redemption Gain (loss) on valuation Amortization based on effective interest method Others (*) Ending balance (*) Others consist of foreign currencies translation, etc. For the year ended December 31, 2018 Stage 1 12,843,997 - - - 13,275,429 (9,146,307) 70,017 10,195 33,765 17,087,096 Stage 2 Stage 3 30,212 - - - 10,000 (15,047) (59) 47 - 25,153 Total 12,874,209 - - - 13,285,429 (9,161,354) 69,958 10,242 33,765 17,112,249 - - - - - - - - - - (4) During the term, the Group sold its equity securities., designated as financial assets at FVTOCI in accordance with the sale settlement of the creditors and the fair value at disposal is 34,841 million Won and the cumulative loss at disposal is 38,995 million Won. 9. SECURITIES AT AMORTIZED COST (1) Details of securities at amortized cost as of December 31, 2019 and December 31, 2018 are as follows (Unit: Korean Won in millions): Korean treasury and government agencies Financial institutions Corporates Bond denominated in foreign currencies Allowance for credit losses Total December 31, 2019 8,044,040 6,694,614 5,068,489 518,907 (5,511) 20,320,539 December 31, 2018 7,523,458 9,474,922 5,707,063 234,041 (6,925) 22,932,559 WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 61 - 239 (2) Changes in the loss allowance and gross carrying amount of securities at amortized cost are as follows (Unit: Korean Won in millions): 1) Loss allowance Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Net reversal of loss allowance Others (*) Ending balance (*) Others consist of foreign currencies translation, etc. Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Net provision of loss allowance Disposal Others (*) Ending balance (*) Others consist of foreign currencies translation, etc. 2) Gross carrying amount Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Acquisition Disposal/Redemption Amortization based on effective interest method Others (*) Ending balance (*) Others consist of foreign currencies translation, etc. Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Acquisition Disposal/Redemption Amortization based on effective interest method Others (*) Ending balance (*) Others consist of foreign currencies translation, etc. For the years ended December 31, 2019 Stage 1 Stage 2 Stage 3 Total (6,924) - - - 1,415 (2) (5,511) - - - - - - - - - - - - - - (6,924) - - - 1,415 (2) (5,511) For the year ended December 31, 2018 Stage 1 Stage 2 Stage 3 Total (5,078) - - - (1,922) 22 54 (6,924) - - - - - - - - - - - - - - - - (5,078) - - - (1,922) 22 54 (6,924) For the year ended December 31, 2019 Stage 1 22,939,484 - - - 6,092,078 (8,709,947) (3,286) 7,721 20,326,050 Stage 2 Stage 3 - - - - - - - - - - - - - - - - - - For the year ended December 31, 2018 Stage 1 16,749,296 - - - 15,622,847 (9,426,757) (7,970) 2,068 22,939,484 Stage 2 Stage 3 - - - - - - - - - - - - - - - - - - Total 22,939,484 - - - 6,092,078 (8,709,947) (3,286) 7,721 20,326,050 Total 16,749,296 - - - 15,622,847 (9,426,757) (7,970) 2,068 22,939,484 Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review 240 - 62 - 10. LOANS AND OTHER FINANCIAL ASSETS AT AMORTIZED COST, AND LOANS AND RECEIVABLES (1) Details of loans and other financial assets at amortized cost as of December 31, 2019 and loans and receivables as of December 31, 2018 are as follows (Unit: Korean Won in millions): Due from banks Loans Other financial assets Total December 31, 2019 December 31, 2018 14,492,223 271,032,244 8,193,226 293,717,693 14,151,012 260,819,917 7,486,649 282,457,578 (2) Details of due from banks are as follows (Unit: Korean Won in millions): December 31, 2019 December 31, 2018 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 Loss allowance Due from banks in foreign currencies: Sub-total Due from banks on demand Due from banks on time Others Loss allowance Sub-total Total 11,028,850 82,509 378 50,113 43,253 (2,865) 11,202,238 1,122,521 1,296,842 872,617 (1,995) 3,289,985 14,492,223 11,034,602 90,988 76 30,000 85,915 (3,069) 11,238,512 828,022 1,288,303 798,493 (2,318) 2,912,500 14,151,012 WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 63 - 241 (3) Details of restricted due from banks are as follows (Unit: Korean Won in millions): Counterparty Amount Reason of restriction Due from banks in local currencies: Due from BOK The BOK Due from KSFC Others Korea Securities Finance Corp. The Korea Exchange and others Sub-total Due from banks in foreign currencies: Due from banks on demand Foreign currency deposits on time Others The BOK and others National Bank Cambodia Korea Investment & Securities and others Sub-total Total Reserve deposits under the BOK Act Customer’s deposit reserve Central counterparty KRW margin and others 11,028,850 50,000 41,645 11,120,495 Reserve deposits under the BOK 1,103,917 Act and others Reserve deposits and others Overseas futures and options trade deposits and others 58 872,603 1,976,578 13,097,073 Counterparty December 31, 2018 Reason of restriction Due from banks in local currencies: Due from BOK The BOK Due from KSFC Korea Securities Finance Corp. Others The Korea Exchange and others Sub-total Due from banks in foreign currencies: Due from banks on demand Others The BOK and others The People’s Bank of China and others Sub-total Total Reserve deposits under the BOK Act Customer’s deposit reserve Central counterparty KRW margin and others 11,034,602 30,000 51,889 11,116,491 Reserve deposits under the 780,576 BOK Act and others Reserve deposits and others 798,493 1,579,069 12,695,560 Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review242 - 64 - (4) Changes in the loss allowance and gross carrying amount of due from banks are as follows (Unit: Korean Won in millions): 1) Allowance for credit losses For the year ended December 31, 2019 Stage 1 Stage 2 Stage 3 Total Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Reversal of loss allowance Others (*) Ending balance (5,387) - - - 544 (17) (4,860) - - - - - - - - - - - - - - (5,387) - - - 544 (17) (4,860) (*) Others consist of foreign currencies translation, etc. For the year ended December 31, 2018 Stage 1 Stage 2 Stage 3 Total Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Net provision of loss allowance Others (*) Ending balance (3,092) - - - (2,219) (76) (5,387) - - - - - - - - - - - - - - (3,092) - - - (2,219) (76) (5,387) (*) Others consist of foreign currencies translation, etc. 2) Gross carrying amount For the year ended December 31, 2019 Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Net increase(decrease) Business combination (Note 45) Others(*) Ending balance (*) Others consist of foreign currencies translation, etc. Stage 1 14,156,399 - - - 313,991 35,910 (9,217) 14,497,083 Stage 2 Stage 3 - - - - - - - - Total 14,156,399 - - - 313,991 35,910 (9,217) 14,497,083 - - - - - - - - For the year ended December 31, 2018 Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Net increase(decrease) Others(*) Ending balance (*) Others consist of foreign currencies translation, etc. Stage 1 8,870,835 - - - 5,302,244 (16,680) 14,156,399 Stage 2 Stage 3 - - - - - - Total 8,870,835 - - - 5,302,244 (16,680) 14,156,399 - - - - - - WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 65 - 243 (5) Details of loans are as follows (Unit: Korean Won in millions): December 31, 2019 December 31, 2018 Loans in local currency Loans in foreign currencies Domestic banker’s usance Credit card accounts Bills bought in foreign currencies Bills bought in local currency Factoring receivables Advances for customers on guarantees Private placement bonds Securitized loans Call loans Bonds purchased under resale agreements Others Loan origination costs and fees Discounted present value Allowance for credit losses Total 221,484,049 18,534,270 2,899,651 8,398,605 4,772,093 61,362 20,905 12,616 307,339 2,250,042 3,290,167 8,981,752 980,448 620,791 (6,826) (1,575,020) 271,032,244 210,701,421 15,239,032 2,934,366 8,051,384 7,874,457 22,885 45,851 13,810 365,531 1,377,072 2,669,080 11,701,951 1,037,283 574,178 (10,308) (1,778,076) 260,819,917 (6) Changes in the loss allowance of loans are as follows (Unit: Korean Won in millions): Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Net reversal(provision) of loss allowance Recovery Charge-off Disposal Interest income from impaired loans Business combination (Note 45) Others (*) Ending balance Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Net reversal(provision) of loss allowance Recovery Charge-off Disposal Interest income from impaired loans Business combination (Note 45) Others (*) Ending balance For the year ended December 31, 2019 Stage 1 (114,509) (14,430) 14,022 8,603 21,802 - - - - - (636) (85,148) Consumers Stage 2 (48,368) 13,661 (15,332) 10,312 (38,203) - - - - - (32) (77,962) Stage 3 (129,906) 769 1,310 (18,915) (146,204) (61,914) 217,382 2,763 9,647 - (520) (125,588) Stage 1 (348,311) (58,537) 8,215 3,308 86,565 - - - - (9) (15,489) (324,258) Corporates Stage 2 (349,619) 49,884 (20,473) 17,852 6,855 - - 1 - (2,008) (210) (297,718) For the year ended December 31, 2019 Credit card accounts Stage 2 (78,131) 15,231 (6,317) 94,116 (96,434) - - - - - 2 (71,533) Stage 1 (64,787) (15,712) 6,031 98,647 (98,888) - - - - - (17) (74,726) Stage 3 (116,772) 481 286 (192,763) (40,343) (60,365) 281,420 - - - 14 (128,042) Stage 1 (527,607) (88,679) 28,268 110,558 9,479 - - - - (9) (16,142) (484,132) Total Stage 2 (476,118) 78,776 (42,122) 122,280 (127,782) - - 1 - (2,008) (240) (447,213) Stage 3 (527,673) 8,653 12,258 (21,160) (75,392) (66,359) 222,537 42,095 17,887 (3,150) 259 (390,045) Stage 3 (774,351) 9,903 13,854 (232,838) (261,939) (188,638) 721,339 44,858 27,534 (3,150) (247) (643,675) (*) Changes due to debt-equity swap, foreign currencies translation, and etc. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review244 - 66 - Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Net reversal(provision) of loss allowance Recovery Charge-off Disposal Interest income from impaired loans Others (*) Ending balance Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Net reversal(provision) of loss allowance Recovery Charge-off Disposal Interest income from impaired loans Others (*) Ending balance For the year ended December 31, 2018 Stage 1 (101,479) (9,848) 5,905 79,078 (86,224) - - - - (1,941) (114,509) Consumers Stage 2 (41,358) 8,966 (7,183) 47,343 (56,164) - - 33 - (5) (48,368) Stage 3 (117,168) 882 1,278 (126,421) (49,637) (51,855) 204,552 1,633 7,945 (1,115) (129,906) Stage 1 (365,251) (24,324) 15,074 62,731 (68,381) - - - - 31,840 (348,311) Corporates Stage 2 (255,922) 22,658 (407,780) 97,750 193,392 - - 237 - 46 (349,619) Stage 3 (905,243) 1,666 392,706 (160,481) (94,004) (127,630) 290,109 49,902 23,381 1,921 (527,673) For the year ended December 31, 2018 Credit card accounts Stage 2 (71,463) 13,738 (6,194) 84,048 (98,260) - - - - - (78,131) Stage 1 (57,134) (13,846) 5,871 82,406 (82,083) - - - - (1) (64,787) Stage 3 (102,858) 108 323 (166,454) (33,205) (57,565) 242,879 - - - (116,772) Stage 1 (523,864) (48,018) 26,850 224,215 (236,688) - - - - 29,898 (527,607) Stage 3 Total Stage 2 (368,743) (1,125,269) 2,656 394,307 (453,356) (176,846) (237,050) 737,540 51,535 31,326 806 (774,351) 45,362 (421,157) 229,141 38,968 - - 270 - 41 (476,118) (*) Changes due to debt-equity swap, foreign currencies translation, and etc. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 67 - 245 (7) Changes in the gross carrying amount of loans are as follows (Unit: Korean Won in millions): Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Charge-off Disposal Net increase (decrease) Business combination (Note 45) Ending balance Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Charge-off Disposal Net increase (decrease) Business combination (Note 45) Ending balance Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Charge-off Disposal Net increase (decrease) Ending balance Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Charge-off Disposal Net increase (decrease) Ending balance For the year ended December 31, 2019 Stage 1 110,619,242 2,626,998 (8,238,499) (152,128) - - 6,397,570 100 111,253,283 Consumers Stage 2 6,028,009 (2,614,767) 8,256,600 (104,129) - (55) 883,149 - 12,448,807 Stage 1 Stage 3 391,494 131,453,727 1,560,734 (12,231) (2,306,186) (18,101) (252,249) 256,257 - (217,382) (67,924) - 3,985,392 85,561 2,561 - 417,674 134,443,979 Corporates Stage 2 5,031,258 (1,550,164) 2,341,881 (142,902) - (70) (809,566) 40,161 4,910,598 Stage 3 1,020,658 (10,570) (35,695) 395,151 (222,537) (161,318) (266,432) 21,000 740,257 For the year ended December 31, 2019 Credit card accounts Stage 2 982,772 (258,166) 307,450 (104,712) - - (41,512) - 885,832 Stage 1 6,861,844 258,674 (307,100) (124,675) - - 589,724 - 7,278,467 Stage 3 Stage 1 208,989 248,934,813 4,446,406 (10,851,785) (529,052) - - 10,972,686 2,661 228,367 252,975,729 (508) (350) 229,387 (281,420) - 72,269 - Total Stage 2 12,042,039 (4,423,097) 10,905,931 (351,743) - (125) 32,071 40,161 18,245,237 Stage 3 1,621,141 (23,309) (54,146) 880,795 (721,339) (229,242) (108,602) 21,000 1,386,298 For the year ended December 31, 2018 Stage 1 103,502,347 1,921,485 (3,186,506) (218,943) - - 8,600,859 110,619,242 Consumers Stage 2 5,487,758 (1,912,046) 3,199,993 (127,447) - (478) (619,771) 6,028,009 Stage 3 Stage 1 326,739 131,096,396 (9,439) 1,081,702 (13,487) (2,275,984) 346,390 (348,503) (204,552) - (31,910) - 1,900,116 (22,247) 391,494 131,453,727 Corporates Stage 2 4,466,354 (1,077,895) 2,733,860 (275,189) - (2,781) (813,091) 5,031,258 Stage 3 1,622,409 (3,807) (457,876) 623,692 (290,109) (166,347) (307,304) 1,020,658 For the year ended December 31, 2018 Credit card accounts Stage 2 935,266 (221,841) 288,027 (95,758) - - 77,078 982,772 Stage 1 5,721,743 221,984 (287,623) (104,459) - - 1,310,199 6,861,844 Stage 3 Stage 1 177,983 240,320,486 3,225,171 (5,750,113) (671,905) - - 11,811,174 208,989 248,934,813 (143) (404) 200,217 (242,879) - 74,215 Total Stage 2 10,889,378 (3,211,782) 6,221,880 (498,394) - (3,259) (1,355,784) 12,042,039 Stage 3 2,127,131 (13,389) (471,767) 1,170,299 (737,540) (198,257) (255,336) 1,621,141 (8) Details of other financial assets are as follows (Unit: Korean Won in millions): CMA accounts Receivables Accrued income Telex and telephone subscription rights and refundable deposits Other receivables Allowance for credit losses Total December 31, 2019 199,000 5,653,997 1,012,240 949,118 456,010 (77,139) 8,193,226 December 31, 2018 185,999 4,864,738 1,002,964 986,834 514,055 (67,941) 7,486,649 Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review246 - 68 - (9) Changes in the allowances for credit losses on other financial assets are as follows (Unit: Korean Won in millions): Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Net reversal (provision) of loss allowance Charge-off Disposal Business combination (Note 45) Others Ending balance Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Net provision of loss allowance Charge-off Disposal Others Ending balance For the year ended December 30, 2019 Stage 1 Stage 2 Stage 3 Total (3,469) (207) 116 19 802 - - (401) (56) (3,196) (1,971) 198 (43) 159 (9) - - - - (1,666) (62,501) 9 (73) (178) (6,854) 2,506 1,685 (7,268) 397 (72,277) (67,941) - - - (6,061) 2,506 1,685 (7,669) 341 (77,139) For the year ended December 30, 2018 Stage 1 Stage 2 Stage 3 Total (2,955) (150) 105 6,509 (6,583) - - (395) (3,469) (1,832) 139 (416) 304 (166) - 1 (1) (1,971) (54,211) 11 311 (6,813) (31,550) 28,200 1,264 287 (62,501) (58,998) - - - (38,299) 28,200 1,265 (109) (67,941) (10) Changes in the gross carrying amount of other financial assets are as follows (Unit: Korean Won in millions): Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Charge-off Disposal Net increase (decrease) Business combination (Note 45) Ending balance Beginning balance Transfer to 12-month expected credit losses Transfer to lifetime expected credit losses Transfer to credit-impaired financial assets Charge-off Disposal Net increase (decrease) Ending balance (*) Others consist of foreign currencies translation, etc. Stage 1 7,454,390 8,036 (17,678) (952) - - 606,457 9,591 8,059,844 For the year ended December 30, 2019 Stage 2 Stage 3 28,193 (8,019) 17,740 (918) - - 55,651 - 92,647 72,007 (17) (62) 1,870 (2,506) (2,212) 41,138 7,656 117,874 Stage 1 6,662,335 7,573 (11,418) (7,580) - - 803,480 7,454,390 For the year ended December 30, 2018 Stage 2 Stage 3 29,124 (7,556) 11,734 (1,110) - (5) (3,994) 28,193 79,912 (17) (316) 8,690 (28,201) (1,640) 13,579 72,007 Total 7,554,590 - - - (2,506) (2,212) 703,246 17,247 8,270,365 Total 6,771,371 - - - (28,201) (1,645) 813,065 7,554,590 WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 69 - 247 11. 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. 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 assets or liabilities 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. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review248 - 70 - (2) Fair value hierarchy of financial assets and liabilities measured at fair value are as follows (Unit: Korean Won in millions): Level 1 (*) Level 2 (*) Level 3 Total December 31, 2019 Financial assets: Financial assets at fair value through profit or loss mandatorily measured at fair value Deposits Debt securities Equity securities Capital contributions Beneficiary certificates Loans Derivative assets (Designated for trading) Sub-total Financial assets at FVTOCI Debt securities Equity securities Securities loaned Sub-total Derivative assets (Designated for hedging) Total Financial liabilities: Financial liabilities at fair value through profit or loss mandatorily measured at fair value Deposits due to customers Derivative liabilities (Designated for trading) Sub-total Financial liabilities at fair value through profit or loss designated as upon initial recognition Equity-linked securities Derivative liabilities (Designated for hedging) Total 27,901 420,330 157,895 - 1 - 3,057 609,184 2,146,163 441,672 - 2,587,835 - 3,197,019 27,530 4,336 31,866 - - 31,866 - 1,910,929 1,834 - 90,498 59,844 2,893,798 4,956,903 24,568,261 - 80,737 24,648,998 121,131 29,727,032 - 5,826 528,621 515,199 1,275,734 152,629 25,048 2,503,057 - 493,698 - 493,698 - 2,996,755 27,901 2,337,085 688,350 515,199 1,366,233 212,473 2,921,903 8,069,144 26,714,424 935,370 80,737 27,730,531 121,131 35,920,806 - - 27,530 2,766,771 2,766,771 72,039 72,039 2,843,146 2,870,676 - 87,626 87,626 6,516 2,773,287 321 159,986 6,837 2,965,139 (*) There were no transfers between Level 1 and Level 2 of financial assets and liabilities measured at fair value. The Group recognizes transfers among levels at the end of reporting period in which events have occurred or conditions have changed. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 71 - 249 Level 1 (*) Level 2 (*) Level 3 Total December 31, 2018 Financial assets: Financial assets at fair value through profit or loss mandatorily measured at fair value Deposits Debt securities Equity securities Capital contributions Beneficiary certificates Loans Derivative assets (Designated for trading) Sub-total Financial assets at FVTOCI Debt securities Equity securities Securities loaned Sub-total Derivative assets (Designated for hedging) Total Financial liabilities: Financial liabilities at fair value through profit or loss mandatorily measured at fair value Deposits due to customers Derivative liabilities (Designated for trading) Sub-total Financial liabilities at fair value through profit or loss designated as upon initial recognition Equity-linked securities Derivative liabilities (Designated for hedging) Total 26,935 239,794 53,806 - 2,130 - 13,216 335,881 1,838,409 482,327 - 2,320,736 - 2,656,617 27,058 2,245 29,303 - - 29,303 - 1,575,972 - - 128,988 205,000 1,964,065 3,874,025 15,233,811 - 40,029 15,273,840 35,503 19,183,368 - 8,389 401,860 422,614 854,299 180,450 48,798 1,916,410 - 468,847 - 468,847 - 2,385,257 26,935 1,824,155 455,666 422,614 985,417 385,450 2,026,079 6,126,316 17,072,220 951,174 40,029 18,063,423 35,503 24,225,242 - - 27,058 2,071,925 2,071,925 16,691 16,691 2,090,861 2,117,919 - 164,767 164,767 51,408 2,123,333 - 181,458 51,408 2,334,094 (*) There were no transfers between Level 1 and Level 2 of financial assets and liabilities measured at fair value. The Group recognizes transfers among levels at the end of reporting period in which events have occurred or conditions have changed. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review250 - 72 - Financial assets and liabilities at fair value through profit or loss, financial assets at FVTOCI, and derivative assets (Designated for hedging) and liabilities (Designated for hedging) 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 valuation methods. Valuation methods and input variables for each type of financial instruments are as follows: ① Valuation methods and input variables for each type of financial instrument classified into level 2 in December 31, 2019 and 2018 are as follows: Loans Valuation methods 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. Input variables Risk-free market rate, Credit spread Debt securities and Securities loaned Fair value is measured by discounting the future cash flows of debt securities applying the risk-free market rate. Risk-free market rate Credit spread Beneficiary certificates The beneficiary certificates classified as Level 2 are Base price MMF and are measured at base price. Derivatives The fair value is measured through option model (Closed Form), DCF Model, FDM, Monte Carlo Simulation and etc. Market rate, foreign exchange rate, stock prices and value of underlying assets, volatility, and etc. ② Valuation methods and input variables for each type of financial instrument classified into level 3 in December 31, 2019 and 2018 are as follows: Loans Debt securities Equity securities, capital contributions and Beneficiary certificates Valuation methods The fair value of Loans is measured by the Binomial tree given the values of underlying assets and volatility. 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. Input variables Values of underlying assets, Volatility Risk-free market rate, Credit spread Risk-free market rate, market risk premium, corporate Beta, etc. Derivatives Fair value is measured by models such as option model (Closed form), DCF model, FDM and Monte Carlo Simulation. Market rate, values of underlying assets such as foreign exchange rate and stock prices, volatility, etc. Equity-linked securities Fair value is measured by models such as option model (Closed form), DCF model, FDM and Monte Carlo Simulation. Values of underlying assets, market rate, dividend, volatility, correlation coefficient and foreign exchange rate, etc. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 73 - 251 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 Binomial tree, DCF Type Loans Derivative assets Option valuation model and others Interest rate related Range Impact of changes in significant unobservable inputs on fair value measurement 14.50%~46.06% Variation of fair value as volatility of underlying asset increases. 0.90~0.98 Variation of fair value increases as correlation coefficient increases. 16.30%~41.20% Variation of fair value increases as volatility increases. Input variable Stock, Volatility of underlying asset Correlation coefficient Volatility of underlying asset Equity related Correlation coefficient 0.237~0.675 Variation of fair value increases as correlation coefficient increases. DCF model Currency related Credit risk adjustment ratio 7.70%~100.00% Variation of fair value increases as credit risk adjustment ratio increases. Derivative liabilities Option valuation model and others Interest rate related Correlation coefficient 0.90~0.98 Variation of fair value increases as correlation coefficient increases. Volatility of underlying asset 16.30%~41.20% Variation of fair value increases as volatility increases. Equity related Correlation coefficient 0.237~0.675 Variation of fair value increases as correlation coefficient increases. Volatility of underlying 21.40%~22.40% Variation of fair value increases as volatility increases. Equity-linked securities Monte Carlo Simulation and others Correlation coefficient Volatility of underlying asset Equity securities, capital contributions, debt securities, and beneficiary certificates External appraisal value and others Terminal growth rate Discount rate Volatility of real estate sale price Volatility of underlying assets 0.294~0.675 19.10%~25.30% 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 a compound financial instrument may decrease. Fair value increases as terminal growth rate increases. Fair value increases as discount rate decreases. Fair value increases as real estate sale price increases. 13.21%~52.48% Variation of fair value increases as 0.35%~19.21% 0.00%~ 9.15% 0.00 volatility of underlying assets increases Fair value of financial assets and liabilities classified into Level 3 is measured by the Group using its own valuation methods 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. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review252 - 74 - (3) Changes in financial assets and liabilities measured at fair value classified into Level 3 are as follows (Unit: Korean Won in millions): January 1, 2019 Business combination Net Income (loss) (*1) Other comprehens -ive income Purchases/ issuances Disposals/ settlements Transfer to or out Level 3 (*2) December 31, 2019 For the year ended December 31, 2019 Financial assets: Financial assets at fair value through profit or loss mandatorily measured at fair value Debt securities Equity securities Capital contributions Beneficiary certificates Loans Derivative assets Sub-total Financial assets at FVTOCI Equity securities Total Financial liabilities: Financial liabilities at fair value through profit or loss mandatorily measured at fair value Derivative liabilities (Designated for trading) Financial liabilities at fair value through profit or loss designated as upon initial recognition Equity-linked securities Derivatives liabilities (designated for hedging) Total 8,389 401,860 422,614 854,299 180,450 48,798 1,916,410 468,847 2,385,257 16,691 164,767 - 181,458 - - 707 - - - 707 476 59,537 (13,270) 18,450 6,854 16,935 88,982 - - - - - - - 1,408 2,115 - 88,982 23,063 23,063 2,000 95,511 173,064 578,228 60,696 1,115 910,614 687 911,301 (5,039) (28,287) (67,916) (183,684) (95,371) (40,343) (420,640) (306) (420,946) - - - - 8,441 - (1,457) 6,984 5,826 528,621 515,199 1,275,734 152,629 25,048 2,503,057 (1) 6,983 493,698 2,996,755 - - - - 84,033 33,237 - 117,270 - - - - (11,140) (14,817) (2,728) 72,039 1,809 (112,187) - 87,626 321 (9,010) - (127,004) - (2,728) 321 159,986 (*1) The losses that increase financial liabilities are presented as positive amounts, and the gains that decrease financial liabilities are presented as negative amounts. The loss amounting to 21,809 million Won for the years ended December 31, 2019, which is from financial assets and liabilities that the Group holds as at the end of the periods, has been recognized in net gain (loss) on financial assets at FVTPL and net gain (loss) on financial assets at FVTOCI 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. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 75 - 253 January 1, 2018 Net Income (loss) (*1) For the year ended December 31, 2018 Other comprehensiv -e income Purchases/ issuances Disposals/ settlements Transfer to or out of Level 3 (*2) December 31, 2018 Financial assets: Financial assets at fair value through profit or loss mandatorily measured at fair value Debt securities Equity securities Capital contributions Beneficiary certificates Loans Derivative assets Sub-total Financial assets at FVTOCI Equity securities Total Financial liabilities: Financial liabilities at fair value through profit or loss mandatorily measured at fair value Derivative liabilities Financial liabilities at fair value through profit or loss designated as upon initial recognition Equity-linked securities Total 9,694 280,171 294,121 654,066 165,001 19,346 1,422,399 (28) 56,271 16,119 16,391 3,378 75,696 167,827 - - - - - - - 3,000 67,953 144,207 5,151,535 150,103 4,722 5,521,520 (4,277) (2,535) (31,833) (4,971,003) (138,032) (50,966) (5,198,646) - - - 3,310 - - 3,310 8,389 401,860 422,614 854,299 180,450 48,798 1,916,410 451,287 1,873,686 - 167,827 19,688 19,688 432 5,521,952 (2,560) (5,201,206) - 3,310 468,847 2,385,257 20,951 46,409 160,057 181,008 (16,243) 30,166 - - - 255 (50,921) (3) 16,691 183,039 183,294 (162,086) (213,007) - (3) 164,767 181,458 (*1) The losses that increase financial liabilities are presented as positive amounts, and the gains that decrease financial liabilities are presented as negative amounts. The gain amounting to 137,777 million Won for the years ended December 31, 2018, which is from financial assets and liabilities that the Group holds as at the end of the periods, has been recognized in net gain (loss) on financial assets at FVTPL and net gain (loss) on financial assets at FVTOCI 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. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review254 - 76 - (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) interest rate related derivatives, currency related derivatives, equity related derivatives, equity-linked securities beneficiary certificates and loans of which fair value changes are recognized as net income; (2) equity securities of which fair value changes are recognized as other comprehensive income. Among the financial instruments that are classified as Level 3 amounting to 3,156,741 million Won and 2,566,715 million Won as of December 31, 2019 and 2018 respectively, investments of 2,194,320 million Won and 1,641,875 million Won that are considered to provide the best estimate of fair value are excluded from the sensitivity analysis. 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 (Unit: Korean Won in millions): Financial assets: Financial assets at fair value through profit or loss mandatorily measured at fair value Derivative assets (*1) Loans (*2) Debt securities Equity securities (*3) (*4) Beneficiary certificates (*4) Financial assets at FVTOCI Equity securities (*3) (*4) Total Financial liabilities: Financial liabilities at fair value through profit or loss mandatorily measured at fair value Derivative liabilities (*1) Financial liabilities at FVTPL designated as upon initial recognition Equity-linked securities (*1) Total December 31, 2019 Net income (loss) Other comprehensive income (loss) Favorable Unfavorable Favorable Unfavorable 640 152 652 16,104 1,125 - 18,673 1,054 136 1,190 (935) (128) (640) (10,929) (1,125) - (13,757) (816) (142) (958) - - - - - - - - - - 26,380 26,380 (11,981) (11,981) - - - - - - (*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%. (*2) Fair value changes of equity securities are calculated by increasing or decreasing stock prices (-10%~10%) and volatility (-10~10%) and discount rate. The stock prices, volatility, and discount rate are major unobservable variables. (*3) Fair value changes of equity securities are calculated by increasing or decreasing growth rate (0~1%) and discount rate (-1~1%) or liquidation value (-1~1%). The growth rate, discount rate, and liquidation value are major unobservable variables. (*4) 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%. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 77 - 255 December 31, 2018 Net income (loss) Other comprehensive income (loss) Favorable Unfavorable Favorable Unfavorable Financial assets: Financial assets at fair value through profit or loss mandatorily measured at fair value Derivative assets (*1) Loans Debt securities Equity securities (*2) (*3) Beneficiary certificates (*3) Financial assets at FVTOCI Equity securities (*2) (*3) Total Financial liabilities: Financial liabilities at fair value through profit or loss mandatorily measured at fair value Derivative liabilities (*1) Financial liabilities at fair value through profit or loss designated as upon initial recognition Equity-linked securities (*1) Total 4,578 146 68 12,700 1,582 - 19,074 (4,352) (127) (35) (9,165) (1,582) - (15,261) - - - - - - - - - - 23,798 23,798 (10,078) (10,078) 2,433 (2,751) 1,561 3,994 (1,669) (4,420) - - - - - - (*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%. (*2) Fair value changes of equity securities are calculated by increasing or decreasing growth rate (0~1%) and discount rate or liquidation value (-1~1%). The growth rate, discount rate, and liquidation value are major unobservable variables. (*3) 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%. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review256 - 78 - (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: Securities at amortized cost Loans and other financial assets at amortized cost Financial liabilities: Deposits due to customers Borrowings Debentures Other financial liabilities Financial assets: Securities at amortized cost Loans and other financial assets at amortized cost Financial liabilities: Deposits due to customers Borrowings Debentures Other financial liabilities December 31, 2019 Fair value Level 1 Level 2 Level 3 Total Book value 3,123,898 17,378,920 - 20,502,818 20,320,539 25,902 54,507 283,058,699 283,139,108 293,717,693 - - - - 264,909,974 18,919,018 31,173,189 17,693,559 - - - - 264,909,974 18,919,018 31,173,189 17,693,559 264,685,578 18,998,920 30,858,055 17,706,767 December 31, 2018 Fair value Level 1 Level 2 Level 3 Total Book value 3,618,213 19,417,130 - 23,035,343 22,932,559 - - - - - - 282,342,760 282,342,760 282,457,578 248,763,952 16,203,070 28,765,251 21,461,397 - - - - 248,763,952 16,203,070 28,765,251 21,461,397 248,690,939 16,202,986 28,735,862 21,442,524 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 by using valuation methods. Valuation methods and input variables for financial assets and liabilities that are measured at amortized cost are given as follows: Securities at amortized cost Valuation methods 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. Input variables Risk-free market rate, credit spread, prepayment rate, etc. Loans and other financial assets at amortized cost 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, prepayment rate, etc. Deposits due to customers, borrowings, debentures and other financial liabilities The fair value is measured by discounting the projected cash flows of debt products by applying the market discount rate that is reflecting credit rating of the Group. Risk-free market rate, forward rate, etc. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 79 - 257 (6) Financial instruments by category Carrying amounts of financial assets and liabilities by each category are as follows (Unit: Korean Won in millions): Financial assets Deposits Securities Loans Derivative assets Other financial assets Total December 31, 2019 Financial asset at FVTPL Financial assets at FVTOCI 27,901 4,906,867 212,473 2,921,903 - 8,069,144 - 27,730,531 - - - 27,730,531 Financial assets at amortized cost 14,492,223 20,320,539 271,032,244 - 8,193,226 314,038,232 December 31, 2019 Derivatives assets (Designated for hedging) - - - 121,131 - 121,131 Total 14,520,124 52,957,937 271,244,717 3,043,034 8,193,226 349,959,038 Financial liabilities Deposits due to customers Borrowings Debentures Derivative liabilities Other financial liabilities (*) Total Financial liabilities at FVTPL 27,530 87,626 - 2,843,146 - 2,958,302 Financial liabilities at amortized cost 264,685,578 18,998,920 30,858,055 - 17,769,531 332,312,084 Derivatives liabilities (Designated for hedging) - - - 6,837 - 6,837 Total 264,713,108 19,086,546 30,858,055 2,849,983 17,769,531 335,277,223 (*) Other financial liabilities include 62,764 million Won of financial guarantee liabilities measured at amortized cost included in provisions. Financial assets Deposits Securities Loans Derivative assets Other financial assets Total December 31, 2018 Financial asset at FVTPL Financial assets at FVTOCI 26,935 3,687,852 385,450 2,026,079 - 6,126,316 - 18,063,423 - - - 18,063,423 Financial assets at amortized cost 14,151,012 22,932,559 260,819,917 - 7,486,649 305,390,137 December 31, 2018 Derivatives assets (Designated for hedging) - - - 35,503 - 35,503 Total 14,177,947 44,683,834 261,205,367 2,061,582 7,486,649 329,615,379 Financial liabilities Deposits due to customers Borrowings Debentures Derivative liabilities Other financial liabilities(*) Total Financial liabilities at FVTPL 27,058 164,767 - 2,090,861 - 2,282,686 Financial liabilities at amortized cost 248,690,939 16,202,986 28,735,862 - 21,490,341 315,120,128 Derivatives liabilities (Designated for hedging) - - - 51,408 - 51,408 Total 248,717,997 16,367,753 28,735,862 2,142,269 21,490,341 317,454,222 (*) Other financial liabilities include 47,817 million Won of financial guarantee liabilities measured at amortized cost included in provisions. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review258 - 80 - (7) Income or expense from financial instruments by category Income or expense from financial assets and liabilities by each category during the years ended December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions): December 31, 2019 Interest Income(expense) 50,277 474,751 436,340 Fees and Commissions Income(expense) 89,817 - - 9,615,060 - (4,682,722) - - 5,893,706 296,435 - - - 71,106 457,358 Provision (reversal) of credit loss - (3,297) 1,415 (385,758) - Others 112,434 31,995 - 102,115 - Total 252,528 503,449 437,755 9,627,852 - - - (4,682,722) - 13,396 (374,244) 36,982 - 283,526 36,982 84,502 6,260,346 December 31, 2018 Interest Income(expense) 54,243 280,371 376,788 Fees and Commissions Income(expense) 86,845 66 - 8,973,097 (3,164) (4,030,384) - - 5,650,951 317,316 - 27,742 - - 431,969 Provision (reversal) of credit loss - (2,027) (1,922) (415,084) - Others 264,850 24,707 431 79,101 17,485 Total 405,938 303,117 375,297 8,954,430 14,321 - 25,498 (3,977,144) - 89,459 (329,574) (672) - 411,400 (672) 89,459 6,164,746 Financial assets at FVTPL Financial assets at FVTOCI Securities at amortized cost Loans and other financial assets at amortized cost Financial liabilities at FVTPL Financial liabilities at amortized cost Net derivatives (designated for hedging) Off-balance provisions Total Financial assets at FVTPL Financial assets at FVTOCI Securities at amortized cost Loans and other financial assets at amortized cost Financial liabilities at FVTPL Financial liabilities at amortized cost Net derivatives (designated for hedging) Off-balance provisions Total WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 81 - 259 12. DERECOGNITION AND OFFSET OF FINANCIAL INSTRUMENTS (1) Derecognition of financial instruments Transferred financial assets that do not meet the condition of derecognition in their entirety. 1) Bonds sold 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): December 31, 2019 December 31, 2018 Assets transferred Financial assets at FVTPL Financial assets at FVTOCI Securities at amortized cost Loans and other financial assets at amortized cost Related liabilities Total Bonds sold under repurchase agreements 407,985 56,975 42,841 82,594 590,395 569,002 - 33,588 5,552 - 39,140 42,907 2) 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 the securities loaned are as follows (Unit: Korean Won in millions): Financial assets at FVTOCI Korean financial institution’s debt securities and others Total December 31, 2019 December 31, 2018 80,737 80,737 40,029 40,029 Loaned to Korea Securities Finance Corporation The details of the transferred financial assets that do not meet the conditions of derecognition in their entirety, such as disposal of securities under repurchase agreement or securities loaned, are explained in Note 18. The Group does not have continuing involvement in transferred financial assets. (2) The offset of financial assets and liabilities The Group possesses both the uncollected domestic exchange receivables and the 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 offset with part of unpaid domestic exchange payable or uncollected domestic exchange receivables and has been disclosed in loans at amortized cost and other financial assets and other financial liabilities of the Group’s statements of financial position respectively. The Group possesses the derivative assets, derivative liabilities, receivable spot exchange and payable spot exchange that do not satisfy the offsetting criteria of K-IFRS 1032, but provide the Group under the circumstances of the trading party’s defaults, insolvency or bankruptcy, with the right of offsetting. Items 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 net amount of derivative assets and derivative liabilities, receivable spot exchange and payable spot exchange can be offset. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review 260 - 82 - The Group has entered into a resale and repurchase agreement and accounted it as a collateralized borrowing. The Group has also entered into a resale and purchase agreement and accounted it as a secured loans. The Group under the repurchase agreements has an offsetting right only upon the counterparty’s default, insolvency or bankruptcy; thus, the repurchase agreements are applied by the TBMA/ISMA Global Master Repurchase Agreement, which does not satisfy the offsetting criteria of K-IFRS 1032. The Group disclosed bonds sold under repurchase agreements as borrowings and bonds purchased under resale agreements as loan at amortized cost and other financial assets. As of December 31, 2019 and 2018, the financial instruments to be off set and may be covered by master netting agreements and similar agreements are as follows (Unit: Korean Won in millions): Gross amounts of recognized financial assets 3,032,894 5,112,206 8,981,752 Gross amounts of recognized financial assets setoff - - - December 31, 2019 Related amounts not setoff in the consolidated statement of financial position Netting agreements and others Cash collateral received Net amounts 7,058,885 111,122 975,093 Net amounts of financial assets presented 3,032,894 5,112,206 8,981,752 8,981,752 - - 31,642,486 31,269,258 48,769,338 31,269,258 373,228 17,500,080 - 16,040,637 - 111,122 373,228 1,348,321 2,824,449 87,626 5,111,386 569,002 - - - - 2,824,449 87,626 5,111,386 7,071,549 172,488 779,424 569,002 180,402 388,600 - 32,531,186 31,269,258 41,123,649 31,269,258 1,261,928 9,854,391 1,257,280 8,509,231 - 561,088 4,648 784,072 Financial assets: Derivative assets (*1) Receivable spot exchange (*2) Bonds purchased under resale agreements (*2) Domestic exchange settlement credits (*2)(*6) Total Financial liabilities: Derivative liabilities (*1) Equity-linked securities in short position (*3) Payable spot exchange (*4) Bonds sold under repurchase agreements (*5) Domestic exchange settlement debits (*4)(*6) Total (*1) The items include derivatives held for trading, derivatives designated for hedging. (*2) The items are included in loan at amortized cost and other financial assets. (*3) The items are equity linked securities related to derivatives and are included in financial liabilities at FVTPL. (*4) The items are included in other financial liabilities. (*5) The items are included in borrowings. (*6) Certain financial assets and liabilities are presented as net amounts. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 83 - 261 Gross amounts of recognized financial assets 1,908,542 4,200,532 11,701,951 Gross amounts of recognized financial assets setoff - - - December 31, 2018 Related amounts not setoff in the consolidated statement of financial position Netting agreements and others Cash collateral received Net amounts 5,527,117 66,857 515,100 Net amounts of financial assets presented 1,908,542 4,200,532 11,701,951 11,701,951 - - 30,090,598 29,699,412 47,901,623 29,699,412 391,186 18,202,211 - 17,229,068 - 66,857 391,186 906,286 1,862,681 164,767 4,206,027 42,907 - - - - 1,862,681 164,767 4,206,027 5,540,147 115,615 577,713 42,907 42,907 - - 36,832,774 29,699,412 43,109,156 29,699,412 7,133,362 13,409,744 6,231,538 11,814,592 - 901,824 115,615 1,479,537 Financial assets: Derivative assets (*1) Receivable spot exchange (*2) Bonds purchased under resale agreements (*2) Domestic exchange settlement credits (*2)(*6) Total Financial liabilities: Derivative liabilities (*1) Equity-linked securities index in short position (*3) Payable spot exchange (*4) Bonds sold under repurchase agreements (*5) Domestic exchange settlement debits (*4)(*6) Total (*1) The items include derivatives held for trading, derivatives designated for hedging. (*2) The items are included in loan at amortized cost and other financial assets. (*3) The items are equity linked securities related to derivatives and are included in financial liabilities at FVTPL. (*4) The items are included in other financial liabilities. (*5) The items are included in borrowings. (*6) Certain financial assets and liabilities are presented as net amounts. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review262 - 84 - 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: Joint ventures and associates Main business Woori Bank: Woori Service Networks Co., Ltd. (*1) Korea Credit Bureau Co., Ltd. (*2) Freight & staffing services Credit information Korea Finance Security Co., Ltd. Security service (*1) Saman Corporation (*2) Wongwang Co., Ltd. (*4) Sejin Construction Co., Ltd. (*4) ARES-TECH Co., Ltd. (*4) General construction Technology service Wholesale and real estate Construction Electronic component manufacturing Other services Reading Doctors Co., Ltd. (*4) Cultizm Korea LTD Co., Ltd. (*4) Wholesale and retail NK Eng Co., Ltd. (*4) Woori Growth Partnerships New Technology Private Equity Fund Bank 2016KIF-IMM Woori Technology Venture Fund K BANK Co., Ltd. (*2) Smart Private Equity Fund No.2 Woori Bank-Company K Korea Movie Asset Fund Well to Sea No. 3 Private Equity Fund (*7) Partner One Value Up I Private Equity Fund IBK KIP Seongjang Dideemdol 1st Investment Limited Private Partnership Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund LOTTE CARD Co., Ltd. (*8) Japanese Hotel Real Estate Private Equity Fund 2 (*8) Woori Investment Bank Co., Ltd.: sales Manufacturing Other financial services Other financial services Finance Other financial services Other financial services Finance Other financial services Other financial services Other financial services Credit card and installment financing Other financial services Percentage of ownership (%) December 31, December 31, 2018 2019 Location Financial statements as of 4.9 9.9 15.0 9.2 29.0 29.6 23.4 35.4 31.3 23.1 23.1 20.0 14.5 20.0 25.0 50.0 23.3 20.0 25.0 20.0 19.9 4.9 9.9 Korea Korea 15.0 Korea 9.2 Korea 29.0 29.6 23.4 35.4 31.3 23.1 Korea Korea Korea Korea Korea Korea 23.1 Korea 20.0 Korea 14.1 Korea 20.0 Korea 25.0 Korea 50.0 Korea 23.3 Korea 20.0 Korea 25.0 Korea - - Korea Korea November 30, 2019(*5) December 31,2019 November 30,2019 (*5) September 30,2019(*5) - - - - - - December 31,2019 December 31,2019 November 30,2019 (*5) December 31,2019 December 31,2019 September 30,2019(*5) December 31,2019 December 31,2019 December 31,2019 September 30,2019(*5) October 31,2019(*5) Nomura-Rifa Private Real Estate Investment Trust No.17 (*6) Other financial services - 19.4 Korea - Woori Private Equity Asset Management Co., Ltd.: Uri Hanhwa Eureka Private Equity Fund Japanese Hotel Real Estate Private Equity Fund 1: Godo Kaisha Oceanos 1 (*8) Woori bank and Woori card Co., Ltd.: Other financial services Other financial services 0.8 0.8 Korea 47.8 - Japan December 31,2019 October 31,2019(*5) WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 85 - 263 Percentage of ownership (%) December 31, December 31, 2018 2019 Location Korea Financial statements as of - 24.5 Joint ventures and associates Dongwoo C & C Co., Ltd. (*4) SJCO Co., Ltd. (*4) G2 Collection Co., Ltd. (*4) The Base Enterprise Co., Ltd. (*4) Kyesan Engineering Co., Ltd. (*4) Good Software Lap Co., Ltd. (*4) QTS Shipping Co., Ltd. (*4) DAEA SNC Co., Ltd. (*4) Main business Construction Aggregate transportation and wholesale Wholesale and retail sales Manufacturing Construction Service Complex transportation brokerage Wholesale and retail sales Manufacturing Manufacturing Manufacturing Plating Manufacturing Force TEC Co., Ltd. (*4) Sinseong Trading Co., Ltd. (*4) PREXCO Co., Ltd. (*4) Jiwon Plating Co., Ltd. (*4) Gil Co.,Ltd. (*6) Youngdong Sea Food Co., Ltd. (*4) Processed sea food Woori Bank , Woori Investment Bank Co., Ltd. and Woori Private Equity Asset Management Co., Ltd.: Woori-Shinyoung Growth-Cap Private Equity Fund I (*8) Woori Bank and Woori Investment Bank Co., Ltd.: manufacturing Other financial services Chin Hung International Inc. (*3) Construction PCC-Woori LP Secondary Fund (*8) Other financial services Woori Bank and Woori Private Equity Asset Management Co., Ltd.: Woori-Q Corporate Restructuring Private Equity Fund (*8) Trust and collective investment 24.5 28.7 29.2 48.4 23.3 29.4 49.8 25.5 25.8 27.9 28.1 20.8 - 24.5 26.5 Korea 28.9 48.4 23.3 29.4 Korea Korea Korea Korea 49.4 Korea 24.0 25.8 27.2 28.1 20.8 26.1 Korea Korea Korea Korea Korea Korea 24.0 Korea - - - - - - - - - - - - - 31.9 - Korea 25.3 38.8 38.4 25.3 Korea - - Korea Korea December 31,2019 November 30,2019 (*5) December 31,2019 December 31,2019 (*1) Most of the significant business transactions of associates are with the Group as of December 31, 2019 and 2018. (*2) The Group can participate in decision-making body and exercise significant influence over financial policies and operational policies decision making of the associates. (*3) Equity securities that have published market price among investment assets of associates are common shares of Chin Hung International Inc. Quoted market prices of Chin Hung International Inc. are 2,310 Won and 2,065 Won as of December 31, 2019 and 2018, respectively. (*4) There is no investment balance as of December 31, 2019 and 2018. (*5) The equity method was applied using the most recent financial statements available from the settlement date because no financial statements were available at the end of December and the significant transactions or events that occurred between the end of the reporting period of the associate and the end of the reporting period of the subsidiary were duly reflected. (*6) The entity was excluded from the associate as the group sold its entire stake during the year ended December 31, 2019. (*7) The Group has signed a contract that the Group (or the third party designated by the Group) has the priority to purchase the underlying assets (Aju Capital Co. Ltd.) when it is disposed by Well to Sea No. 3 Private Equity Fund. (*8) Due to capital contribution by the Group for the year ended December 31, 2018, the entities have been included in and associates. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review264 - 86 - (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): Woori Service Networks Co., Ltd. Korea Credit Bureau Co., Ltd. Korea Finance Security Co., Ltd. Chin Hung International Inc. 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 Partner One Value Up I Private Equity Fund IBK KIP Seongjang Dideemdol 1st Private Investment Limited Partnership Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund Woori-Shinyoung Growth- Cap Private Equity Fund I LOTTE CARD Co.,Ltd Woori-Q Corporate Restructuring Private Equity Fund PCC-Woori LP Secondary Fund Nomura-Rifa Private Real Estate Investment Trust No.17 Uri Hanhwa Eureka Private Equity Fund Godo Kaisha Oceanos 1 Japanese Hotel Real Estate Private Equity Fund 2 Acquisiti- on cost January 1, 2019 Share of profits (losses) Acquisi- tion Disposal and others Dividends Change in capital December 31, 2019 For the year ended December 31, 2019 108 3,313 3,267 130,779 8,521 157 6,790 3,456 44,741 1,014 31 190 (169) 6,426 (198) - - - - - - - - - - (2) (135) - - - - - - 9 33 186 6,845 3,287 51,176 849 18,666 25,091 1,466 309 (7,490) (164) - 19,212 12,385 73,150 2,915 3,000 15,300 43,709 2,890 2,700 1,193 (18,233) - 5,807 (41) 623 101,483 197,393 30,343 10,000 9,948 (40) - - - - - - 150 1,350 (824) 63,444 12,665 346,000 (83) 6,129 - 2,525 4,576 4,426 4,375 3,025 12,665 346,000 6,129 2,525 1,000 350 10,870 - - - - 787 339 - (2,615) - (85) - - - - - - - - - - - - - 1,263 (29) 15,141 31,254 - - 2,764 3,323 (18,836) 123 209,023 - - - - - - - - - (105) - - - - - - - - - 200 - 1,599 9,908 4,576 4,375 11,841 409,444 6,046 2,525 - 342 10,952 3,291 806,360 (136) - 3 2 - 10,870 (651) - (15) 3,291 759,368 - 361,766 - 83,997 3,291 389,096 - (10,856) - (19,242) WOORI FINANCIAL GROUP ANNUAL REPORT 2019Acquisiti- on cost 175,652 January 1, 2018 98,933 Share of profits (losses) (10,451) 108 158 1 3,313 5,816 1,087 3,267 3,519 (10) Kumho Tire Co., Inc. Woori Service Networks Co., Ltd. Korea Credit Bureau Co., Ltd. Korea Finance Security Co., Ltd. Chin Hung International Inc. 130,779 45,101 1,206 13,916 50,760 8,521 - 6,947 1,254 - (816) (98) - 87 - For the year ended December 31, 2018 Acquisi- tion - - - - - - - - Disposal and others (*) (83,286) Dividends - Change in capital (5,196) - - - - - (5,865) - (2) (113) (54) - - 1 - - - - (1,725) - (266) 35 Impair- ment - - - - - - - (177) 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 Partner One Value Up Ist Private Equity Fund IBK KIP Seongjang Dideemdol 1st Private Investment Limited Partnership Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund Nomura-Rifa Private Real Estate Investment Trust No.17 Uri Hanhwa Eureka Private Equity Fund Equity Fund 101,992 182,309 22,546 25,847 27,611 950 360 (3,346) (484) - 15,000 67,343 6,840 31,735 - (10,705) 8,160 21,951 3,000 2,932 (42) 3,000 2,957 (257) - - - 10,000 4,426 3,025 - - - (52) 10,000 - - 4,426 3,025 1,000 939 (152) - - - - - - - - - 300 144 - - (508) (517) (6,437) - - - - - - - - - - - - 265 December 31, 2018 - Others - - - - 157 6,790 3,456 159 44,741 - - - - - 584 - - - - - - - - - 1,014 25,091 15,300 43,709 2,890 2,700 197,393 9,948 4,426 3,025 787 - - - - - - - - - - 350 621,299 - 417,051 (11) 3,196 350 48,272 - (93,005) - (1,170) - (13,144) - (177) - 743 339 361,766 (*) The amount transferred from the investments in joint ventures and associates to financial assets at FVTOCI is 83,286 million Won. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review266 - 88 - (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): December 31, 2019 Assets Liabilities Operating revenue Net income (loss) Woori Service Networks Co., Ltd. Korea Credit Bureau Co., Ltd. Korea Finance Security Co., Ltd. Chin Hung International Inc. 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 Partner One Value Up I Private Equity Fund IBK KIP Seongjang Dideemdol 1st Private Investment 5,742 96,855 32,574 335,147 92,206 83,583 72,768 2,679,968 13,872 13,294 7,073,363 42,602 1,969 30,289 10,660 229,764 66,184 330 343 2,464,168 51 2 6,470,540 - 17,572 91,200 61,939 499,152 91,088 7,866 8,939 84,928 2 4,532 524,319 457 1,322 1,480 (1,265) 26,617 (485) 6,355 7,462 (89,779) (204) 2,492 48,357 (175) Limited Partnership 21,208 691 766 (676) Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund Woori-Shinyoung Growth-Cap Private Equity Fund I LOTTE CARD Co.,Ltd (*) Woori-Q Corporate Restructuring Private Equity Fund PCC-Woori LP Secondary Fund Uri Hanhwa Eureka Private Equity Fund Godo Kaisha Oceanos 1 Japanese Hotel Real Estate Private Equity Fund 2 16,939 37,642 12,936,977 15,975 6,498 41,950 70,869 16,561 124 620 10,659,889 823 - 236 47,960 6 10 2 1,366,512 - - 41 778 - (494) (2,679) 42,538 (823) (2) (436) 119 (600) (*) The amount is after reflecting the fair value adjustment that occurred when acquiring the shares and the adjustments that occurred by difference of accounting policies with the Group. December 31, 2018 Assets Liabilities Operating revenue Net income (loss) Woori Service Networks Co., Ltd. Korea Credit Bureau Co., Ltd. Korea Finance Security Co., Ltd. Chin Hung International Inc. 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 Partner One Value Up Ist Private Equity Fund IBK KIP Seongjang Dideemdol 1st Private Investment Limited Partnership Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund Nomura-Rifa Private Real Estate Investment Trust No.17 Uri Hanhwa Eureka Private Equity Fund 5,066 88,797 35,155 412,205 97,720 109,167 73,231 2,024,856 14,502 10,805 5,968,591 42,776 21,200 12,014 20,197 42,332 1,886 22,788 12,114 332,268 69,915 440 12 1,807,502 51 5 5,395,307 - 757 105 16,178 181 15,803 78,018 60,706 606,192 75,825 5,943 16 60,039 1 1,663 429,742 326 819 9,901 17 6,402 (869) 4,117 (1,510) (69,256) (209) (299) 39,711 (224) 390 (1,268) 3 10 1 (191) (228) (1,349) WOORI FINANCIAL GROUP ANNUAL REPORT 2019 - 89 - 267 (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, 2019 and 2018, are as follows: Associate (*) Orient Shipyard Co., Ltd. Saenuel Co., Ltd. E Mirae Tech Co., Ltd. Jehin Trading Co., Ltd. The Season Company Co., Ltd. Yuil PESC Co., Ltd. CL Tech Co., Ltd. Associate (*) Orient Shipyard Co., Ltd. Saenuel Co., Ltd. E Mirae Tech Co., Ltd. Jehin Trading Co., Ltd. The Season Company Co., Ltd. Yuil PESC Co., Ltd. CL Tech Co., Ltd. December 31, 2019 Ownership (%) Number of shares owned 464,812 3,531 7,837 83,056 18,283 8,642 13,759 December 31, 2018 Ownership (%) Number of shares owned 464,812 3,531 7,696 81,610 18,187 8,642 13,759 21.4 37.4 41.8 27.7 30.3 24.0 38.6 21.4 37.4 41.0 27.3 30.1 24.0 38.6 (*) 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 joint ventures and associates. (5) As of December 31, 2019 and 2018, the reconciliations from the net assets of the associates to the book value of the shares of the investment in joint ventures and associates are as follows (Unit: Korean Won in millions except for ownership): Total net asset Ownership (%) Ownership portion of net assets Basis difference Impairment Intercompany transaction Book value December 31, 2019 Woori Service Networks Co., Ltd. Korea Credit Bureau Co., Ltd. Korea Finance Security Co., Ltd. Chin Hung International Inc. (*1) Saman Corporation Woori Growth Partnerships New Technology Private Equity Fund 2016KIF-IMM Woori Bank Technology Venture Fund K BANK Co., Ltd. (*1) (*2) Smart Private Equity Fund No.2 Woori Bank-Company K Korea Movie Asset Fund Well to Sea No.3 Private Equity Fund (*1) Partner One Value Up Ist Private Equity Fund IBK KIP Seongjang Dideemdol 1st Private Investment Limited Partnership Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund Woori-Shinyoung Growth-Cap Private Equity Fund I LOTTE CARD Co., Ltd (*1) 3,773 66,566 21,914 105,383 26,022 83,253 72,425 215,800 13,821 13,292 418,250 42,602 4.9 9.9 15.0 25.3 9.2 23.1 20.0 14.5 20.0 25.0 50.0 23.3 186 6,597 3,287 26,646 2,391 19,215 14,485 31,248 2,764 3,323 209,041 9,909 20,517 20.0 4,103 16,815 37,022 2,047,220 25.0 31.9 20.0 4,204 11,841 409,444 - 246 - - - - - 2 - 186 6,845 3,287 24,565 5,373 - (6,915) (35) - 51,176 849 - - 3,634 - - - - - - - - - (3) 19,212 - (3,634) - - - - - - - - 656 6 - 15,141 31,254 2,764 - 3,323 (18) 209,023 (1) 9,908 473 4,576 171 4,375 - - 11,841 409,444 Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review268 - 90 - Woori-Q Corporate Restructuring Private Equity Fund PCC-Woori LP Secondary Fund Uri Hanhwa Eureka Private Equity Fund Godo Kaisha Oceanos 1 Japanese Hotel Real Estate Private Equity Fund 2 Total net asset Ownership (%) Ownership portion of net assets Basis difference Impairment Intercompany transaction Book value December 31, 2019 15,152 6,498 41,714 22,909 16,555 38.4 38.8 0.8 47.8 19.9 5,813 2,524 342 10,952 3,291 - - - - - - - - - - 233 1 - - - 6,046 2,525 342 10,952 3,291 (*1) The net asset equity amount is after the debt-for-equity swap, non-controlling etc. (*2) As a result of conducting an impairment test on the investment stocks of the related companies, the recoverable value was less than the carrying amount and thus the impairment loss was recognized. Total net asset Ownership (%) Ownership portion of net assets Basis difference Impairment Intercompany transaction Book value December 31, 2018 Woori Service Networks Co., Ltd. Korea Credit Bureau Co., Ltd. Korea Finance Security Co., Ltd. Chin Hung International Inc. (*) 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 (*) Partner One Value Up Ist Private Equity Fund IBK KIP Seongjang Dideemdol 1st Private Investment Limited Partnership Crevisse Raim Impact 1st Startup Venture Specialist Private Equity Fund Nomura-Rifa Private Real 3,180 66,009 23,041 79,793 27,805 108,727 73,219 290,597 14,451 10,800 396,248 42,776 4.9 9.9 15.0 25.3 9.2 23.1 20.0 14.1 20.0 25.0 50.0 23.3 157 6,544 3,456 20,192 2,556 25,091 14,644 40,984 2,890 2,700 198,027 9,948 20,443 20.0 4,089 Estate Investment Trust No.17 4,019 Uri Hanhwa Eureka Private Equity Fund 42,151 11,909 25.0 19.4 0.8 2,977 780 339 (*) The net asset equity amount is after the debt-for-equity swap. - 246 - 24,565 5,373 - - 2,725 - - - - - - - - - - - - (6,915) - - - - - - - - - - - - - - (16) - 157 6,790 3,456 44,741 1,014 - 25,091 656 - - 15,300 43,709 2,890 - 2,700 (634) 197,393 - 9,948 337 4,426 48 3,025 7 - 787 339 WOORI FINANCIAL GROUP ANNUAL REPORT 2019 - 91 - 269 14. INVESTMENT PROPERTIES (1) Details of investment properties are as follows (Unit: Korean Won in millions): December 31, 2019 December 31, 2018 Acquisition cost Accumulated depreciation Net carrying value 299,802 (19,563) 280,239 (2) Changes in investment properties are as follows (Unit: Korean Won in millions): For the years ended December 31 2018 2019 Beginning balance (*) Acquisition Disposal Depreciation Transfers from(to) premises and equipment Classified to assets held for sale Foreign currencies translation adjustments Others Ending balance 178,910 70,346 (193) (2,225) 32,394 - 402 605 280,239 416,796 (38,600) 378,196 371,301 15,195 (3,045) (4,045) 7,623 (10,056) (5) 1,228 378,196 (*) 199,286 million Won is deducted which was reclassified from the investment properties to premises and equipment at the beginning of the period within the net carrying mount of the previous term. (3) Fair value of investment properties amounted to 502,305 million Won and 438,534 million Won as of December 31, 2019 and 2018, respectively. The fair value of investment properties has been assessed on the basis of recent similar real estate market price and officially assessed land price in the area of the investment properties, is classified as level 3 on the fair value hierarchy. (4) Rental fee earned from investment properties is amounting to 10,106 million Won and 5,080 million Won for the years ended December 31, 2019 and 2018, respectively. Operating expenses directly related to the investment properties where rental fee was earned amounted to 3,010 million Won and 4,120 million Won. (5) The lease payments expected to be received in the future under lease contracts as of December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions): Lease payments: Within a year More than 1 year and within 2 years More than 2 years and within 3 years More than 3 years and within 4 years More than 4 years and within 5 years More than 5 years Total December 31, 2019 December 31, 2018 6,574 4,924 4,018 3,618 3,126 241 22,501 5,454 3,702 3,009 2,619 2,222 - 17,006 Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review270 - 92 - 15. PREMISES AND EQUIPMENT (1) Details of premises and equipment as of December 31, 2019 are as follows (Unit: Korean Won in millions): Premises and equipment(owned) Right-of-use asset Carrying value Land Building Equipment and vehicles Leasehold improvement Construction in progress Structures Total December 31, 2019 1,761,159 - 1,761,159 802,299 449,878 1,252,177 278,016 17,236 295,252 54,839 - 54,839 1,287 - 1,287 2 - 2 2,897,602 467,114 3,364,716 (2) Details of premises and equipment(owned) as of December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions): Acquisition cost Accumulated depreciation Net carrying value Land 1,761,159 - 1,761,159 Building 1,063,756 (261,457) 802,299 Acquisition cost Accumulated depreciation Net carrying value Land 1,481,871 - 1,481,871 Building 872,282 (210,370) 661,912 December 31, 2019 Equipment and vehicles 1,123,101 (845,085) 278,016 Leasehold improvement 463,181 (408,342) 54,839 Construction in progress 1,287 - 1,287 Structures 20 (18) 2 Total 4,412,504 (1,514,902) 2,897,602 December 31, 2018 Equipment and vehicles 1,031,431 (791,418) 240,013 Leasehold improvement 446,264 (388,670) 57,594 Construction in progress 9,099 - 9,099 Structures 20 (17) 3 Total 3,840,967 (1,390,475) 2,450,492 WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 93 - 271 (3) Details of changes in premises and equipment are as follows (Unit: Korean Won in millions): Beginning balance Acquisitions Disposals Depreciation Classified to assets held for sale Transfer Foreign currencies translation adjustments Business combination (Note 45) Others Ending balance Land 1,481,871 186,303 (3,015) - Building 661,912 87,667 (2,245) (30,766) (21) 93,956 (74) 83,260 880 801 1,185 - 1,761,159 74 1,670 802,299 Beginning balance Acquisitions Disposals Depreciation Classified to assets held for sale Transfer Foreign currencies translation adjustments Business combination Others Ending balance Land 1,487,278 1,372 (29) - Building 680,846 14,701 - (26,014) (3,651) (2,863) (2,592) (4,760) (236) - - 1,481,871 (257) - (12) 661,912 For the year ended December 31, 2019 Equipment and vehicles 240,013 119,474 (1,203) (87,453) Leasehold improvement 57,594 28,788 (2,738) (27,134) Construction in progress 9,099 7,315 - - Structures 3 - - (1) Total 2,450,492 429,547 (9,201) (145,354) - 3,670 1,459 926 1,130 278,016 - 912 609 1 (3,193) 54,839 - (14,886) 36 - (277) 1,287 - - - - - 2 (95) 166,912 3,785 2,186 (670) 2,897,602 For the year ended December 31, 2018 Equipment and vehicles 180,072 76,783 (5,192) (76,171) Leasehold improvement 64,787 17,527 (737) (32,162) Construction in progress 64,559 8,285 (187) - Structures 3 - - - Total 2,477,545 118,668 (6,145) (134,347) - 63,432 (69) 969 189 240,013 - - - (63,432) 323 661 7,195 57,594 (126) - - 9,099 - - - - - 3 (6,243) (7,623) (365) 1,630 7,372 2,450,492 (4) Details of right-of-use assets as of December 31, 2019 are as follows (Unit: Korean Won in millions): Acquisition cost Accumulated depreciation Net carrying value Building 615,201 (165,323) 449,878 December 31, 2019 Other tangible assets 25,563 (8,327) 17,236 Total 640,764 (173,650) 467,114 (5) Details of changes in right-of-use assets as of December 31, 2019 are as follows (Unit: Korean Won in millions): Beginning balance New contracts Termination Depreciation Business combination (Note 45) Others Ending balance Building December 31, 2019 Other tangible assets Total 416,828 251,992 (3,803) (219,743) 5,438 (834) 449,878 18,963 8,306 (178) (9,984) 114 15 17,236 435,791 260,298 (3,981) (229,727) 5,552 (819) 467,114 Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review272 - 94 - 16. INTANGIBLE ASSETS (1) Details of intangible assets are as follows (Unit: Korean Won in millions): Goodwill 350,682 Software 174,132 Industrial property rights 1,576 Development cost 517,224 Other intangible assets 862,313 Membership deposit 32,583 Construction in progress 4,066 Total 1,942,576 December 31, 2019 - (138,300) (884) (292,031) (638,005) - - (1,069,220) Acquisition cost Accumulated amortization Accumulated impairment losses Net carrying value - 350,682 - 35,832 - 692 - 225,193 (25,993) 198,315 (3,253) 29,330 - 4,066 (29,246) 844,110 Goodwill 153,602 Software 156,109 Industrial property rights 1,258 Development cost 469,226 Other intangible assets 729,052 Membership deposit 27,025 Construction in progress 10,415 Total 1,546,687 December 31, 2018 - (126,382) (696) (228,906) (589,618) - - (945,602) Acquisition cost Accumulated amortization Accumulated impairment losses Net carrying value - 153,602 - 29,727 - 562 - 240,320 (137) 139,297 (3,428) 23,597 - 10,415 (3,565) 597,520 (2) Details of changes in intangible assets are as follows (Unit: Korean Won in millions): For the year ended December 31, 2019 Goodwill 153,602 - - - - - Software 29,727 13,133 - (9,389) - - Industrial property rights 562 318 - (188) - - Development cost 240,320 41,373 - (64,415) - 7,915 Other intangible assets 139,297 87,538 - (54,421) (25,858) 7,188 Beginning balance Acquisitions Disposal Amortization (*1) Impairment losses (*2) Transfer Foreign currencies translation adjustment 10,234 1,269 Business combination (Note 45) Others Ending balance 186,846 - 350,682 835 257 35,832 - - - 692 - 1,023 - - 225,193 43,530 18 198,315 Membership deposit 23,597 4,931 (675) - (939) - 60 2,143 213 29,330 Construction in progress 10,415 8,754 - - - (15,103) Total 597,520 156,047 (675) (128,413) (26,797) - - 12,586 - - 4,066 233,354 488 844,110 (*1) Amortization of other intangible assets amounting to 22,317 million Won is included in other operating expenses. (*2) The impairment test for other intangible assets indicates that the recoverable value is less than the carrying amount and thus the impairment loss is recognized. For the year ended December 31, 2018 Software 40,672 6,839 (4,359) (14,028) Industrial property rights 539 195 - (172) Beginning balance Acquisitions Disposal Amortization (*) Reversal of impairment loss Transfer Business combination Foreign currencies translation adjustment Others Ending balance Goodwill 108,707 - - - - - 46,752 - - 763 (1,857) - 153,602 (165) 5 29,727 Development cost 77,241 20,935 - (46,045) - 188,189 - Other intangible assets 117,546 45,205 (196) (73,913) - 51,672 - Membership deposit 20,685 5,162 (2,871) - Construction in progress 153,209 97,067 - - 674 - - - (239,861) - Total 518,599 175,403 (7,426) (134,158) 674 - 47,515 - - 240,320 (227) (790) 139,297 (53) - 23,597 - - 10,415 (2,302) (785) 597,520 - - - - - 562 (*) Amortization of other intangible assets amounting to 51,770 million Won is included in other operating expenses. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 95 - 273 (3) Goodwill. 1) Details of allocated goodwill based on each cash-generating unit as of December 31, 2019 and 2018 are as follows (Unit: Korean Won in million): Cash-generating unit (*1) December 31, 2019 December 31, 2018 Woori Asset Management Corp. Woori Global Asset Management Co., Ltd. Woori Asset Trust Co., Ltd. PT Bank Woori Saudara Indonesia 1906 Tbk (*2) WB Finance Co., Ltd (*3) Others Total 43,036 2,030 141,780 106,173 49,374 8,289 350,682 - - - 98,229 47,681 7,692 153,602 (*1) Allocated to the cash-generating unit that will benefit from the synergy effect of the business combination, and the cash-generating unit is generally comprised of the operating or sub-sectors. (*2) The Group has acquired Saudara Bank to expand retail sales in Indonesia, and recognized the goodwill as it is expected to strengthen our competitiveness by securing a local sales network in Indonesia. (*3) The Group has acquired VisionFund Cambodia to expand Cambodian retail sales, and recognized goodwill based on the economies of scale and acquired customer base. 2) Impairment test The recoverable amount of the cash-generating unit is measured at larger amount among the fair value less costs to sell or the value to use. The net fair value is calculated by deducting costs of disposal from the amount received from the sale of the cash-generating unit in an arm’s length transaction between the parties with reasonable judgment and willingness to negotiate. In case of difficulty in measuring this amount, the sale amount of a similar cash- generating unit in the past market is calculated by reflecting the characteristics of the cash-generating unit. If reliable information related to fair value less costs to sell is not available, value in use is considered as recoverable amount. Value in use is the present value of future cash flows expected to be generated by the cash-generating unit. Future cash flows are estimated based on the latest financial budget approved by the management, with an estimated period of up to five years. The Group estimates cash flows based on an annual growth rate of up to 4.0% in relation to cash flows after the longest period. The main assumptions used to estimate cash flows are about the size of the market and the share of the group. The appropriate discount rate for discounting future cash flows is the pre-tax discount rate, including assumptions about risk-free interest rates, market risk premium, and systemic risk of cash-generating units. The impairment test, which compares the carrying amount and recoverable amount of the cash-generating unit to which goodwill has been allocated, is conducted every year and every time an impairment sign occurs. Category Discount rate (%). Terminal growth rate (%) Recoverable amount. Carrying amount Woori Asset Management Corp. Woori Global Asset Management Co., Ltd 7.3 1.0 145,820 106,735 8.8 1.0 45,367 29,577 PT Bank Woori Saudara Indonesia 1906 Tbk 18.3 4.0 952,692 577,075 WB Finance Co., Ltd 17.3 3.0 133,149 93,143 As a result of the impairment test on goodwill, it is determined that the carrying amount of the cash- generating unit to which the goodwill has been allocated will not exceed the recoverable amount. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review274 - 96 - 17. ASSETS HELD FOR DISTRIBUTION (SALE) As of the end of the current term, the Group is planning to sell lands, buildings and machinery items that are from subsidiary companies, Seari First Securitization Specialty Co., Ltd., Namjong 1st Securitization Specialty Co., Ltd., Bukgeum First Securitization First Specialty Co., Ltd. and Bukgeum Second Securitization Specialty Co., Ltd., and therefore they are classified as assets held for sale. In addition, tangible assets that are highly likely to be sold within another year are classified as held for sale. Assets held for distribution (sale) are as follows (Unit: Korean Won in millions): Lands Buildings Others Total December 31, 2019 5,164 4,815 577 10,556 December 31, 2018 7,280 7,736 2,896 17,912 The Group measured assets held for sale at the lower of their net fair value or carrying amount 18. ASSETS SUBJECT TO LIEN AND ASSETS ACQUIRED THROUGH FORECLOSURES (1) Assets subjected to lien are as follows (Unit: Korean Won in millions): Financial assets at Korean treasury and Nonghyup bank 19,720 Related to bonds sold under FVTPL government bonds and others repurchase agreements (*) Korean corporate debt Kookmin bank and 168,327 Related to bonds sold under Collateral given to Amount Reason for collateral December 31, 2019 Financial assets at FVTOCI Securities at amortized cost Loan at amortized cost and other financial assets securities Korean corporate debt securities Korean financial institutions’ debt securities and others Korean financial institutions’ debt securities and others others Eugene investment & futures co., Ltd. . Nonghyup bank and others BOK and others Foreign corporate debt Spain BBVA and others securities Korean corporate debt Nonghyup bank futures securities Korean treasury and government bonds Korean treasury and government bonds and others and others Korea Securities Depository repurchase agreements (*) 3,008 Collateral for futures transaction 219,938 Related to bonds sold under repurchase agreements (*) 5,127,383 Settlement risk 56,975 Related to bonds sold under repurchase agreements (*) 9,042 Collateral for futures transaction 5,570 Related to bonds sold under repurchase agreements (*) The BOK and others 6,190,630 Settlement risk and others Foreign financial institutions’ NATIXIS and others debt securities Due from banks in local currency Branch of IBK at Phnom Penh and others 37,271 Related to bonds sold under repurchase agreements (*) 11,352 Collateral deposits for local currency borrowings Due from banks in local Daishin AMC and others 1,500 Right of pledge currencies Other due from banks in local Samsung Securities Co., 17,345 Margin deposit for futures currencies Other due from banks in foreign currencies Ltd. and others Korea Investment & Securities Co., Ltd. and others Foreign currency loans Industrial and Commercial Bank of China or option 180,919 Foreign margin deposit for future or option and others 82,594 Related to bonds sold under repurchase agreements (*) WOORI FINANCIAL GROUP ANNUAL REPORT 2019Premises and equipment Land and building - 97 - 275 Collateral given to Credit Counselling & Recovery Service and others December 31, 2019 Amount Reason for collateral 689 Right to collateral and others Total 12,132,263 December 31, 2018 Collateral given to Daishin AMC and others Amount Reason for collateral 1,500 Right of pledge Loan at amortized cost and other financial assets Due from banks on time in local currency Due from banks in local Samsung Securities Co., 38,112 Margin deposit for futures currencies Due from banks in foreign currencies Financial assets at FVTOCI Korean financial institutions’ debt securities and others Korean financial institutions’ Securities at amortized cost Premises and equipment debt securities Korean treasury and government bonds Korean treasury and government bonds and others Land and building Ltd. and others Korea Investment & Securities Co., Ltd. and others or option 202,156 Foreign margin deposit for future or option and others The BOK and others 2,919,042 Settlement risk and others Banco Bilbao Vizcaya 33,588 Related to bonds sold under Argentaria, S.A Korea Securities Depository repurchase agreements (*) 5,552 Related to bonds sold under repurchase agreements (*) The BOK and others 6,382,188 Settlement risk and others Credit Counselling & Recovery Service and others 5,987 Total 9,588,125 Right to collateral and others (*) The Group has the agreements to repurchase the sold assets at the predetermined price or the price that includes the rate of return and to provide the guarantee on the assets. The transferee has the right to sell or to provide as guarantee. Therefore, the Group does not derecognize the assets, but recognizes the relevant amounts as liability (bonds sold under repurchase agreements). (2) As of December 31, 2019 and December 31, 2018 there is no asset acquired through foreclosures. (3) Securities loaned are as follows (Unit: Korean Won in millions): Financial assets at FVTOCI Korean financial institutions’ debt securities and others Total 80,737 80,737 40,029 40,029 December 31, 2019 December 31, 2018 Loaned to Korea Securities Finance Corporation Securities loaned are lending of specific securities to borrowers who agree to return the same amount 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. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review276 - 98 - (4) Collaterals held that can be disposed and re-subjected to lien regardless of defaults of counterparties Fair values of collaterals held that can be disposed and re-subjected to lien regardless of defaults of counterparties as of December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions): Securities 9,340,517 Fair values of collaterals Fair values of collaterals were disposed or re- subjected to lien December 31, 2019 Securities 12,262,041 Fair values of collaterals Fair values of collaterals were disposed or re- subjected to lien December 31, 2018 - - 19. OTHER ASSETS Details of other assets are as follows (Unit: Korean Won in millions): Prepaid expenses Advance payments Others Total December 31, 2019 December 31, 2018 135,010 78,306 20,330 233,646 161,129 18,467 18,057 197,653 20. FINANCIAL LIABILITIES AT FVTPL (1) Financial liabilities at FVTPL are as follows (Unit: Korean Won in millions): Financial instruments at fair value through profit or loss mandatorily measured at fair value Financial liabilities at fair value through profit or loss designated as upon initial recognition Total December 31, 2019 December 31, 2018 2,870,676 87,626 2,958,302 2,117,919 164,767 2,282,686 (2) Financial liabilities at fair value through profit or loss mandatorily measured at fair value are as follows (Unit: Korean Won in millions): Deposits Gold banking liabilities Derivative liabilities Total December 31, 2019 December 31, 2018 27,530 2,843,146 2,870,676 27,058 2,090,861 2,117,919 WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 99 - 277 (3) Financial liabilities at fair value through profit or loss designated as upon initial recognition as of December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions): Equity-linked securities Equity-linked securities in short position Total December 31, 2019 December 31, 2018 87,626 87,626 164,767 164,767 Financial liabilities at fair value through profit or loss designated as upon initial recognition are designated in order to eliminate or significantly reduce accounting mismatch arising from recognition or measurement. (4) There are no accumulated changes in credit risk adjustments to financial liabilities at fair value through profit or loss designated as upon initial recognition. The adjustment to reflect Group’s credit risk is considered in measuring the fair value of equity-linked securities index. The Group’s credit risk is determined by adjusting credit spread observed in credit rating of Group. (5) The difference between carrying amount and maturity amount of financial liabilities at fair value through profit or loss designated as upon initial recognition (Financial liabilities designated as at FVTPL) are as follows (Unit: Korean Won in millions): Carrying amount Nominal amount at maturity Difference December 31, 2019 December 31, 2018 87,626 97,503 (9,877) 164,767 217,280 (52,513) (6) Changes in equity in relation to financial liabilities at fair value through profit or loss designated as upon initial recognition The cumulative gain or loss realized as a result of the derecognition of financial liabilities designated as at fair value through profit or loss that is presented in other comprehensive income and transferred within equity is 4 million (after income tax expense) Won for the year ended December 31, 2018. 21. DEPOSITS DUE TO CUSTOMERS 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 Customer deposit for security investment Certificate of deposits Other deposits Sub-total Deposits in foreign currency: Deposits in foreign currencies Present value discount Total December 31, 2019 December 31, 2018 8,655,228 224,115,771 28,574 2,174,995 150,300 - 973,625 1,451,470 237,549,963 27,143,710 (8,095) 264,685,578 11,076,417 204,051,570 30,783 1,891,556 137,316 30,000 6,510,571 1,409,505 225,137,718 23,626,234 (73,013) 248,690,939 Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review278 - 100 - 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 December 31, 2019 Lenders Interest rate (%) Amount The BOK Small Enterprise And Market Service and others The Korea Development Bank and others 9,685,725 0.5~0.8 0.0~2.8 0.0~5.0 1,770,726 1,844,798 6,070,201 The Export-Import Bank of Korea and others HSBC, HKG Bills sold Call money Bonds sold under repurchase Others Bank and others Other financial institutions agreements Present value discount Total (0.3)~8.3 8,566,872 3.0 0.0~1.6 (0.3)~3.5 1.4~12.7 34,734 8,601,606 9,367 133,519 569,002 (299) 18,998,920 (*) Included borrowing in foreign currencies under cash flow hedge amounting to 34,443 million Won as of December 31, 2019. December 31, 2018 Lenders Interest rate (%) Amount The BOK Small Enterprise And Market Service and others The Korea Development Bank and others 0.5 ~ 0.8 0.0 ~ 3.5 0.0 ~ 4.0 1,335,459 1,771,379 4,716,231 7,823,069 The Export-Import Bank of Korea and others JPMORGAN CHASE BANK 0.0 ~ 7.5 7,308,857 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 Others Bank and others Other financial institutions agreements Present value discount Total 2.9 0.0 ~ 1.8 0.0 ~ 7.3 0.8 ~ 12.7 33,543 7,342,400 19,336 975,358 42,907 (84) 16,202,986 WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 101 - 279 (2) Details of debentures are as follows (Unit: Korean Won in millions): December 31, 2019 December 31, 2018 Interest rate (%) Amount Interest rate (%) Amount Face value of bond(*): Ordinary bonds Subordinated bonds Other bonds Sub-total Discounts on bonds Total 0.0~4.3 2.1~5.9 1.2~17.0 1.6 ~ 4.5 3.0 ~ 12.6 1.9 ~ 17.0 23,207,600 6,732,687 942,421 30,882,708 (24,653) 30,858,055 22,432,183 5,358,838 974,230 28,765,251 (29,389) 28,735,862 (*) Included debentures under fair value hedge amounting to 3,151,172 million Won and 2,956,565 million Won as of December 31, 2019 and 2018, respectively. Debentures under cash flow hedge amounting to 829,082 million Won and 823,219 million Won are also included as of December 31, 2019 and 2018, respectively. 23. PROVISIONS (1) Details of provisions are as follows (Unit: Korean Won in millions): Asset retirement obligation Provisions for guarantees (*1) Provisions for unused loan commitments Provisions for customer reward credits (*2) Other provisions (*3) Total December 31, 2019 December 31, 2018 66,485 92,486 112,554 - 172,455 443,980 67,200 89,761 121,535 49,180 63,637 391,313 (*1) Provisions for guarantees includes provision for financial guarantee of 62,764 million Won and 47,817 million Won as of December 31, 2019 and 2018, respectively. (*2) The provisions for existing points that are paid to credit card members and others have been reclassified to other liabilities. (*3) Other provisions consist of provision for litigation, loss compensation and others. (2) Changes in provisions for guarantees and unused loan commitments are as follows (Unit: Korean Won in millions): 1) Provisions for guarantees Beginning balance Transfer to 12-month expected credit loss Transfer to expected credit loss for the entire period Transfer to credit-impaired financial assets Provisions used Net provision (reversal) of unused amount Others (*) Ending balance For the year ended December 31, 2019 Stage1 44,903 Stage2 33,760 Stage3 11,098 Total 89,761 13,568 (13,568) (317) (30) (27,711) (14,400) 34,788 50,801 532 (32) - 5,611 - 26,303 - (215) 62 - 4,437 - 15,382 - - - (27,711) (4,352) 34,788 92,486 (*) Others have occurred as a result of new financial guarantee contract valued at initial fair value. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review 280 - 102 - Beginning balance Transfer to 12-month expected credit loss Transfer to expected credit loss for the entire period Transfer to credit-impaired financial assets Provisions used Net reversal of unused amount Others (*) Ending balance For the year ended December 31, 2018 Stage1 47,132 Stage2 18,281 Stage3 127,511 Total 192,924 92 (92) - (237) 91,008 (90,771) - - (38) (20,429) (4,866) 23,249 44,903 (29) - (75,410) 2 33,760 67 - (25,709) - 11,098 - (20,429) (105,985) 23,251 89,761 (*) Others have occurred as a result of new financial guarantee contract valued at initial fair value. 2) Provisions for unused loan commitment Beginning balance Transfer to 12-month expected credit loss Transfer to expected credit loss for the entire period Transfer to credit-impaired financial assets Net provision(reversal) of unused amount Others Ending balance Beginning balance Transfer to 12-month expected credit loss Transfer to expected credit loss for the entire period Transfer to credit-impaired financial assets Net provision(reversal) of unused amount Others Ending balance For the year ended December 31, 2019 Stage1 74,624 Stage2 45,285 Stage3 1,626 Total 121,535 11,771 (11,024) (1,813) (213) (19,394) 63 65,038 1,945 (275) 7,233 - 43,164 (747) (132) 488 3,117 - 4,352 - - - (9,044) 63 112,554 For the year ended December 31, 2018 Stage1 75,232 Stage2 27,875 Stage3 1,878 Total 104,985 7,770 (7,396) (2,376) 2,525 (374) (149) (213) (1,579) 1,792 - - - (5,813) 24 74,624 23,860 - 45,285 (1,521) - 1,626 16,526 24 121,535 (3) Changes in asset retirement obligation are as follows (Unit: Korean Won in millions): Beginning balance Provisions provided Provisions used Reversal of provisions unused Amortization Increase in restoration costs and others Business Combination (Note 45) Ending balance For the years ended December 31 2018 2019 67,200 2,729 (2,276) (2,926) 435 994 329 66,485 61,872 1,489 (913) (1,038) 564 5,226 - 67,200 WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 103 - 281 The amount of the asset retirement obligation is the present value of the best estimate of future expected expenditure to settle the obligation – arising from leased premises as of December 31, 2019, discounted by appropriate discount rate. The restoration cost is expected to occur by the end of each premise’s lease period, and the Group has used average lease period of each category of leases terminated during the past years in order to rationally estimate the lease period. In addition, the Group used average amount of actual recovery cost for the past 3 years and the inflation rate for last year in order to estimate future recovery cost. (4) Changes in other provisions are as follows (Unit: Korean Won in millions): Beginning balance Provisions provided Provisions used Reversal of provisions unused Foreign currencies translation adjustments Others Business combination (Note 45) Ending balance For the year ended December 31, 2019 Other provisions 63,637 109,875 (6,123) (171) 1,193 224 3,820 172,455 Beginning balance Provisions provided Provisions used Reversal of unused amount Foreign currencies translation adjustments Transfer (*1) Others Ending balance (*2) For the year ended December 31, 2018 Provisions for customer reward credits Other provisions Total 40,445 70,138 (98,170) - - 9,228 27,539 49,180 58,791 8,384 (6,940) (52) (194) - 3,648 63,637 99,236 78,522 (105,110) (52) (194) 9,228 31,187 112,817 (*1) Provision for customer reward credits have increased for the Group due to the point transfer from partners during the year ended in December 31, 2018. (*2) The provisions for existing points that are paid to credit card members and others have been reclassified to other liabilities. (5) Others 1) As of September 23, 2019, the Group temporarily suspended the won-payment business due to tightened U.S. sanctions on Iran while it was ongoing to settle 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) and Office of Foreign Assets Control as to whether the Group has violated United States laws by participating in prohibited transactions involving the following countries: Iran, Sudan, Syria and Cuba, which have been sanctioned by the US. 2) The Group recognized the provision of the estimated compensation amount related to the miss-selling of the Derivative Linked Fund (DLF) incurred during the current term and a fine is expected to be imposed by the Financial Supervisory Service as the best estimate for the expenditure required to meet its obligations at the end of the reporting period. The Group estimated such provision will be paid at the request of each counter party, and estimates all amount will be paid within 2020. On the other hand, the actual amount of compensation of the Group may change due to interest rate changes since the end of the reporting period. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review282 - 104 - 24. NET DEFINED BENEFIT LIABILITY(ASSET) The retirement benefits of the Group are based on the defined retirement benefit plans. 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 salary 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 Decrease in profitability of blue A decrease in profitability of blue chip bonds will be offset by some 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. chip bonds Risk of inflation increase in the value of debt securities that the employee benefit plan owns but will bring an increase in the defined benefit obligation. 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 are as follows (Unit: Korean Won in millions): Present value of defined benefit obligation Fair value of plan assets Net defined benefit liability(*) December 31, 2019 December 31, 2018 1,442,859 (1,352,971) 89,888 1,275,020 (1,101,911) 173,109 (*) Net defined benefit liability of 89,888 million Won at the end of the current term is the subtracted amount of the net defined benefit asset of 2,582 million Won from the net defined benefit liability of 92,470 million Won. (2) Changes in the carrying value of defined benefit obligation are as follows (Unit: Korean Won in millions): Beginning balance Subsequent amount from transfer company Current service cost (*) Interest cost (*) Remeasurements Financial assumption Demographic assumptions Experience adjustment Foreign currencies translation adjustments Retirement benefit paid Business combination (Note 45) Others Ending balance For the year ended December 31, 2019 For the year ended December 31, 2018 1,275,020 93 163,369 32,693 32,831 49,453 (33,518) 179 (79,908) 4,674 (2,027) 1,442,859 1,071,170 - 144,394 32,143 59,429 7,728 33,697 (3) (74,952) - 1,414 1,275,020 WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 105 - 283 (3) Changes in the plan assets are as follows (Unit: Korean Won in millions): Beginning balance Subsequent amount from transfer company Interest income Remeasurements Employer’s contributions Retirement benefit paid Others Business combination (Note 45) Ending balance For the year ended December 31, 2019 For the year ended December 31, 2018 1,101,911 93 30,937 125 292,095 (76,304) (2,255) 6,369 1,352,971 1,027,906 - 33,825 (14,783) 128,926 (71,672) (2,291) - 1,101,911 (4) Plan assets wholly consist of fixed deposits as of December 31, 2019 and 2018. Among plan assets, realized returns on plan assets amount to 31,062 million Won and 19,042 million Won for the years ended December 31, 2019 and 2018, respectively. Meanwhile, the contribution expected to be paid in the next accounting year amounts to 156,396 million Won. (5) Current service cost, net interest income, loss (gain) on the curtailment or settlement and remeasurements recognized in the consolidated statements comprehensive income are as follows (Unit: Korean Won in millions): Current service cost Net interest expense (Income) Cost recognized in net income Remeasurements Cost recognized in total comprehensive income For the year ended December 31, 2019 163,369 1,756 165,125 48,641 213,766 For the year ended December 31, 2019 144,394 (1,682) 142,712 115,637 258,349 Retirement benefits related to defined contribution plans recognized as expenses are 3,297 million Won and 2,437 million Won for the years ended December 31, 2019 and 2018, respectively. (6) Key actuarial assumptions used in net defined benefit liability measurement are as follows: Discount rate Future wage growth rate Mortality rate Retirement rate December 31, 2019 2.18~2.50% 1.89~6.00% Issued by Korea Insurance Development Institute Experience rate for each employment classification December 31, 2018 2,69% 6.18% Issued by Korea Insurance Development Institute Experience rate for each employment classification The weighted average maturity of defined benefit liability is a minimum of 6.91 to a maximum 11.85 years. (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, 2019 December 31, 2018 (116,812) 136,990 135,767 (118,020) (151,104) 178,434 176,169 (152,174) Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review284 - 106 - 25. OTHER FINANCIAL LIABILITIES AND OTHER LIABILITIES Other financial liabilities and other liabilities are as follows (Unit: Korean Won in millions): December 31, 2019 December 31, 2018 Other financial liabilities: Accounts payable Accrued expenses Borrowings from trust accounts Agency business revenue Foreign exchange payables Domestic exchange settlement credits Lease liabilities Other miscellaneous financial liabilities Present value discount Sub-total Other liabilities: Unearned income Other miscellaneous liabilities Sub-total Total 6,131,339 2,516,231 3,277,795 362,820 1,153,457 1,261,928 419,045 2,587,193 (3,041) 17,706,767 224,840 195,631 420,471 18,127,238 5,409,268 2,224,330 3,747,492 396,735 539,554 7,134,966 - 1,992,663 (2,484) 21,442,524 204,034 142,044 346,078 21,788,602 26. DERIVATIVES (1) Derivative assets and derivative liabilities are as follows (Unit: Korean Won in millions): Nominal amount For cash flow hedge Assets For fair value hedge December 31, 2019 For trading For cash flow hedge Liabilities For fair value hedge Interest rate: Futures Swaps Purchase options Written options Currency: Futures Forwards Swaps Purchase options Written options Equity: 124,737 150,731,987 460,000 395,789 1,934 113,988,295 82,125,050 1,588,746 2,341,179 Futures Forwards Swaps Purchase options Written options Total 630,562 11 1,280,436 8,851,984 8,978,953 371,499,663 - - - - - - 9,367 - - - - - - - 9,367 - 111,764 - - - 300,750 11,888 - - - - - - - 1,447,811 966,181 18,835 - - - - - - 111,764 - - 1,217 175,221 - 2,921,903 - 1,323 - - - 321 5,193 - - - - - - - 6,837 - - - - - - - - - - - - - - - For trading - 413,195 - 9,655 - 1,030,246 1,106,423 - 9,403 - - 54,393 - 219,831 2,843,146 WOORI FINANCIAL GROUP ANNUAL REPORT 2019 - 107 - 285 December 31, 2018 Nominal Amount For fair value hedge For trading Assets For cash flow hedge Liabilities 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 Total - 150,710,490 530,000 525,000 320,213 88,376,776 67,179,195 1,933,454 3,134,774 186,737 441,573 4,925,315 6,145,935 324,409,462 - 35,503 - - - - - - - - 218,140 10,461 - - 843,621 761,907 17,544 - - - - - 35,503 - 31,377 143,029 - 2,026,079 - 665 - - - - 33,089 - - - - - - 33,754 - 17,654 - - - - - - - - 266,207 - 12,438 - 777,039 773,701 - 20,747 - - - - 17,654 - 1,217 - 239,512 2,090,861 Derivatives held for trading are classified into financial assets at FVTPL (Note 7) and financial liabilities at FVTPL (Note 20), and derivatives designated for hedging are presented as a separate line item in the consolidated statements of financial position. (2) Overview of the Group’s hedge accounting The hedging relationships the entity applies fair value hedge accounting and cash flow hedge accounting to are affected by interest rate which is related with Interest Rate Benchmark Reform. The interest rates to which the hedging relationships are exposed are USD 1M LIBOR, USD 3M LIBOR, USD 6M LIBOR, and 3M EURIBOR. The nominal amounts of hedging instruments related to 1M LIBOR, 3M LIBOR, 6M LIBOR and 3M EURIBOR are USD 400,000,000, USD 2,230,000,000, USD 500,000,000, and EUR 26,635,556, respectively. The entity pays close attention to discussions in the market and industry regarding the applicable alternative benchmark interest rates for the exposed interest rate. The entity judges related uncertainty is expected to be no longer present when the exposed interest rates are replaced by the applicable benchmark interest rates. 1) Fair value hedge As of the current period end, the Group has applied fair value hedge on fixed interest rate foreign currency denominated debentures amounting to 3,151,172 million Won. The purpose of the hedging is to avoid fair value volatility risk of fixed interest rate foreign currency denominated debentures derived from fluctuations of market interest rate, and as such the Group entered into interest rate swap agreements designated as hedging instruments. Pursuant to the interest rate swap agreement, by swapping the calculated difference between the fixed interest rate and floating interest rate applied to the nominal value, the fair value fluctuation risk is hedged as the foreign currency denominated debentures fixed interest rate terms are converted to floating interest rate. Pursuant to the interest rate swap agreement, hedge ratio is determined by matching the nominal value of hedged instrument to the face value of the hedged item. In this hedging relationship, only the market interest rate fluctuation, which is the most significant part of the fair value change of the hedged item, is designated as the hedged risk, and other risk factors including credit risk are not included in the hedged risk. Therefore, the ineffective portion of the hedge could arise from fluctuations in the timing of the cash flow of the hedged item, the change in the total amount and price of the hedged item, or significant credit risk fluctuation of either party of the hedging instrument. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review286 - 108 - The interest rate swap agreements and the hedged items are subject to fluctuations in the underlying market rate of interest and the Group expects the fair value of the interest rate swap contract and the value of the hedged item to generally change in the opposite direction. The fair value of the interest rate swap at the end of the reporting period is determined by discounting future cash flows estimated by using the yield curve at the end of the reporting period and the credit risk embedded in the contract and the average interest rate is determined based on the outstanding balance at the end of the reporting period. The variable interest rate applied to the interest rate swap is USD Libor 3M (6M) plus spread. In accordance with the terms of each interest rate swap contract designated as a hedging instrument, the Group receives interest at a fixed interest rate and pays interest at a variable interest rate. 2) Cash Flow Hedge As of the December, 31 2019, the Group has applied cash flow hedge on local currency denominated debentures amounting to 99,941 million Won, debentures on foreign currency amounting to 729,141 million Won and Borrowings in foreign currency amounting to 34,443 million Won. The Group’s hedging strategies are to ① Mitigate risks of cash flow fluctuation from variable interest rate debentures on local currency due to changes in market interest rate by entering into an interest rate swap contract and thereby designating it as hedging instrument; ② Mitigate the risks of cash flow fluctuation from principal and interest of variable-interest rate debentures denominated in foreign currency due to changes in foreign exchange rates and interest rates by entering into a currency swap contract and thereby designating it as hedging instrument; ③ Mitigate the risks of cash flow fluctuation from principal and interest of fixed- interest rate debentures denominated in foreign currency due to changes in foreign exchange rates by entering into a currency swap contract and thereby designating it as hedging instrument and ④ Mitigate the risks of cash flow fluctuation in variable-interest rate foreign currency borrowings resulting from changes in market interest rates and designate it as a hedging instrument through entering into currency swap contracts and interest rate swap contracts. This means exchanging a predetermined nominal amount as set forth in the interest rate swap contract adjusted by the differences between the fixed and variable interest rates, which results in the conversion of interest rates of debentures in local currency and borrowings in foreign currency from variable interest into fixed interest, eliminating the cash flow fluctuation risk. In addition, this also means a payment of predetermined principal amount as set forth in the currency swap adjusted by fixed interest rate, an exchange of an amount calculated by applying variable interest rate to USD or applying fixed interest rate to SGD, and an exchange of the principal denominated in KRW and principal denominated in foreign currency at maturity eliminating cash flow fluctuation risk on principal and interest. The hedge ratio is determined by matching the nominal amount of the hedging instrument to the face amount of the hedged item in accordance with interest rate swap and currency swap. Only interest rate and foreign exchange rate fluctuation risk, which is the most significant factor in the cash flow fluctuation of the hedged item, is addressed in this hedging relationship, and other risk factors such as credit risk are not subject to hedging. Thus, there could be hedge ineffectiveness arising from price margin set by the counterparty of hedging instruments and unilateral change in credit risk of any party in the transaction. The interest rate swap, currency swap contract and the hedged item are all affected by the changes in market interest rate and foreign exchange rates which are basic factors of the derivative. The Group expects that the value of interest rate swap contract, currency swap contract and the hedged item will generally fluctuate in opposite direction. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 109 - 287 (3) The nominal amounts of the hedging instrument are as follows (Unit: USD, EUR, SGD, JPY and Korean Won in millions): Fair value hedge Interest rate risk 1 year or less December 31, 2019 1 year to 5 years More than 5 years Total Interest rate swap (USD) 350,000,000 2,000,000,000 300,000,000 2,650,000,000 Cash flow hedge Interest rate risk Interest rate swap (EUR) Interest rate swap (KRW) Foreign currencies translation risk and interest rate risk Currency swap(USD) Foreign currencies translation risk Currency swap (SGD) Currency forward (JPY) - - 26,635,556 100,000 150,000,000 330,000,000 136,000,000 49,325,155 68,000,000 1,059,903,932 - - - - - 26,635,556 100,000 480,000,000 204,000,000 1,109,229,087 1 year or less December 31, 2018 1 year to 5 years More than 5 years Total Fair value hedge Interest rate risk Interest rate swap (USD) Cash flow hedge Interest rate risk Interest rate swap (KRW) Foreign currencies translation risk and interest rate risk Currency swap (USD) Foreign currencies translation risk Currency swap (SGD) 1,350,000,000 1,300,000,000 2,650,000,000 - - 100,000 - - - 100,000 500,000,000 204,000,000 50,000,000 450,000,000 - 204,000,000 (4) The average interest rate and average currency rate of the hedging instrument as of December 31, 2019 and December 31, 2018 are as follows: Fair value hedge Interest rate risk Interest rate swap (USD) Cash flow hedge Interest rate risk Interest rate swap (EUR) Interest rate swap (KRW) Foreign currencies translation risk and interest rate risk Currency swap (USD) Foreign currencies translation risk Currency swap (SGD) Currency forward (JPY) December 31, 2019 Average interest rate and average exchange rate Fixed 3.96% receipt and Libor 3M+1.61% floating paid Fixed 5.88% receipt and Libor 6M+2.15% floating paid 3M EURIBOR receipt, EUR 0.09% paid CMS 3Y+0.40% receipt, 2.38% paid USD 3M Libor+0.8% receipt, KRW 1.45% paid, KRW/USD = 1,155 USD 1M Libor+0.54% receipt, KRW 1.53% paid, KRW/USD = 1,158 SGD 1.91% receipt, KRW 1.98% paid, KRW/SGD = 828 KRW/JPY = 10.47 Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review288 - 110 - Fair value hedge Interest rate risk Interest rate swaps (USD) Cash flow hedge Interest rate risk Interest rate swap (KRW) Foreign currencies translation risk and interest rate risk Currency swap (USD) Foreign currencies translation risk Currency swap (SGD) December 31, 2018 Average interest rate and average exchange rate Fixed 3.96% receipt and Libor 3M+1.61% floating paid Fixed 5.88% receipt and Libor 6M+2.15% floating paid CMS 3Y+0.40% receipt, 2.38% paid USD 3M Libor+0.70% receipt, KRW 1.74% paid, KRW/USD = 1,136 USD 1M Libor+0.52% receipt, KRW 1.70% paid, KRW/USD = 1,178 SGD 1.91% receipt, KRW 1.98% paid, KRW/SGD = 828 (5) The amounts related to items designated as hedging instruments are as follows (Unit: Korean Won in millions, USD, EUR, SGD and JPY): December 31, 2019 Carrying amounts of the hedging instrument Nominal amounts of the hedging instrument Assets Liabilities Line item in the statement of financial position where the hedging instrument is located Changing in fair value used for calculating hedge ineffectiveness Fair value hedge Interest rate risk Interest rate swap Cash flow hedge Interest rate risk Interest rate swap Interest rate swap Foreign currency translation risk and interest rate risk Currency swap Foreign currency translation risk USD 2,650,000,000 111,764 Derivative assets (designated for hedging) -, EUR 26,635,556 KRW 100,000 - - 43 1,280 Derivative liabilities (designated for hedging) Derivative liabilities (designated for hedging) USD 480,000,000 4,070 5,193 Derivative assets (designated for hedging) Derivative liabilities (designated for hedging) Currency swap Currency forward SGD 204,000,000 JPY 1,109,229,087 5,297 - Derivative assets (designated for hedging) Derivative liabilities (designated for hedging) - 321 90,244 (43) (615) 22,364 8,918 321 WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 111 - 289 December 31, 2018 Carrying amounts of the hedging instrument Nominal amounts of the hedging instrument Assets Liabilities Line item in the statement of financial position where the hedging instrument is located Changing in fair value used for calculating hedge ineffectiveness Fair value hedge Interest rate risk Interest rate swap Cash flow hedge Interest rate risk Interest rate swap Foreign currencies translation risk and interest rate risk Currency swap Foreign currencies translation risk Currency swap USD 2,650,000,000 KRW 100,000 USD 500,000,000 SGD 204,000,000 35,503 17,654 Derivative assets (Designated for hedging) Derivative liabilities (Designated for hedging) - - - Derivative liabilities (Designated for hedging) 665 28,907 Derivative liabilities (Designated for hedging) 4,182 Derivative liabilities (Designated for hedging) (27,362) (665) 21,582 2,353 (6) Details of carrying amount to hedge and amount due to hedge accounting are as follows (Unit: Korean Won in millions): December 30, 2019 Accumulated amount of fair value hedge adjustments on the hedged item included in the carrying amount of the hedged item Assets Liabilities Line item in the statement of financial position in which the hedged item is included Changing in fair value used for calculating hedge ineffectivene ss Cash flow hedge reserve (*) - - - - - 91,368 Debentures (85,984) - Borrowing foreign currency Debentures 43 663 (43) (821) Debentures (25,057) (2,525) Debentures (8,315) (2,304) - - - - Carrying amounts of the hedging item Assets Liabilities - 3,151,172 - - - - 34,443 99,941 554,433 174,708 Fair value hedge Interest rate risk Debentures Cash flow hedge Interest rate risk Borrowings in foreign currency Debentures Foreign currencies translation risk and interest rate risk Debentures Foreign currencies translation risk Debentures (*) After tax amount Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review290 - 112 - December 31, 2018 Accumulated amount of fair value hedge adjustments on the hedged item included in the carrying amount of the hedged item Assets Liabilities Line item in the statement of financial position in which the hedged item is included Changing in fair value used for calculating hedge ineffectivene ss Cash flow hedge reserve (*) Carrying amounts of the hedging item Assets Liabilities - - - - 2,956,565 99,911 557,186 166,122 - - - - 5,200 Debentures 25,498 - - - - Debentures 521 (371) Debentures (16,790) (1,211) Debentures (1,762) (2,287) Fair value hedge Interest rate risk Debentures Cash flow hedge Interest rate risk Debentures Foreign currencies translation risk and interest rate risk Debentures Foreign currencies translation risk Debentures (*) After tax amount (7) Amounts recognized in profit or loss due to the ineffective portion of fair value hedges during the current period are as follows (Unit: Korean Won in millions): Fair value hedge Interest rate risk 4,260 Other net operating income(expense) For the year ended December 30, 2019 Hedge ineffectiveness recognized in profit or loss Line item in the profit or loss that includes hedge ineffectiveness Fair value hedge Interest rate risk (1,864) Other net operating income(expense) For the year ended December 30, 2018 Hedge ineffectiveness recognized in profit or loss Line item in the profit or loss that includes hedge ineffectiveness WOORI FINANCIAL GROUP ANNUAL REPORT 2019 - 113 - 291 (8) Reclassification of profit or loss from other comprehensive income and equity related to cash flow hedges are as follows (Unit: Korean Won in millions): For the year ended December 31, 2019 Changes in the value of hedging instruments recognized in cash flow hedge reserve Hedge ineffective ness recognize d in profit or loss Changes in the value of foreign basis spread recognized in OCI (658) - - 21,420 944 838 7,638 1,601 560 Amounts reclassified from cash flow hedge reserve to profit or loss - (23,541) (8,215) Line item in the profit or loss that includes hedge ineffectiveness Other net operating income (expense) Other net operating income (expense) Other net operating income (expense) For the year ended December 31, 2018 Changes in the value of hedging instruments recognized in cash flow hedge reserve Hedge ineffective ness recognize d in profit or loss Changes in the value of foreign basis spread recognized in OCI (517) (148) - 21,429 153 (882) 2,353 - (491) Amounts reclassified from cash flow hedge reserve to profit or loss - (23,084) (3,601) Line item in the profit or loss that includes hedge ineffectiveness Other net operating income (expense) Other net operating income (expense) Other net operating income (expense) Line item affected in profit or loss due to reclassification Other net operating income (expense) Other net operating income (expense) Other net operating income (expense) Line item affected in profit or loss due to reclassification Other net operating income (expense) Other net operating income (expense) Other net operating income (expense) Interest rate risk Cash flow hedge Foreign currencies translation risk and interest rate risk Foreign currencies translation risk Interest rate risk Cash flow hedge Foreign currencies translation risk and interest rate risk Foreign currencies translation risk 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 losses Ending balance For the years ended December 31 2018 2019 25,463 53,289 (26,493) 52,259 7,416 23,678 (5,631) 25,463 In case some variables to measure fair values of financial instruments are not observable in the market, valuation techniques are utilized to evaluate such financial instruments. Those financial instruments are recorded the transaction price 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. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review 292 28. EQUITY - 114 - (1) Details of equity as of December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions): December 31, 2019 December 31, 2018 Capital Common stock capital Hybrid securities (*1) Capital surplus Paid in capital in excess of par (*2) Equity method Others Sub-total Capital adjustments Treasury stocks Other adjustments (*3) Sub-total Accumulated other comprehensive income Financial assets at FVTOCI Gain(loss) on evaluation of investment stocks by equity method Gain(loss) from foreign business translation Remeasurements of defined benefit plan Gain(loss) on evaluation of cash flow hedge Sub-total Retained earnings (*4) Non-controlling interest (*1) (*5) Total 3,611,338 997,544 608,348 1,153 16,794 626,295 - (1,748,667) (1,748,667) (71,914) 915 (152,987) (270,977) (5,692) (500,655) 18,524,515 3,981,962 25,492,332 3,381,392 3,161,963 269,533 - 16,356 285,889 (34,113) (1,607,647) (1,641,760) (87,182) 302 (244,735) (236,726) (3,869) (572,210) 17,124,657 213,113 21,953,044 (*1) At the end of the previous term, hybrid securities were issued by Woori Bank, a subsidiary company, and were classified as non-controlling interests of capital from the 11th of January, 2019. (*2) Capital surplus increased as new shares were issued through a comprehensive stock exchange of shares when Woori Financial Inc. was established. (Note 1) (*3) Included capital transaction gains and losses recognized by the 2014 merger of Woori Bank and (formerly) Woori Financial Group Inc. During the current term, the Group entered to acquire and additional interest in the Woori Asset Trust Co., Ltd., reducing the capital adjustment by 111,242 million Won. (*4) The regulatory reserved for credit loss under the relevant laws as of December 31, 2019 and 2018 are 2,356,246 million Won, and 2,578,457 million Won, respectively. (*5) 69,533 million Won increased as of December 31, 2019 due to business combination of Woori Asset Management Corp., and Woori Asset Trust Co., Ltd. (Note 45) (2) The number of authorized shares and others of the Group are as follows: Shares of common stock authorized Par value Shares of common stock issued Capital stock December 31, 2019 4,000,000,000 Shares 5,000 Won 722,267,683 Shares 3,611,338 million Won WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 115 - 293 (3) Details of changes in shares of the Group issued are as follows: Date of incorporation (*1) Increase (*2) Decrease Ending Balance December 31, 2019 680,164,306 42,103,377 - 722,267,683 (*1) The number of shares issued by Woori Bank at the end of the business combination period is 676,000,000. When Woori Financial Group Inc. was established, 4,164,306 shares were issued as a result of stock comprehensive exchange with Woori Bank which is a shareholder of Woori FIS Co., Ltd., Woori Finance Management Research Institute Co., Ltd., Woori Credit Information Co., Ltd., Woori Private Equity Asset Management Co., Ltd., and Woori Fund Service Co., Ltd. (*2) New stocks were issued for the comprehensive stock exchange which was to transfer Woori Card Co., Ltd., as a first level of subsidiary from second-tier subsidiary in September, 2019. (4) Hybrid securities The bond-type hybrid securities classified as owner’s equity are as follows (Unit: Korean Won in millions): Securities in local currency Issue date July 18, 2019 October 11, 2019 Maturity - - Issuance cost Total 3.49 3.32 sInterest rate (%) December 31, 2019 500,000 500,000 (2,456) 997,544 The hybrid securities mentioned above do not have maturity date but are redeemable after 5 years. (5) Capital adjustment Details of changes in capital adjustments are as follows (Unit: Korean Won in millions): Beginning balance Losses on redemption of hybrid securities Net increase of treasury stocks Transaction with other owners (*) Ending balance December 31, 2019 December 31, 2018 (1,641,760) (277) 4,245 (110,875) (1,748,667) (1,849,551) (368) - 208,159 (1,641,760) (*) 111,242 million Won is included which has been reduced by the Group to obtain an additional stake in the Woori Asset Trust Co., Ltd. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review294 - 116 - (6) Accumulated other comprehensive income Changes in the accumulated other comprehensive income are as follows (Unit: Korean Won in millions): For the year ended December 31, 2019 Reclassif- ication adjustments Increase (decrease) (*) Income tax effect Ending balance Beginning balance Net gain (loss) on valuation of financial assets at FVTOCI Share of other comprehensive gain (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 derivatives designated as cash flow hedges Total (87,182) (24,180) 43,021 (3,573) (71,914) 302 (1,420) (244,735) 96,157 (236,726) (48,244) - - - 2,033 915 (4,409) (152,987) 13,993 (270,977) (3,869) (572,210) (32,719) (10,406) 31,756 74,777 (860) 7,184 (5,692) (500,655) (*) The increase and decrease of financial asset valuation profit or loss at fair value through other comprehensive income is a change due to the period evaluation and includes the amount of 29,368 million Won replaced by retained earnings due to the disposal of the equity securities. Beginning balance For the year ended December 31, 2018 Increase (decrease) (*1)(*2) Reclassification adjustments Income tax effect Ending balance Net gain (loss) on valuation of financial assets at FVTOCI Gain (loss) on financial liabilities at FVTPL designated as upon initial recognition due to own credit risk Share of other comprehensive gain (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 derivatives designated as cash flow hedges Transfer to assets held for distribution (sale) Total (88,906) (8,677) 8,015 2,386 (87,182) (96) 132 (2,656) 4,080 (242,806) (2,661) (152,358) (111,401) - - - - (36) - (1,122) 302 732 (244,735) 27,033 (236,726) 777 30,655 (26,871) (8,430) (3,869) 4,145 (481,900) (4,145) (92,017) - (18,856) - 20,563 - (572,210) (*1) Net gain (loss) on valuation of financial assets at FVTOCI included the 1,009 million Won transfer to retained earnings due to disposal of equity securities. (*2) Gain (loss) on financial liabilities at fair value through profit or loss designated as upon initial recognition due to credit risk included the 4 million Won transferred to retained earnings due to redemption. WOORI FINANCIAL GROUP ANNUAL REPORT 2019 - 117 - 295 (7) Regulatory Reserve for Credit Loss In accordance with Paragraphs 1 and 3 of Article 27 of the Financial holding company Supervision Regulations, the Group calculates and discloses the regulatory reserve for credit loss. 1) Balance of the regulatory reserve for credit loss Balance of the planned regulatory reserve for credit loss is as follows (Unit: Korean Won in millions): Beginning balance Planned provision of regulatory reserve (reversal) for credit loss Ending balance December 31, 2019 2,356,246 December 31, 2018(*) 2,578,457 191,301 2,547,547 (222,211) 2,356,246 (*) The amount is calculated and accumulated in accordance with Article 29 of the Banking Supervision Regulations, paragraphs 1 and 2. 2) Planned reserves provided, adjusted net income after the planned reserves provided and adjusted EPS after the planned reserves provided are as follows (Unit: Korean Won in millions, except for EPS 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 2019 2,037,596 191,301 1,846,295 2018 2,051,649 40,875 2,010,774 2,689 2,762 (*) The amount of reserve for credit loss for the year ended December 31, 2018 is calculated considering only the change in the reserve for credit loss after the accounting policy change due to adoption of K-IFRS 1109. Therefore, the effect of reducing the reserve for credit losses due to changes in accounting policies was excluded. (8) Treasury stock Details of treasury stocks are as follows (Unit: Shares, Korean Won in millions): Beginning balance Acquisition(*) Disposal Ending balance December 31, 2019 Number of shares Book value 2,728,774 57,721,387 (60,450,159) 2 34,113 799,886 (833,999) - (*) At the establishment of Woori Financial Group Inc., Woori Bank acquired 15,618,008 shares of the Group. (The comprehensive stock transfer of Woori FIS Co., Ltd., Woori Finance Research Institute Co., Ltd., Woori Credit Information Co., Woori Fund Services Co., Woori Private Equity Asset Management Co. and the parent company, Woori Financial Group Inc. :4,164,306 shares, execution of the right to purchase shares from shareholders who were against to comprehensive stock transfer: 11,453,702 shares) In September 2019, Woori Bank acquired 42,103,377 additional shares of Woori Financial Group Inc. through a comprehensive exchange of shares of Woori Card Co., Ltd. and Woori Financial Group Inc., the parent company. 2 shares of treasury stocks have been incurred for the provision for odd-lot payment incurred during the partial stock replacement of the shareholders who possess physical stock certificate. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review 296 29. DIVIDENDS - 118 - Dividends for the years 2019 and 2018 are 700 Won and 650 Won, respectively, and the total amount of dividends paid are 505,587 million Won and 437,626 million Won, respectively. The dividends for the current period will be submitted as an agenda in the upcoming annual shareholders’ meeting scheduled on March 25, 2020. 30. NET INTEREST INCOME (1) Interest income recognized is as follows (Unit: Korean Won in millions): For the years ended December 31 2019 2018 Financial assets at FVTPL Financial assets at FVTOCI Financial assets at amortized cost Securities at amortized cost Loans and other financial assets at amortized cost: Interest on due from banks Interest on loans Interest of other receivables Sub-total Total 50,619 474,751 436,340 141,330 9,443,740 29,990 10,051,400 10,576,770 (2) Interest expense recognized are as follows (Unit: Korean Won in millions): For the years ended December 31 2019 2018 Interest on deposits due to customers Interest on borrowings Interest on debentures Other interest expense Interest on lease liabilities Total 3,424,441 383,213 777,322 89,002 9,086 4,683,064 54,243 280,371 376,788 112,581 8,832,485 28,031 9,349,885 9,684,499 2,917,165 306,739 720,394 89,250 - 4,033,548 31. NET FEES AND COMMISSIONS INCOME (1) Details of fees and commissions income recognized are as follows (Unit: Korean Won in millions): Fees and commission received for brokerage Fees and commission received related to credit Fees and commission received for electronic finance Fees and commission received on foreign exchange handling Fees and commission received on foreign exchange Fees and commission received for guarantee Fees and commission received on credit card Fees and commission received on securities business Fees and commission from trust management Fees and commission received on credit Information Other fees Total For the years ended December 31 2019 156,578 189,597 137,289 61,756 92,408 71,106 548,580 113,346 180,290 12,626 145,750 1,709,326 2018 162,344 173,233 121,250 60,433 66,036 65,254 598,705 96,379 177,456 12,985 146,689 1,680,764 WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 119 - 297 (2) Details of fees and commissions expense incurred are as follows (Unit: Korean Won in millions): Fees and commissions paid Credit card commission Brokerage commission Others Total 32. DIVIDEND INCOME For the years ended December 31 2019 2018 189,789 407,689 775 8,445 606,698 174,669 428,613 1,833 5,675 610,790 (1) Details of dividend income recognized are as follows (Unit: Korean Won in millions): Dividend income related to financial assets at FVTPL Dividend income financial assets at FVTOCI Total For the years ended December 31 2018 2019 86,979 20,980 107,959 67,892 22,660 90,552 (2) Details of dividends related to financial assets at FVTOCI are as follows (Unit: Korean Won in millions): Dividend income recognized from assets held Equity securities Dividend income recognized in assets derecognized Total For the years ended December 31 2018 2019 20,980 - 20,980 22,386 274 22,660 33. NET GAIN OR LOSS ON FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS MANDATORILY MEASURED AT FAIR VALUE (1) Details of gains or losses related to net gain or loss on financial instruments at FVTPL are as follows (Unit: Korean Won in millions): Gain on financial instruments at fair value through profit o r loss mandatorily measured at fair value Gain on financial instruments at fair value through profit or loss designated as upon initial recognition Total For the years ended December 31 2019 2018 58,692 (33,237) 25,455 196,959 17,484 214,443 Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review298 - 120 - (2) Details of net gain or loss on financial instruments at fair value through profit or loss mandatorily measured at fair value and financial instruments held for trading are as follows (Unit: Korean Won in millions): For the years ended December 31 2018 2019 Financial assets at FVTPL (financial assets held for trading) Securities Loans Other financial assets Gain on valuation Gain on disposals Loss on valuation Loss on disposals Sub-total Gain on valuation Gain on disposals Loss on valuation Loss on disposals Sub-total Gain on valuation Gain on disposals Loss on valuation Loss on disposals Sub-total Derivatives (for trading) Sub-total Interest rate derivatives Gain on transactions and valuation Loss on transactions and valuation Sub-total Currency Gain on transactions derivatives and valuation Loss on transactions and valuation Sub-total Equity Gain on transactions derivatives and valuation Loss on transactions and valuation Sub-total Other Gain on transactions derivatives and valuation Loss on transactions and valuation Sub-total Sub-total Total 121,794 64,600 (61,288) (19,018) 106,088 1,037 519 (21) - 1,535 2,062 1,901 (1,755) (1,815) 393 108,016 1,507,254 (1,615,833) (108,579) 6,872,513 (6,855,447) 17,066 839,196 (796,336) 42,860 695 (1,366) (671) (49,324) 58,692 137,237 45,105 (25,499) (26,728) 130,115 1,606 4,136 (4,805) (117) 820 2,050 530 (2,280) (86) 214 131,149 1,255,581 (1,303,244) (47,663) 4,935,922 (4,822,915) 113,007 486,560 (484,986) 1,574 4,138 (5,246) (1,108) 65,810 196,959 WOORI FINANCIAL GROUP ANNUAL REPORT 2019 - 121 - 299 (3) Details of net gain(loss) on financial instruments at fair value through profit or loss designated as upon initial recognition and Losses on financial instruments designated as at fair value through profit or loss are as follows (Unit: Korean Won in millions): Gain(loss) on equity-linked securities: Loss on disposal of equity-linked securities Gain(loss) on valuation of equity-linked securities Sub-total Gain on other financial instruments: Gain on valuation of other financial instruments Total For the years ended December 31 2018 2019 (16,006) (17,231) (33,237) - (33,237) (2,058) 17,945 15,887 1,597 17,484 34. NET GAIN OR LOSS ON FINANCIAL ASSETS AT FVTOCI AND AFS FINANCIAL ASSETS Details of net gain or loss on financial assets at FVTOCI recognized are as follows (Unit: Korean Won in millions) : Gain on redemption of securities Gain on transactions of securities Total For the years ended December 31 2018 2019 15 11,000 11,015 53 1,994 2,047 35. REVERSAL OF (PROVISION FOR) IMPAIRMENT LOSSES DUE TO CREDIT LOSS Reversal of (provision for) impairment losses due to credit loss are as follows (Unit: Korean Won in millions): Impairment loss due to credit loss on financial assets measured at FVTOCI Impairment loss due to credit loss on securities at amortized cost Reversal for credit loss on loan and other financial assets at amortized cost Reversal of provision on guarantee Reversal of provision on (provision for) unused loan commitment Total For the years ended December 31 2019 2018 (3,297) 1,415 (385,758) 4,352 9,044 (374,244) (2,027) (1,922) (415,084) 105,985 (16,526) (329,574) Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review300 - 122 - 36. GENERAL AND ADMINISTRATIVE EXPENSES AND OTHER NET OPERATING INCOME (EXPENSES) (1) Details of general and administrative expenses recognized are as follows (Unit: Korean Won in millions): For the years ended December 31 2018 2019 Employee benefits Salaries Employee fringe benefits Short-term employee benefits Share based payments Retirement benefit service costs Termination Sub-total Depreciation and amortization Other general and administrative expenses Rent Taxes and public 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 1,584,791 475,238 6,328 168,423 156,441 2,391,221 481,176 85,705 137,137 235,117 93,573 70,220 45,594 85,887 7,845 13,255 7,736 9,668 23,577 18,495 15,272 10,564 34,035 893,680 3,766,077 1,484,236 468,012 - 145,149 225,106 2,322,503 216,735 321,198 115,454 222,530 88,689 70,618 43,540 72,450 8,601 12,757 7,071 8,355 23,474 17,384 14,686 10,264 47,724 1,084,795 3,624,033 (2) Details of other operating income recognized are as follows (Unit: Korean Won in millions): Gain on transactions of foreign exchange Gain related to derivatives(Designated for hedging) Gain on fair value hedged items Others (*) Total For the years ended December 31 2019 2018 602,115 126,651 231 45,706 774,703 1,227,561 35,810 42,797 82,417 1,388,585 (*) Other income includes income amounting to 29,316 million Won for the years ended December 31, 2018, that the Group recognized for it is to receive from other creditor financial institutions in accordance with the creditor financial institutions committee agreement. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 123 - 301 (3) Details of other operating expenses recognized are as follows (Unit: Korean Won in millions): Losses on transactions of foreign exchange KDIC deposit insurance premium Contribution to miscellaneous funds Losses related to derivatives (Designated for hedging) Losses on fair value hedged items Others (*) Total For the years ended December 31 2019 2018 192,331 333,600 317,667 3,686 86,214 143,786 1,077,284 991,423 315,315 298,416 36,483 17,299 124,240 1,783,176 (*) Other expense includes such expenses amounting to 1,594 million for the years ended December 31, 2018 , 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, in includes 22,317 million Won and 51,770 million Won, respectively, of intangible asset amortization expense for the years ended December 31, 2019 and 2018, respectively. (4) Share-based payment Details of performance condition share-based payment granted to executives as of December 31, 2019 is as follows. 1) Performance condition share-based payment Subject to Type of payment Vesting period Date of payment Number of shares measured as of the closing date (*) Shares granted for the year 2019 Cash-settled January 1, 2019 ~ December 31, 2022 2023-01-01 524,746 shares (*) The number of payable stocks is granted at the initial contract date and the payment rate is determined based on the achievement of the pre-determined performance targets. Performance is evaluated as long-term performance indication including relative shareholder return, net income, return on equity (ROE), non-performing loan ratio and job performance. 2) The Group accounts for performance condition share-based payments according to the cash-settled method and the fair value of the liabilities is reflected in the compensation costs by re-measuring every closing period. As of December 31, 2019, the book value of the liabilities related to the performance condition share-based payments recognized by the Group is 6,328 million Won. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review302 - 124 - 37. 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): Gains on valuation of investments in joint ventures and associates Losses on valuation of investments in joint ventures and associates Impairment losses of investments in joint ventures and associates Total For the years ended December 31 2019 2018 103,775 (16,144) (3,634) 83,997 25,791 (22,595) (177) 3,019 (2) Details of other non-operating income and expenses recognized are as follows (Unit: Korean Won in millions): Other non-operating incomes Other non-operating expenses Total For the years ended December 31 2019 2018 68,459 (229,383) (160,924) 129,709 (87,157) 42,552 (3) Details of other non-operating income recognized are as follows (Unit: Korean Won in millions): Rental fee income Gains on disposal of investments in joint ventures and associates Gains on disposal of premises and equipment, intangible assets and other assets Reversal of impairment loss of premises and equipment, intangible assets and other assets Others Total For the years ended December 31 2019 2018 10,106 - 1,632 103 56,618 68,459 6,835 50,511 30,278 761 41,324 129,709 (4) Details of other non-operating expenses recognized are as follows (Unit: Korean Won in millions): Depreciation on investment properties Interest expenses of refundable deposits Losses on disposal of investment in joint ventures and associates Losses on disposal of premises and equipment, intangible assets and ot her assets Impairment losses of premises and equipment, intangible assets and other assets Donation Others Total For the years ended December 31 2019 2018 2,225 834 - 3,433 28,295 62,545 132,051 229,383 4,045 620 2,931 1,160 87 51,983 26,331 87,157 WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 125 - 303 38. INCOME TAX EXPENSE (1) Details of income tax expenses are as follows (Unit: Korean Won in millions): Current tax expense: Current tax expense with respect to the current period Adjustments recognized in the current period in relation to the tax expense of prior periods Sub-total Deferred tax expense Income tax expense For the years ended December 31 2019 2018 612,680 (65,227) 547,453 138,000 685,453 432,645 5,923 438,568 314,655 753,223 (2) Income tax expense reconciled to net income before income tax expense is 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 expenses that are not deductible in determining taxable income Adjustments recognized in the current period in relation to the current tax of prior periods Others Income tax expense Effective tax rate Sub-total For the years ended December 31 2019 2,723,049 738,476 2018 2,804,872 760,978 (61,730) (49,418) 31,549 18,639 (65,227) 42,385 (53,023) 685,453 25.2% 5,923 17,101 (7,755) 753,223 26.9% (*) The applicable income tax rate: 1) 11% for taxable income below 200 million Won, 2) 22% for above 200 million Won and below 20 billion Won, 3) 24.2% for above 20 billion Won and below 300 billion Won, 4) 27.5% for above 300 billion Won. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review304 - 126 - (3) Changes in cumulative temporary differences for the years ended Deferred 31, 2019 and 2018, are as follows (Unit: Korean Won in millions): For the year ended December 31, 2019 Beginning balance 372,346 Business combination 1,360 Recognized as income (expense) (91,781) Recognized as other comprehensive income (expense) (*2) (3,573) Ending Balance 278,352 28,354 (27,507) (55,846) (52,345) 6,672 (154,431) 360,087 (318,330) 11,374 75,194 (204,083) 41,485 90 6 (52) - - - 1,131 (1,131) - 76 (6,927) (5,447) (17,648) (48,217) (10,486) (366) 221 (8,011) 21,234 (62,458) (3,459) 10,958 72,013 (138,000) (83) 306 - - - - 13,850 143 - 2,228 (5,687) 7,184 10,713 (75,412) (66,384) (52,711) 6,893 (162,442) 396,302 (381,776) 7,915 88,456 (144,684) (94,778) Gain (loss) on financial assets Gain 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 (*1) Net deferred tax assets (*1) Among the deferred tax assets and liabilities classified as ‘Others,’ the deferred tax asset arising from unused tax losses amounts to 21,656 million Won. (*2) Includes 2,737 million Won presented on non-controlling interests. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 127 - 305 K-IFRS 1109 adoption effect For the year ended December 31, 2018 Beginning balance Recognized as retained earnings Recognized as other comprehensive income (loss) Beginning balance after K-IFRS 1109 adoption Business combination Recognized as income (expense) Recognized as other comprehensive income (expense)(*2) Ending Balance 479,065 (150,140) 149,796 478,721 24,482 - (10,260) (60,987) (3,990) - (47,697) 47,446 9,777 (137,320) 284,234 (287,333) 30,602 45,153 (72,265) - 36 - - 1,370 25,879 4,917 - - - - - - - - - - - - - - 621 399 - - (102,170) (4,205) 372,346 3,203 (13,617) 4,520 (52,493) (3,105) (17,147) 669 360 - - - - 28,354 (27,507) (55,846) (52,345) 6,672 (154,431) 24,482 (14,250) (60,987) (251) 9,777 (137,284) 284,234 317 43,821 31,715 360,087 (287,333) 31,972 71,032 (67,348) - - - 44 (31,092) 95 (318,330) (20,598) 4,162 (130,137) - - (6,642) 11,374 75,194 (204,083) 257,451 (74,482) 149,796 332,765 1,381 (314,653) 21,992 41,485 Gain (loss) on financial assets Gain 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(*1) Net deferred tax assets (*1) Among the deferred tax assets and liabilities classified as ‘Others,’ the deferred tax asset arising from unused tax losses amounts to 18,154 million Won. (*2) Includes 1,429 million Won presented on non-controlling interests. (4) Unrealizable temporary differences are as follows (Unit: Korean Won in millions): Deductible temporary differences Tax loss carry forward Taxable temporary differences Total December 31, 2019 171,714 41,546 (8,024,406) (7,811,146) December 31, 2018 272,911 149,035 (868,541) (446,595) No deferred income tax asset has been recognized for the deductible temporary difference of 165,679 million Won associated with investments in subsidiaries and associates as of December 31, 2019, because it is not probable that the temporary differences will be reversed in the foreseeable future. 6,035 million Won associated with others, respectively, as of December 31, 2019, due to the uncertainty that these will be realized in the future. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review306 - 128 - No deferred income tax liability has been recognized for the taxable temporary difference of KRW 8,024,406 million associated with investment in subsidiaries and associates as of December 31, 2019, due to the following reasons: - The Group is able to control the timing of the reversal of the temporary difference. - It is probable that the temporary difference will not be reversed in the foreseeable future. As of December 31, 2019, the expected extinctive date of tax loss carry forward that are not recognized as deferred tax assets are as follows (Unit: Korean Won in millions): Tax loss carry forward - - 1 year or less 1 – 2 years 2 – 3 years More than 3 years 41,546 - (5) Details of accumulated deferred tax charged directly to other equity are as follows (Unit: Korean Won in millions): Gain on valuation of financial assets at FVTOCI Gain on foreign currency translation of foreign operations Remeasurements of the net defined benefit liability Gain on derivatives designated as cash flow hedge Gain on valuation of financial assets at FVTOCI Total December 31, 2019 27,849 1,748 3,774 102,120 280 135,771 December 31, 2018 31,422 (285) 8,183 88,127 1,140 128,587 (6) Current tax assets and liabilities are as follows (Unit: Korean Won in millions) Current tax assets Current tax liabilities December 31, 2019 47,367 182,690 December 31, 2018 20,730 159,078 WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 129 - 307 39. EARNINGS PER SHARE (“EPS”) (1) Basic earnings per share Basic EPS is calculated by dividing net income attributable to common shareholders by weighted-average number of common shares outstanding (Unit: Korean Won in millions, except for EPS and number of shares): Net income attributable to Owners Dividends to hybrid securities Net income attributable to common shareholders Weighted average number of common shares outstanding Basic EPS . For the years ended December 31 2018 2019 1,872,207 (4,362) 1,867,845 2,033,182 (151,194) 1,881,988 685 million shares 673 million shares 2,727 Won 2,796 Won (2) Weighted-average number of ordinary shares The weighted average number of common shares outstanding is as follows: For the year ended December 31, 2019 Period Number of shares Dates Accumulated number of shares outstanding during period Common shares issued at the beginning of the period Purchase of treasury stock Disposal of treasury stock Disposal of treasury stock(*) Disposal of treasury stock(*) 2019-01-01 ~ 2019-12-31 2019-01-08 ~ 2019-12-31 2019-03-22 ~ 2019-12-31 2019-09-26 ~ 2019-12-31 2019-11-12 ~ 2019-12-31 673,271,226 (11,453,702) 18,346,782 28,890,707 13,212,670 365 358 285 97 40 Sub-total (①) Weighted average number of common shares outstanding (②=(①/365) 245,743,997,490 (4,100,425,316) 5,228,832,870 2,802,398,579 528,506,800 250,203,310,423 685,488,522 (*) Woori Bank disposed 42,103,377 shares of Woori Financial Group Inc. which were acquired through comprehensive stock exchange with the shares of Woori Card Co., Ltd., and its parent company, Woori Financial Group Inc. For the year ended December 31, 2018 Period Number of shares Dates Accumulated number of shares outstanding during period Common shares issued at the beginning of the period 2018-01-01 ~ 2018-12-31 673,271,226 365 Sub-total (①) Weighted average number of common shares outstanding (②=(①/365) 245,743,997,490 245,743,997,490 673,271,226 Diluted EPS is equal to basic EPS because there is no dilution effect for the years ended December 31, 2019 and 2018. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review308 - 130 - 40. 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 Sub-total Unconfirmed guarantees Local letters of credit Letters of credit Other unconfirmed guarantees Sub-total Commercial paper purchase commitments and others Total December 31, 2019 December 31, 2018 89,699 391,688 224,746 6,982,889 7,689,022 193,096 3,081,390 771,378 4,045,864 884,031 12,618,917 125,870 371,525 158,179 6,452,791 7,108,365 305,057 3,322,731 669,677 4,297,465 1,260,587 12,666,417 (2) Details of unused loan commitments and others are as follows (Unit: Korean Won in millions): Loan commitments Other commitments (3) Litigation case December 31, 2019 103,651,674 5,993,608 December 31, 2018 97,796,704 5,041,314 Legal cases where the Group is involved are as follows (Unit: Korean Won in millions): Number of cases (*) Amount of litigation Provisions for litigations December 31, 2019 As plaintiff 119 cases 291,880 As defendant 415 cases 391,362 27,029 December 31, 2018 As plaintiff As defendant 77 cases 494,645 154 cases 246,826 17,925 (*) The number of lawsuits as of December 31, 2019 and 2018 does not include fraud lawsuits, etc. and those lawsuits that are filed only to extend the statute of limitation. (4) Recently, the FSS announced ‘Results of interim inspection of Lime Asset Management Co., Ltd and future countermeasures’ regarding the deferment of the redemption of Lime Asset Management Co., Ltd. The status of the sale of the Lime Asset Management Co., Ltd. operation deferral fund of the Group is 357.7 billion Won for 1,640 accounts as of the end of December 2019. Currently, a full-time management team is dispatched to monitor the implementation of the normal repurchase and management plan of lime and proper performance of internal control work. (5) The Group decided to enter into a stock sales agreement with a major shareholder of Woori Asset Trust Co., Ltd (formerly Kukje Asset Trust Co., Ltd) to acquire 44.5% interest (58.6% of voting rights) during July, 2019, and to acquire additional 21.3% interest (28.0% of voting rights) after a certain period. As a result, the Group acquired the interest of the first sales agreement in December 2019 and is planning to acquire the interest of the second sales agreement after a certain period. In regards to this acquisition, the Group recognized 111,242 million as other financial liabilities for the second sales agreement. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 131 - 309 41. RELATED PARTY TRANSACTIONS Related parties of the Group as of December 31, 2019 and 2018, and assets and liabilities recognized, guarantees and commitments, major transactions with related parties and compensation to key management for the years ended December 31, 2019 and 2018 are as follows: (1) Related parties Associates Related parties Woori Service Networks Co., Ltd., Korea Credit Bureau Co., Ltd., Korea Finance Security Co., Ltd., LOTTE CARD Co., Ltd, Chin Hung International Inc., 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 31 associates) (2) Assets and liabilities from transactions with related parties are as follows (Unit: Korean Won in millions): Associates Woori Service Networks Co., Related party Ltd. Korea Credit Bureau Co., Ltd. Korea Finance Security Co., Ltd. Chin Hung International Inc. LOTTE CARD Co. Ltd. K BANK Co., Ltd. Well to Sea No.3 Private Equity Fund Others (*) A title of account Loans Loss allowance Deposits due to customers Accrued expenses Other liabilities Loans Deposits due to customers Other liabilities Loans Loss allowance Deposits due to customers Other liabilities Loans Loss allowance Deposits due to customers Other liabilities Loans Loss allowance Deposits due to customers Loans Account receivables Other assets Loans Loss allowance Deposits due to customers Other liabilities Loans Loss allowance Other assets Deposits due to customers Other liabilities December 31, 2019 December 31, 2018 23 (1) 1,881 6 429 3 26 - 1,860 (3) 1,371 - 244 (2) 5,381 321 7,500 (30) 2,726 141 24 4 4,490 (8) 714 47 84 (84) 338 5,577 172 69 - 1,967 - 333 7 6,494 19 57 (4) 5,040 10 411 (204) 11,605 2,974 - - - 190 - - 1,857 (9) 356 64 4,783 (324) 9 8,049 165 (*) Others include Saman Corporation,. Woori-Shinyoung Growth-Cap Private Equity Fund, Uri Hanhwa Eureka Private Equity Fund, Kyesan Engineering Co., Ltd. and DAEA SNC Co., Ltd. etc., as of December 31, 2019 and 2018. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review 310 - 132 - (3) Gain or loss from transactions with related parties are as follows (Unit: Korean Won in millions): For the years ended December 31 Associates Kumho Tire Co., Inc. (* 1) Related party A title of account Interest income Reversal of allowance for credit loss Woori Service Networks Co., Ltd Other income . Interest expenses Reversal of allowance for Korea Credit Bureau Co., Ltd. Associates Korea Finance Security Co., Ltd. Chin Hung International Inc STX Engine Co., Ltd. (*2) STX Corporation(*2) LOTTE CARD Co., Ltd. K BANK Co., Ltd. Well to Sea No.3 Private Equity Fund Others (*3,4) credit loss Fees expenses Other expenses Interest expenses Fees expenses Interest expenses Provisions for allowance for credit loss Other expenses Interest expenses Provisions for allowance for credit loss Interest income Interest expenses Reversal of allowance for credit loss Interest expenses Reversal of allowance for credit loss Interest income Fees income Interest expenses Provisions for allowance for credit loss Fees income Other income Interest income Interest expenses Reversal of allowance for credit loss Interest income Fees income Other income Interest expenses Reversal of allowance for credit loss 2019 - - 32 20 (3) 448 1,423 29 2,608 9 8 112 35 44 - - - - - 213 593 53 30 1,468 - 1,774 11 (18) - 1,281 17 55 (5) 2018 1,098 (156,712) 30 14 - 561 580 62 2,310 12 4 146 43 182 333 86 (88,734) 2 (31,210) - - - - 1,134 19 2,179 9 (30) 233 23 14 40 (147) (*1) The Group lost significant influence over the entity due to the termination of the joint management procedures of the creditors’ financial institution during the year ended December 31, 2018, and thus the entity was excluded from the list of associates. (*2) The shares of the entity were sold after it was transferred to assets held for distribution (sale) during the year ended December 31, 2018 and thus was excluded from the list of associates. (*3) Others include Saman Corporation,. Woori-Shinyoung Growth-Cap Private Equity Fund, Uri Hanhwa Eureka Private Equity Fund, PCC-Woori LP Secondary Fund, Kyesan Engineering Co., Ltd. and DAEA SNC Co., Ltd. etc., as of December 31, 2019. (*4) Others include Saman Corporation, Uri Hanhwa Eureka Private Equity Fund, Kyesan Engineering Co., Ltd, DAEA SNC Co., Ltd. etc., as of December 31, 2018. WOORI FINANCIAL GROUP ANNUAL REPORT 2019 - 133 - 311 (4) Major loan transactions with related parties for the years ended December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions): Associates Well to Sea No. 3 Private Equity Related parties Beginning balance Loan Collection Others Fund Korea Finance Security Co., Ltd. LOTTE CARD Co., Ltd. 1,857 - - 2,633 1,800 7,500 - - - Ending balance(*1) - - - 4,490 1,800 7,500 For the year ended December 31, 2019 Related parties Associates Kumho Tire Co., Inc.(*2) Well to Sea No. 3 Private Equity For the year ended December 31, 2018 Beginning balance 57,470 Loan Collection 7,057 - Others (50,413) Ending balance(*1) - Fund STX Engine Co., Ltd. (*3) 73,810 39,886 16,857 - 88,810 2,177 - (37,709) 1,857 - (*1) Payments that occurred for business reasons among related parties are excluded and net increase or decrease was used for limited credit loan. (*2) The Group lost significant influence over the entity due to the termination of the joint management procedures of the creditors’ financial institution during the year ended December 31, 2018, and thus the entity was excluded from the list of associates. (*3) The shares of the entity were sold after it was transferred to assets held for distribution (sale) during the year ended December 31, 2018 and thus was excluded from the list of associates. (5) Details of changes in major deposits due to customers with related parties for the years ended December 31, 2019 and 2018 are as follows (Unit: Korean Won in millions): Associates . For the year ended December 31, 2019 Related parties Saman Corporation Woori Service Networks Co., Ltd Chin Hung International Inc Korea Credit Bureau Co., Ltd. Partner One Value Up I Private Equity Fund Korea Finance Security Co., Ltd. Beginning balance 2,436 1,180 765 6,000 1,403 535 Borrowings 86 1,460 400 - Repayment and others - 1,460 765 6,000 1,617 25 1,870 560 Ending balance (*1) 2,522 1,180 400 - 1,150 - For the year ended December 31, 2018 Related parties Associates . Saman Corporation Woori Service Networks Co., Ltd Chin Hung International Inc Korea Credit Bureau Co., Ltd. Partner One Value Up I Private Equity Fund Korea Finance Security Co., Ltd. STX Corporation (*2) STX Engine Co., Ltd.(*2) Kumho Tire Co., Inc.(*2) Hyunwoo International Co., Ltd.(*2) Beginning balance 2,334 1,135 765 4,000 - 635 330 10,256 37 41 Borrowings 102 1,025 765 12,000 Repayment and others - 980 765 10,000 1,803 560 - - - - 400 660 330 10,256 37 41 Ending balance (*1) 2,436 1,180 765 6,000 1,403 535 - - - - (*1) Details of payment between related parties and demand deposit due to customers etc. are excluded. (*2) Excluded from associates due to disposal during the previous year. (6) There are no major borrowing transactions with related parties for the years ended December 31, 2019 and 2018. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review312 - 134 - (7) Guarantees provided to the related parties are as follows (Unit: Korean Won in millions): December 31, 2019 December 31, 2018 Warranty Korea Finance Security Co., Ltd. Korea Credit Bureau Co., Ltd. Woori Service Networks Co., Ltd. Chin Hung International Inc. K BANK Co., Ltd. Well to Sea No.3 Private Equity Fund LOTTE CARD Co. Ltd. 400 32 177 32,055 159 210,510 150,000 203 28 Unused loan commitment Unused loan commitment 131 32,058 15 Unused loan commitment Unused loan commitment Unused loan commitment 208,143 - Unused loan commitment Unused loan commitment There no recognized provisions for guarantees provided to the related parties as of December 31, 2019 and 2018, respectively. (8) Amount of derivatives-related commitments with the related parties Warrantee 2019 Well to Sea No.3 Private Equity Fund 584,377 439,243 (9) Compensation for key management is as follows (Unit: Korean Won in millions): For the years ended December 31 2018 Warranty Open interest Short-term employee salaries Retirement benefit service costs Share-based compensation Total For the years ended December 31 2018 2019 13,427 783 2,494 16,704 12,326 489 - 12,815 Key management includes registered executives and non-registered executives. Outstanding assets from transactions with key management amount to 2,414 million Won and 2,816 million Won, as of December 31, 2019 and 2018 respectively and with respect to the assets, the Group has not recognized any allowance nor related impairment loss due to credit losses. Also, liabilities from transaction with key management amount to 6,543 million Won and 6,096 million Won, respectively, as of December 31, 2019 December 31, 2018, WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 135 - 313 42. TRUST ACCOUNTS (1) Trust accounts of the Bank are as follows (Unit: Korean Won in millions): Total assets Trust accounts December 31, 2019 60,288,399 December 31, 2018 53,560,071 Operating income For the years ended December 31 2019 1,118,746 2018 1,049,105 (2) Receivables and payables between the Bank 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, 2019 December 31, 2018 31,533 392,453 2,730,806 3,123,259 28,703 574,330 3,020,371 3,594,701 (3) Significant transactions between the Bank and trust accounts are as follows (Unit: Korean Won in millions): Revenue: Trust fees Termination fees Expense: Total Interest expenses on deposits due to customers Interest expenses on borrowings from trust accounts Total For the years ended December 31 2018 2019 171,072 488 171,560 6,684 40,489 47,173 177,913 5,885 183,798 7,813 38,873 46,686 Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review314 - 136 - (4) Principal guaranteed trusts and principal and interest guaranteed trusts are as follows; 1) The carrying value of principal guaranteed trusts and principal and interest guaranteed trusts are as follows (Unit: Korean Won in millions): December 31, 2019 December 31, 2018 Partial principal guaranteed trusts Personal trust Corporate trust Deposit purpose Sub-total 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 interest guaranteed trusts Development trusts Unspecified money trusts Sub-total Total 9,430 630 1,651 11,711 3,298 516,913 824,735 34,374 7,807 1,742 1,388,869 19 871 890 1,401,470 9,989 633 1,737 12,359 3,564 521,200 819,102 42,187 8,104 2,134 1,396,291 19 835 854 1,409,504 2) The amounts that the Bank must pay by the operating results of the principal guaranteed trusts or the principal and interest guaranteed trusts are as follows (Unit: Korean Won in millions): Liabilities for the account (subsidy for trust account adjustment) December 31, 2019 December 31, 2018 35 33 WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 137 - 315 43. RESTRUCTURING OF THE GOVERNANCE STRUCTURE OF THE GROUP (1) Establishment of the Group On November 7, 2018, Woori Bank, a subsidiary of the parent company, obtained approval from the Financial Services Commission for the establishment of a holding company, and Woori Bank, held an extraordinary general meeting of shareholders on December 28, 2018 to approve the comprehensive transfer of six companies’ shares of Woori Bank and its subsidiaries Woori Finance Management Research Institute, Woori FIS Co., Ltd., Woori Fund Services Inc., Woori Credit Information Co. and Woori Private Equity Asset Management Co. to establish the financial holding company. As a result, Woori Bank and its subsidiaries Woori Finance Research Institute Co., Ltd., Woori FIS Co., Ltd., Woori Fund Services Inc., Woori Credit Information Co., Ltd., and Woori Private Equity Asset Management Co., Ltd. were transferred as wholly-owned subsidiaries to the Group. The Group’s common stocks were listed on the Korea Exchange on February 13, 2019 and its American Depositary Shares (ADSs) are being traded underlying common stock on the New York Stock Exchange since the same date. (2) Accounting treatment of the Group From the perspective of the Group, the establishment of the parent company in a comprehensive share transfer of the controlling, subordinate or subsidiary to restructure the governance under the same control is a transaction that lacks commercial substance with no change in the assets and liabilities of the subsidiary, with no significant change in the existing owners’ absolute and relative interest in the Group net assets. Therefore, the Group accounted for the governance restructuring as it saw the consolidation entity continuing and presented the consolidated financial statements and notes in comparison. Consolidated financial statements in the comparative period are consolidated financial statements of Woori Bank and its subsidiaries (before the scheduled sale classification of five subsidiaries excluding Woori Bank) and consolidated financial statements in the first (current) period are consolidated financial statements of the parent and its subsidiaries, including Woori Bank. 44. LEASES (1) The future lease payments under the lease contracts are as follows (Unit: Korean Won in millions): Lease payments Within one year After one year but within five years After five years Total (2) Total cash outflows from lease are as follows (Unit: Korean Won in millions): Cash outflows from lease December 31, 2019 For the year ended December 31, 2019 161,251 232,985 40,698 434,934 217,867 Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review316 - 138 - (3) Details of lease payments that are not included in the measurement of lease liabilities due to the fact that they are short-term leases or leases for which the underlying asset is of low value are as follows (Unit: Korean Won in millions): For the years ended December 31 Lease payments for short-term leases Lease payments for which the underlying asset is of low value Total 1,964 332 2,296 45. BUSINESS COMBINATION (1) General As of August 1, 2019, the Group acquired 73% interests in Tong Yang Asset Management Co., Ltd. and changed the name of Tong Yang Asset Management Co., Ltd. to Woori Asset Management Corp. As of August 1, 2019, the Group obtained control of 100% of ABL Global Asset Management Co., Ltd. and transferred it as a subsidiary as of December 6, 2019, and changed its name to Woori Global Asset Management Co., Ltd.. As of December 30, 2019, the Group acquired 67.2% interests (including 8.6% interest that Woori Bank held) in the Kukje Asset Trust Co., Ltd. and changed the name Woori Asset Trust Co., Ltd.. The main reasons for the business combination are to maximize synergy between the consolidated subsidiaries and to strengthen the non- bank business portfolio. The operating profit and net profit of Woori Asset Management Corp., reflected in the consolidated statement of comprehensive income for the five months after the acquisition date, are 2,365 million Won and 1,720 million Won, respectively, and the operating and net losses of Woori Global Asset Management Co., Ltd. are 1,751 million Won and 1,360 million Won, respectively. Assuming that the acquisition of Woori Asset Management Corp., Woori Global Asset Management Co., Ltd. and Woori Asset Trust Co., Ltd. was settled on January 1, 2019, the starting date of the annual reporting period, the operating and net profit of Woori Asset Management Corp. would be 10,572 and 7,976 million Won, respectively, the operating and net losses of Woori Global Asset Management Co., Ltd. would be 3,711 million and 2,774 million Won, respectively, and the operating and net profit of Woori Asset Trust Co., Ltd. would be 41,154 million and 30,981 million Won. WOORI FINANCIAL GROUP ANNUAL REPORT 2019- 139 - 317 (2) Identifiable net assets Identified assets and liabilities as of December 31, 2019 are as follows (Unit: Korean Won in millions): Assets Accounts Cash and cash equivalent Financial assets at FVTPL Financial assets at FVTOCI Financial assets at amortized cost Woori Asset Management Corp. 12,914 49,446 26,393 (*1) (*3) Premises and equipment Intangible assets (*2) Deferred tax assets Others Sub-total Financial liabilities Provision liabilities Deferred tax liabilities Others Liabilities Sub-total Fair value of net identifiable assets 16,739 1,610 6,667 1,547 63 115,379 5,129 221 1,085 159 6,594 108,785 Woori Global Asset Management Co., Ltd. Woori Asset Trust Co., Ltd. 2,318 2,470 - 25,612 2,145 264 1,551 60 34,420 3,329 108 13 - 3,450 30,970 67,555 654 - 61,792 3,983 39,577 1,524 1,828 176,913 12,180 3,820 8,971 29,410 54,381 122,532 (*1) The acquired financial assets at amortized cost were estimated at fair value. The contractual total of the financial assets at amortized cost of Woori Asset Management Corp. is 18,680 million Won, and the contractual cash flows that are not expected to be recovered as of the acquisition date are 1,941 million Won. Woori Global Asset Management Co., Ltd. has a contractual total of 25,613 million Won for financial assets measured at amortized cost. The contractual total of Woori Asset Trust Co., Ltd.'s financial assets at amortized cos are 72,686 million Won and will be recovered as of the acquisition date. Unexpected contractual cash flow is 10,894 million Won. (*2) The intangible assets of Woori Asset Management Corp. and Woori Asset Trust Co., Ltd. each include 6,456 million Won in customer relationships and 37,074 million Won in order backlog as a result of business combination and were valued at fair value through the Multi-Period Over-Return Act (MEEM) as they were judged separately identifiable intangible assets. A multi-term excess profit method is a method to estimate the future cash flows generated by each intangible asset and to discount the cash flows generated purely by that intangible asset to its present value by deducting the portion of the asset’s contribution to that cash flow generation. (*3) The Group has set 100% loan loss allowance for non-collected accrued income form operation Woori Asset Management Corp. In addition, although the fund investors have filed a lawsuit seeking compensation for damages, this financial effect was not reflected in the consolidated financial statements as of the end of the current term because the possibility of loss and extent of loss cannot be measured reliably at the end of the current term. If, within one year of the acquisition date, new information obtained about the facts and circumstances that existed at the acquisition date requires the adjustment of the amounts recognized at the acquisition date, or the recognition of additional provisions existing at the acquisition date, the accounting for the business combination will be adjusted. Woori OverviewBusiness OperationsConsolidated Financial StatementsFinancial Review318 (3) Goodwill - 140 - Recognized goodwill as a result of business combination are as follows (Unit: Korean Won in million): Woori Asset Management Corp. Woori Global Asset Management Co., Ltd. Woori Asset Trust Co., Ltd. Transfer price Fair value of net identifiable asset Non-controlling interest (*) Goodwill 122,450 108,785 29,371 43,036 33,000 30,970 - 2,030 224,150 122,532 40,162 141,780 (*) The non-controlling interest in Woori Asset Management Corp. and Woori Asset Trust Co., Ltd. acquired during the year ended December 31, 2019, was measured as the proportion of the non-controlling interest in the acquiree’s identifiable net assets. In the event of a business combination, the consideration transferred includes the premium paid to acquire Woori Asset Management Corp., Woori Global Asset Management Co., Ltd. and Woori Asset Trust Co., Ltd. which results in goodwill. In addition, the consideration paid for the business combination includes expected synergies, revenue growth, and the amount related to future market growth. However, these benefits through Woori Global Asset Management Co., Ltd. did not meet the identifiable intangible asset recognition requirements and were not recognized separately from goodwill. The Group also acquired a relationship with a customer of Woori Asset Management Corp. and order backlog of Woori Asset Trust Co., Ltd. as part of the acquisition. These relationships with customers were recognized separately from goodwill because they met the reparability criteria to meet the recognition requirements for intangible assets. (4) Business combination cost The Group incurred 2,634 million Won, including legal fees and due diligence fees, in relation to the business combination, and the amount was recognized as a fee expense in the consolidated statement of comprehensive income of the Group. (5) Net cash outflow due to business combination Details of net cash outflows due to business combination are as follows (Unit: Korean Won in million): Consideration paid in cash Acquired cash and cash equivalents Deduction in total Woori Asset Management Corp. 122,450 12,914 109,536 Woori Global Asset Management Co., Ltd. Woori Asset Trust Co., Ltd. 33,000 2,318 30,682 224,150 67,555 156,595 46. EVENTS AFTER THE REPORTING PERIOD The Coronavirus disease (COVID-19) outbreak in January, 2020 is having a negative impacts on the global economy, including Korea. As a result, the macroeconomic environment is unstable overall. The Group is closely monitoring the situation; however, the impact on the Group due to the Coronavirus cannot be estimated as of the financial statements approval for the issuance date. WOORI FINANCIAL GROUP ANNUAL REPORT 2019319 GLOBAL NETWORK (AS OF THE END OF MARCH, 2020) Woori Bank Head Office Woori Bank Narayanganj Branch Woori America Bank, Woodside Br. Adamjee Export Processing zone, Shiddhirganj, Narayan- 43-22 50th St. Woodside, NY 11377, USA The 20th and 21st Floor of Woori Bank Main Office, 51, Sogong-ro (203, Hoehyeon-dong 1-ga), Jung-gu, Seoul, ganj-1431 Bangladesh Phone: 880-2769-2031~34 Phone: 1-718-429-1900 Woori America Bank, Ridgefield Br. 100-792, Korea Phone: +82-2-2125-2000 Swift: HVBKKRSE Overseas Branch New York Agency Woori Bank Motijheel Sub-Branch 321 Broad Avenue #104 Ridgefield, NJ 07657, USA AA Tower, 23, Ground Floor, Motijheel C/A, Dhaka Phone: 1-201-941-9999 Woori Bank Kawranbazar Sub-Branch Woori America Bank, Palisades Park Br. A.H.N Tower, Ground Floor, 13 Biponon C/A, 225 Broad Avenue Palisades Park, NJ 07650, USA Sonargaon Road, Bagla Motor, Dhaka Phone: 1-201-346-0055 245, Park Ave. 43rd Floor, New York, NY 10167, USA Chittagong Customer Service Center Woori America Bank, Closter Br. Phone: 1-212-949-1900 BEPZA Building, 1st floor of Zone Services Complex in 234 Closter Dock Road Closter, NJ 07624, USA Chattogram EPZ(CEPZ) Phone: 1-201-784-7012 LA Br. 3360, West Olympic Blvd. Suite 300, LA, CA90019, USA Sydney Br. Woori America Bank, Elkins Park Br. Phone: 1-213-620-0747~8 Suite 21.02, 126 Phillip Street, Sydney, NSW, Australia 7300 Old York Rd Elkins Park, PA 19027 Phone: 61-2-8222-2200 Phone: 1-215-782-1100 London Br. 9th Floor, 71 Fenchurch Street, London, EC3M 4BR,UK Woori Bank Dubai Br. Woori America Bank, Annandale Br. Phone: 44-207-680-0680 1102A, Level 11, The Gate Building, East Wing, Seoul Plaza 4231 Markeham St. Annandale, VA 22003, USA Tokyo Br. Shiodome City Center 10th Floor, 5-2 Higashi-Shimbashi Phone: 971-4-325-8365 Woori America Bank, Bayside Br. P.O. Box 506760, DIFC, Dubai, United Arab Emirates Phone: 1-703-256-7633 1-Chome, Minato-ku, Tokyo, 105-7110 Japan Woori Bank India Regional Headquarters 215-10 Northern Blvd. Bayside, NY 11361, USA Phone: 81-3-6891-5600 Hong Kong Br. Suite 1401, Two Pacific Place, 88 Queensway, Hongkong Phone: 852-2521-8016 Singapore Br. 10 Marina Boulevard #13-05 MBFC Tower 2, Singapore 018983 Phone: 65-6422-2000 Bahrain Br. P.O. Box 1151, 4th Floor, Entrance 1, Manama Centre Building, Manama, Bahrain Phone: 973-17-223503 Dhaka Br. Suvastu Imam Square (1st & 4th Fl.) 65 Gulshan Avenue, Dhaka, Bangladesh Phone: 88-02-5881-3270~3 DEPZ Customer Service Center Dhaka Export Processing Zone(Old Area), Ganakbari, Ssvar, Dhaka-1349, Bangladesh Phone: 880-2778-8030 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 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 Woori Bank Mirpur Sub-Branch Padma Bhaban(First Floor), 1/9 Mirpur Road Pallabi, Mirpur-12, Dhaka-1216, bangladesh Phone: 880-2902-1061~2 Unit 601, 6th floor, Birla Centurion, Century Mills Phone: 1-718-224-3800 Compound, Pandurang Budhkar Marg, Worli, Mumbai, Maharashtra-400030, India Phone: 91-22-6263-8100 Woori Bank Chennai Br. Woori America Bank, Ellicott City Br. 100352 Baltimore National Pike Ellicott City, MD 21042, USA Phone: 1-443-973-3690 Lotte India, 2nd Floor, No.4/169, Rajiv Gandhi Salai(OMR), Kandhanchavadi, Perungudi Taluk, Chennai-600096, Tamil Nadu, India Phone: 91-44-3346-6900 Woori America Bank, Wilshire Br. 3540 Wilshire Blvd. Unit 104, Los Angeles, CA 90010, USA Phone: 1-213-382-8700 Woori Bank Gurgaon Br. 1st Floor, Salcon Platina Building, MG Road, Sector-28, Sikanderpur, Gurgaon-122001,Haryana, India Woori America Bank, Olympic Br. 3360, West Olympic Blvd. Suite #300, LA, CA90019, USA Phone: 1-213-738-1100 Woori America Bank, Fullerton Br. 5731 Beach Blvd., Buena Park, CA 90621, USA Phone: 1-714-521-3100 Woori America Bank, Garden Grove Br. 10120 Garden Grove Blvd. Suite 151Garden Grove, CA 92844, USA Phone: 1-714-534-6300 Woori America Bank, Centreville Br. 13832 Braddock Road. Centreville, VA 20121, USA Phone: 1-703-988-9555 Woori America Bank, Irvine Br. 14252 Culver Dr. #G, Irvine, CA 92604 Phone: 1-949-885-3760 Phone: 91-12-4270-6703 Woori Bank Mumbai Br. Unit 601, 6th floor, Birla Centurion, Century Mills Compound, Pandurang Budhkar Marg, Worli, Mumbai, Maharashtra-400030, India Phone: 91-22-6263-8100 Subsidiary U.S.A Woori America Bank 330 5th Avenue New York, NY 10001, USA Phone: 1-212-244-3000 Woori America Bank, Manhattan Br. 330 5th Avenue New York, NY 10001 Phone: 1-212-244-1500 Woori America Bank, Flushing Br. 136-88 39th Avenue Flushing New York, NY 11354, USA Phone: 1-718-886-1988 Woori America Bank, Fort Lee Br. 2053 Lemoine Avenue Fort Lee, NJ 07024, USA Phone: 1-201-363-9300 Woori OverviewBusiness OperationsGlobal NetworkFinancial Review320 Woori America Bank, Torrance Br. Woori Bank (China) Ltd. TianJin Br. Wooribank (China) Ltd. Shanghai Lianyang Sub-Br. 2390 Crenshaw Boulevard, Units C Torrance NO.1 Building, Aocheng Commercial Square, Binshui West No.52, Zendai Thumb Plaza Lane 199, FangDian CA 90501 USA Phone: 1-310-974-1880 Road, Nankai District, Tianjin, 300381 CHINA Road,Pudong New District, Shanghai, 200135 CHINA Phone: 86-022-2338-8008 Phone: 86-021-6882-0608 Woori America Bank, Georgia LPO Woori Bank (China) Ltd. Shanghai Puxi Sub-Br. Wooribank (China) Ltd. Beijing Sanyuanqiao Sub-Br. 2472 Pleasant Hill Rd. Duluth, GA30096, USA 1F, Maxdo Center, NO.8 Xingyi Road, Changning District, 1-2F, Tower A, Tianyuangang Center, C2, North Road, East Phone: 1-404-904-9880 Woori America Bank, San Jose LPO Shanghai, 200336, China Phone: 86-021-5208-1000 Third Ring Road, Chaoyang District, Beijing 100027, China Phone: 86-010-8440-7177 2328 Walsh Ave, Santa Clara CA 95051 USA Woori Bank (China) Ltd.Beijing Wangjing Sub-Br. Wooribank (China) Ltd, Shenyang Branch Phone: 1-415-652-9476 1F,NO.10, FURONG STREET, CHAOYANG DISTRICT, 1F, 2F, Lotte North-Station Arcade,9-8Beiling Street, Woori America Bank. Northern 164-25 Northern Blvd. Flushing NY 11358, USA BEIJING 100102, CHINA Phone: 86-010-8471-8866 Huanggu District, Shenyang, Liaoning 110032, China Phone: 86-024-8186-0808 Phone: 1-929-362-3330 Woori Bank (China) Ltd. Shanghai Wuzhonglu Sub-Br. 1C, Liaoshen Building, 1068 Wuzhong Road, Minhang District, Shanghai, 201103, China Phone: 86-021-6446-7887 Indonesia Bank Woorisaudara Head Office Treasury Tower 26th, 27th FL. District 8 SCBD Lot 28 JI. Woori Bank (China) Ltd. Shenzhen Futian Sub-Br. Room 107, Daqing Building, NO.6027 Shennan Road, Futian Dis- Jend. Sudirman Kav. 52-53, Jakarta 12190 Phone: 6221-50871906 trict, Shenzhen 518040, China Phone: 86-0755-8826-9000 Corporate Branch Treasury Tower 26th, 27th FL. District 8 SCBD Lot 28 JI. Woori Bank (China) Ltd. Shanghai Jinxiujiangnan Sub-Br. Jend. Sudirman Kav. 52-53, Jakarta 12190 Woori America Bank. Dallas LPO 1028 MacArthur Dr.Suite #108, Carrollton, TX, 75007 Phone: 1-972-810-0166 Woori America Bank. Chicago LPO 1247 Milwaukee Ave, Suite 207, Glenview, Illinois, 60025 Phone: 1-224-938-9553 Woori America Bank. Seattle LPO 19401 40th Avenue West, Lynnwood, Washington, 98504 Phone: 1-206-948-6691 Woori America Bank, Denver LPO 3033 South Parker Rd. #330 Aurora, CO. 80014 Woori America Bank, Dallas Br. 2405 S. Stemmons FWY, Lewisville, TX 75067 China Woori Bank (China) Ltd. No.101-1, 102 MT BLDG, 3999 Hongxin Road, Minhang District, Shanghai,China, 201101 Phone: 86-021-3432-1116 Woori Bank (China) Ltd. Beijing Shunyi Sub-Br. 1F, Tower A, AMB Building, 2 Cangshang Street, Shunyi District 101300, China Phone: 86-010-8945-2220 Woori Bank (China) Ltd. DaLian Br. 2F-218, Yoma IFC, NO.128 Jinma Road, Dalian Development Area, Dalian, P.R. China 116600 Floor 11-12, Block A Building 13, District4, Wangjing Phone: 86-0411-8765-8000 East Park, Chaoyang District Beijing China 100102 Phone: 86-010-8412-3000 Woori Bank (China) Ltd. Zhangjiagang Sub-Br. B104/B205 Huachang Oriental Plaza, 11 Renmin East Road, Woori Bank (China) Ltd. Head office business department Zhangjiagang Jiangsu, 215600 China Floor1 Block B Building 13 District4 Wangjing East Park Phone: 86-0512-5636-6696 Chaoyang District Beijing China 100102 Phone: 86-010-8441-7771 Woori Bank (China) Ltd. Chengdu Br. No.302-306, 3F, Ping'an Fortune Center, No.1, Renmin Woori Bank (China) Ltd. Beijing Br. South Road(Section 3), Chengdu, Sichuan,China,610041 1F, West Tower, Twin Towers, B-12 Jianguomenwai Phone: 86-512-028-6557-2336 Avenue, Chaoyang District, Beijing 100022, CHINA Phone: 86-010-8453-8880 Woori Bank (China) Ltd. Weihai Br. No.106-1,No.106-2,No.106-3 Attached Qingdao Woori Bank (China) Ltd. Shanghai Br. Mid-Road,Weihai, Shandong Province, China 104B,502, Dongfangchunyi Building 1, 5F, Eshan Avenue Phone: 86-0631-599-6000 505 Pudong New Area, Shanghai,200122, China Phone: 86-021-5081-0707 Woori Bank (China)Ltd.Tianjin Dongmalu Sub-Br 1-2F,No. 4 of TowerC,Yuding Plaza,Qixiang Street), Woori Bank (China) Ltd. Shenzhen Br. Dongma Road, Nankai District, Tianjin, 300090, China B0105–B0210 Rongchao Landmark, 4028 Jintian Road, Phone: 86-022-8776-9000 Futian District, Shenzhen, China Phone: 86-0755-3338-1234 WooriBank (China) Ltd. Chongqing Br. Shop 2, First Floor, Jinjia International Building, No.10, Woori Bank (China) Ltd. Suzhou Br. GuiHua Street Branch Road, JiangBei District, 6F Building #58 Suzhou Center, Suxiu Road,Suzhou ChongQing, China, 400000 Industrial Park, Jiangsu, China Phone: 86-0512-6295-0777 Phone: 86-023-6152-2222 Phone: 6221-50871888 Wastukancana Branch Jl Wastukencana No. 79 - Kota. Bandung Phone: 6222-4209940 Cirebon Branch Komplek Cirebon Super Blok (CSB) Mall Office Park Kav. No. 11 Jl. Cipto Phone: 62231-242006 Bogor Branch Jl. Pangkalan Raya No. 8, Warung Jambu - Bogor/16151 Phone: 62251-8377887 Surapati Core Branch Komp Surapati Core F-01-02 Bandung Phone: 6222-87241326 Surabaya Branch Kompleks Ruko 21, Jl. Raya, Gubeng No.68E - Surabaya/60281 Phone: 6231-5041906 Semarang Branch Ruko Imam Bonjol Square Kav 4 - Kota. Semarang Phone: 6224-3521906 Tasikmalaya Branch Ruko Plaza Asia Blok A5-A6, Jl. HZ. Mustofa No. 326 - Tasikmalaya/46126 Phone: 62265-2351906 Yogyakarta Branch Jl. Mangkubumi No. 45 - Yogyakarta/55232 Phone: 62274-549280 Denpasar Branch Ruko Griya Alamanda blok 3-4,Jl. Cok Agung Tresna Renon-Denpasar/80235 Phone: 62361-263755 WOORI FINANCIAL GROUP ANNUAL REPORT 2019321 The Gedung Energy Branch Gd The Energy Lot 11 A SCBD, Jl. Jendral Sudirman Kav 52 - 53, Jakarta/12190 Phone: 6221-29951906 Medan Branch Jl. Zainul Arifin No. 53A Phone: 6261-42007100 Makassar Branch Majalengka Sub-Branch Jl. KH. Abdul Halim No.447 Majalengka/45411 Phone: 62233-8285460 Kuningan Sub-Branch Ampera Branch Jl. Gunung Latimojong, Ruko Metro Square Blok E No. 1 Jl. Dewi Sartika No.4/45512 Jl. Ampera Raya No. 20 Gd.Medco III/12560 Phone: 6241-18001859 Phone: 62232- 8880938 Phone: 6221-7821756 Purwokerto Branch Jl. Jenderal gatot Subroto No.78 Purwokerto - Jawa Tengah/53116 Phone: 62281-622212 Malang Branch Jl. Letjen Sutoyo No. 27 Malang- Jawa Timur/65141 Phone: 62341-421906 Solo Branch Buah Batu Sub-Branch Jl. Buah Batu No. 58 Bandung/40265 Phone: 6222- 7306347 Indramayu Sub-Branch Jl. DI. Panjaitan No.103/45212 Phone: 62234-276236 Kopo Sub-Branch Cibubur Sub-Branch Komp Ruko Mas J-9 Jl. Kopo Cirangrang/40225 Cibubur Times Square Blok B1/1 Jl. Alternatif Cibubur KM Phone: 6222-5436802 Cimahi Sub-Branch 3 Kel. Jatiraya, Kec. Jastisampurna Bekasi/17435 Phone: 6221-84305050 Jl. Raya Cibabat No. 310 Cimahi/40213 Cikampek Sub-Branch Phone: 6222-6634656 Jl. Terusan Sudirman No. 6B(Sudirman Center)/41373 Jl. Ronggo Warsito No. 53 Kota, Solo - Jawa Tengah/57131 Phone: 62264-8385171/ 8385172 Phone: 62271-633600 Tangerang city Branch Tangerang City Business park Blok F/50 Jl. Jend. Sudirman No.1 Tangerang/15118 Phone: 6221-29529226 Pelembang Branch Jl. Basuki Rahmat No. 886 A - Palembang/30127 Phone: 62711-315828 Sukabumi Branch Jl. Jenderal Sudirman No. 31-Sukabumi/43111 Phone: 62266-6251906 Sukajadi Sub-Branch Jl Sukajadi No. 248 Bandung Phone: 6222-2042248 Soekarno Hatta Sub-Branch Jl. Soekarno Hatta No. 618 F/40286 Phone: 6222-7509905 Pemuda/Rawamangun Sub-Branch Jalan Paus No 91F, Pulogadung, Jakarta Timur Phone: 6221-47862070 Sumedang Sub-Branch Jl. Prabu Geusan Ulun No.76/45311 Phone: 62261-206527 Depok Sub-Branch Jl. Margonda Raya No.1 Rt 001/011 Kelurahan Depok Kecamatan Pancoran Mas/16431 Phone: 6221-7522091 Salatiga Sub-Branch Ruko Wijaya Square B5 Jl.Diponegoro No. 110 Salatiga/50711 Phone: 62298-311828 Sidoarjo Sub-Branch Jl. KH. Mukmin No.11 Blok B-7 Sidoarjo/60281 Phone: 6231-8922842 Pekalongan Branch Jl. KH. Mansyur No.64, Perkalongan Phone: 62 285 4460505 Madiun Branch Jl. Diponegoro No. 110, Madiun Phone: 62 351 4773000 Serang Sub-Branch Jl. KH. Abdul fatah Hasan No.53 Kel. Cipare Serang/42124 Phone: 62254-224142 Commercial Center Cikarang Sub-Branch Cikarang Commercial Centre Blok A1-2, Jl. Cibarusah KM. 40 No. 2 Kampung pasir sari kec. Cikarang Selatan/17550 Mojokerto Sub-Branch Jl. Gajah Mada No.85B/60319 Phone: 62321-383444 Cianjur Sub-Branch Jl. Abdulah Bin Nuh No.15/43253 Phone: 62263- 260941, 260943 Jamber Branch Phone: 6221-89835720 Pamulang/Ciputat Sub-Branch Jl. Gajah Made No. Ruko Gajah Mada Square Block A2-3 Phone: 62 331 421648 Kediri Bran Jl, Brawijaya No. 25A Kota Kederi Phone: 62 354 4526726 Jl. RE. Martadinata No. 167 B RT.03 RW. 05 Cipayung, Atrium/Cideng Sub-Branch Jalan Keseman No 2, Kota. Jakarta Pusat Phone: 6221-3451964 Kebon Jeruk Sub-Branch Jl. Kelapa Dua Raya(RayaPanjang) No.2, Rt 008, Rw 002 Ciputat, Kota Tangerang Selatan Phone: 6221-7403205,7443335 Sumber Sub-Branch Jl. Dewi Sartika No. 57 Sumber/45611 Phone: 62231-8330618 Purwakarta Branch Kel. Kelapa Dua Kec. Kebon Jeruk/12130 Jl. Basuki Rahmat No. 94, Purwakarta/41114 Phone: 6221-53660160 Bantul Sub-Branch Phone: 62264-8227474 Subang Branch JL. Ahmad Yani No. 36/41211 Phone: 62260-421014 Diponegoro Sub-Branch Jl. Diponegoro No. 28 Bandung/40251 Phone: 6222-87831928 Lembang Sub-Branch Karawaci Tangerang Branch Jl. Grand Hotel Lembang No.25 Bandung/40391 Ruko Pinangsia Blok H No. 1 Lippo Karawaci Kel. Cibodas Phone: 6222-2784797 Tangerang/15139 Phone: 6221-55772345 Garut Branch Jl. Ahmad Yani No.33/44117 Phone: 62262-544672 Jababeka Cikarang Sub-Branch Ruko Metro Boulevard Kav. A Jl. Niaga Raya No. 10 Kawasan Industri Jabeka/17835 Phone: 6221-89836020/ 89837020 Jl. Jenderal Sudirman No. 130 Kabupaten Bantul/55713 Phone: 62274-367514 Balaraja Sub-Branch Komplek Ruko Balaraja Center Blok A No.2 Jl. Raya Serang Km. 24 Talaga Sari Balaraja-tangerang/15610 Phone: 6221-29015618 Ciledug Sub-Branch Ruko Dian Plaza Jl. Raden Fatah No. 8A Kelurahan Sudirman Selatan,Ciledug/15225 Phone: 6221-7330545 Woori OverviewBusiness OperationsGlobal NetworkFinancial Review322 Gunung Sabeulah Sub-Branch Pangalengan Sub-Branch Banjar Sub-Branch JL. Gunung Sabeulah Kel.Tawangsari Kec. Tawang kota Jl. Raya Pintu Pangalengan KM-1/40378 Jl. Letjen Soewarto No.92/46321 Tasikmalaya/46112 Phone: 62265-326147 Magelang Sub-Branch Ruko Metro Square Blok F No.25/56172 Phone: 62293-326498/326499 Phone: 6222-5979222 Phone: 62265-740557 Megablock Cilegon Sub-Branch Boyolali Sub-Branch Jl. Raya Ahmad Yani Komp. Cilegon Green Megablock D3 Jl. Pandanaran No.179 B Kab.Boyolali/57313 No. 17 - Kota. Cilegon Phone: 62254-8484772 Phone: 62276-323655 Martadinata/Cihapit Sub-Branch Jl. RE Martadinata Pav 123 Bandung/40114 Padalarang Sub-Branch Rangkasbitung Sub-Branch Jl. Raya Padalarang No.463 H/40553 Jl Hardiwangun No.6 B Rangkasbitung - Kab. Lebak Phone: 6222- 7107090 Phone: 6222-6803940/41 Patrol Sub-Branch Phone: 62252-203612 Tabanan Sub-Branch Radio dalam Sub-Branch JL. Radio dalam raya No.4 Kel. Gandaria Utara Kec. Kebay- Jl. Raya Patrol Anjatan Blok Bunder No. 52/45256 Jl. Ngurah Rai No. 73 Kediri/82121 Phone: 62234-5613627 Phone: 62361-814160 oran baru Jakarta selatan/12160 Phone: 6221-7211005 Gianyar Sub-Branch Jl. By.Pass Dharma Giri No.99/80511 Phone: 62361-8958295 Gresik Sub-Branch Surabaya /Darmo Boulevard Sub-Branch Singaraja Sub-Branch Office Park II B.2 No.11 Phone: 6231-7381906 Soreang Sub-Branch Jl. Ngurah Rai No. 16 Singaraja Kelurahan Kendran Kecamatan Buleleng/81112 Phone: 62362-25098 Ruko KIG Jl. Tri Dharma Kav. A-14/61117 Jl. Raya Soreang No.412/40900 Manonjaya Sub-Branch Phone: 6231-3981758 Phone: 6222-5896880 Jl. RTA. Prawira Adiningrat No.214 A Desa Manonjaya kec. Karawang Sub-Branch Ujung Berung Sub-Branch Jl. Tuparev No.499 (Johar) Kab.Karawang Jl AH Nasution No. 28 - Kota.Bandung Phone: 62267-8454873/8454874 Phone: 6222-7834128 Cibinong Sub-Branch Jl. Raya Mayor Oking No.158 V/16918 Phone: 6221-87904397 Jemur Sari/Surabaya selatan Sub-Branch Jl. Raya Jemursari No. 15C Surabaya/60237 Phone: 6231-8480454 Singaparna Sub-Branch Lur Agung Sub-Branch Jl. Raya Timur No.45 Singaparna/46416 Jl. Siliwangi No. 18 Kec Luragung, Kab Kuningan/45581 Phone: 62265-543111-3 Phone: 62232-870016 Ciamis Sub-Branch Ruko Jl Pasar Manis No. 35 -Kab. Ciamis Phone: 62265-772221 Sleman Sub-Branch Pangandaran Sub-Branch Jl. Parapat, Desa Pangandaran, kec pangandaran kab ciamis/46396 Phone: 62265-630400,630010 Jl. Magelang KM 12.8 No.200/55514 Purwodadi Sub-Branch Phone: 62274-865922 Losari Sub-Branch Jl. Letjen S. Parman No. 20 Kecamatan Pabuaran , Kab. Cirebon Jawa Barat Phone: 62231- 8832738-39 Bekasi/Pondok Gede Sub-Branch Jl Raya Jatimakmur Blok A No. 20 Pondok Gede, Kota Jl. Letjend. S. Parman No. 13 Kel. Purwodadi Kec. Purwodadi Jawa Tengah/58111 Phone: 62292-423399 Leuwiliang Sub-Branch Jl. Raya Jasinga 11A Kel. Cibeber, Kec. Leuwiliang Kab Bogor/16640 Phone: 62251-8640297 Manonjaya-Tasikmalaya Phone: 62265-380510 Surabaya Utara /kertajaya Sub-Branch Jl. Kertajaya Indah No. 9/F-105 Surabaya/60161 Phone: 6231-5927202 Batu Sub-Branch Jl. Brantas No.49 Batu-Malang/65314 Phone: 62341-513709 Palimanan Sub-Branch Jl. Otto Iskandardinata No.503 Palimanan Phone: 62231-343950 Cibadak Sub-Branch Jl. Raya Suryakencana RT 03 RW 08, Cibadak - Kab. Sukabumi Phone: 6266-531915 Kemang Pratama Bekasi Sub-branch Jl. Niaga Raya Blok P No.22C RT 001/021 Kel. Bekasi Phone: 62254-369755 Wates Sub-Branch Jl. Kolonel Sugiyono No.3-Wates Phone: 62274-6657325 Bekasi Ruko Taman Jatimakmur Indah Ciawi Tasikmalaya Sub-Branch Karangnunggal Sub-Branch Phone: 6221-82611045-46 Jl. Perjuangan No.80 Kp.Karanganyar Rt. 04 Rw. 05 Desa Jl. Raya Karangnunggal KP.Karangmekar RT/RW 03/09 Kudus Sub-Branch Jl. Sunan Kudus No.5 a/509000 Phone: 62291-4249241 Pamanukan Sub-Branch Jl. Eyang Tirtapraja No.54 Kab.Subang/41254 Phone: 62260-551773 Majalaya Sub-Branch Jl. Alun-alun utara/Jl. Tengah komp ruko permata majalaya Blok C6/40382 Phone: 6222-85963799 Pakemitan Kec Ciawi Kab. Tasikmalaya/46156 Desa Hegarwangi Kec. Bantarkalong Kab. Phone: 62265-455163,455167 Phone: 62265 - 2584571/2584572 Cilacap Sub-Branch Wonogiri Sub-Branch Jl. Jend. A Yani No.46 Cilacap/53212 Jalan Ahmad Yani No 66, Wonogiri Phone: 62282-537929 Jombang Sub-Branch Phone: 62271-633600 Kawali Sub-Branch Jl. KH. Wahid Hasyim No.71 Kota Jombang - Jawa Jl. Siliwangi No.262, Desa Kawali mukti Timur/61411 Phone: 62321-878906, 62321-872906 Phone: 62265 791560 WOORI FINANCIAL GROUP ANNUAL REPORT 2019323 Kepanjen Sub-Branch Jl. Kawi Ruko B7, Kepanjen Phone: 6234 1-379840 Pamekasan Sub-Branch Jl. Kabupaten No.114 Phone: 62324 333905/62324 333906 Kebumen Sub-Branch Jl. Ahmad Yani No.20, Kubumen Phone: 62287 3878168 Mangga Dua Sub-Branch Cikajang Sub-branch Jl. Raya Cikajang No. 80 Garut Phone: 6262-576094 Cilimus Sub-branch Lawang Sub-branch Ruko Lawang View Kav 8, JI. Thamrin,Kecamatan Lawang Phone: 62-341-423540 Purworejo Sub-branch Jalan Raya Cilimus RT 017/04, Desa Cilimus Kecamatan JI. Ahmad Yani no.93, Purworejo Cilimus, Kabupaten Kuningan Phone: 62232-615411 Kendal Sub-branch Jl. Raya Utama No.9 weleri kendal Phone: 62294-644704 Phone: 62-75-321457 Brebes Sub-branch Jl. Jenderal Ahmad Yani No 26 F Phone: 6288-34511421 Karanganyar Sub-branch Ruko Harco Mangga Dua Blok L. No.5 Wonosari Sub-branch Jalan Raya Palur Jurug RT 004/RW 001 Desa Ngringo, Kec. Phone: 6221 62306495 Jl. KH. Agus Salim No.71A Wonosari - Kab Gunungkidul Jaten, Kab. Karanganyar Phone: 62274-3950673 Phone: 62-271-6882712 Kelapa Gading Sub-Branch Jl. Boulevard Barat Ruko MOI Blok I No.15 Purbalingga Sub-branch Phone: 62 21 29364053 Kayu Agung Sub-Branch Jl. Ahmad Yani No.42 Purbalingga Phone: 62281-895553 Jl. Letnan Muthtar Saleh, Kayuagung, Palembang, Sragen Sub-branch South Sumatra Phone: 62-711-315828 Klaten Sub-Branch Jl. Pemuda No. 246 Klaten, solo Phone: 62-271-633600 Jl. Sukowati No.156 Sragen Phone: 62271-895015 Bintaro Sub-branch Jl Kesehatan No 18B, jakarta Phone: 6221-7374693 Dalem Kaum Cash-Office Jl Dalam Kaum No. 5 - Kota.Bandung Phone: 6222-4211906 Batujajar Cash-Office Jl. Batujajar No.324 Bandung Phone: 6222-86861018/17/15 Antapani / Suci Cash-Office Jl. Terusan Jakarta Ruko Pelangi Antapani No. 4 Antapani Bandung Phone: 6222-7279740 Parung Sub-Branch KCP PROBOLINGGO Jl. Rayal Parung RT002/RW006, Kacamatan Parung, Kabu- Ruko Manunggal No. 2, Jl. Soekarno Hatta Jatinangor Cash-Office Phone: 6233-54491787 Jl. Raya Jatinangor KM 20.5 KKBI IKOPIN/45363 paten Bogor Phone: 62-2151-861-9559 Pasuruan Sub-Branch KCP PANDEGLANG Jl. Raya Labuan KM 1 Jl. Panglima Sudirman No.45 Ruko I, Pasuruan, Malang Phone: 6225-35554739 Phone: 62-343-561-4700 Pati Sub-Branch Jl. Ir. Susato No.40 Pati, Jawa Tengah Phone: 62-24-352-1906 Sumenep Sub-Brancch JI. Trunouyo No. 244 Sumenep Phone: 62-3428-6762234 KCP PASAR ATOM Jl. Pangampon No. 75 Phone: 6231-3503350 KCP CITRA RAYA Ruko Cikupa Niaga Mas Blok A No. 12 Phone: 6212-9014270 KCP CAKUNG Pelabuhan Ratu Sub-Branch Jl. Jawa Raya Blok A 14 No. 7 (Kawasan Berikat Nusantara) Jl. Siliwangi Rt/Rw 02/18, Desa Pelabuhan Ratu Phone: 6214-84556 Phone: 62-266-6249715 KCP PANTAI INDAH KAPUK Posco Cilegon Sub-branch Jl. Marina Raya, Rukan Cordoba Blok A Nomor 11 Annex Building Lt. 1 Jl. Afrika No.2 Krakatau Posco Phone: 6212-2571768 Phone: 6222-7781587 Darmaraja Cash-Office Jl. Raya Darmaraja No.253 desa Darmaraja, Kec Darmaraja Kab.Sumedang/45372 Phone: 62262-429000,429069,428478 Cililitan Asabri Cash-Office Jl. Mayjen Sutoyo No.11 Gedung PT Asabri (persero) Jl. Cililitan - jakarta Timur/13630 Phone: 6221-80876494 Jatibarang Cash-Office Jl. Letnan Joni No.178 Kec. Jatibarang - Kab Indramayu/45273 Phone: 62834-352911 Pacar Anyar / Taman Topi Cash-Office Jl. Sawojajar No.12 B, Kota. Bogor Phone: 62251-8574423 Cilegon/42435 Phone: 62254-369755 KCP CENTRAL PARK Ruko Garden Shopping Arcade No. 9 A-C Ciwai bogor / Juanda Cash-Office Jl. Raya Sukabumi Km 2 Pertokoan MJ Center, Kab. Bogor Union Square Cikarang Sub-branch Phone: 6212-9334623 Ruko Union Square Blok A No.6 Lippo Cikarang, Cikarang Selatan Phone: 6221-89909797 Sadang Sub-Branch Sadang Terminal Square No.07,08,25 Jl. Raya Sadang Purwakarta/41181 Phone: 62264-8220180 KCP JEPARA Jl. Pemuda No. 21 D-E Phone: 6291-4290507 KCP BANJARNEGARA Jl. Letjend S Parman No. 29 Phone: 6286-5963716 Phone: 62251-8243874 Ungaran Cash-Office Ruko permata hijau No.1 Jl. MT Haryono No. 16 Kel Ungaran Kec Ungaran Barat Kab. Semarang/50511 Phone: 6224-76911017 Serang / pamila CilegonCash-Office Jl. Raya Serang- pandeglang KM 11 Lingkungan waru Lor, Desa/kel. Kamanisa Kec Curug Kota serang/42117 Phone: 62254-222133 Woori OverviewBusiness OperationsGlobal NetworkFinancial Review324 Gading Serpong Cash-Office Woori Bank Brasil Bom Retiro Branch Kungyangon Branch Jl. Boulevard Raya Gading Sepong, Ruko Alexandrite 3, Rua Tres Rios, 261 Andar 2, Bom Retiro, Sao Paulo SP, Brasil No 540, Yadanar Pone 2nd St, Kangyi / Magyi Ward, Kung- No.21, Kabupaten Tangerang Phone: 62-21-5421-2159 Bojonergoro Cash-Office Jl. Untung Suropati Ruko Adipura Block A-11 Phone: 62-353-311271 Surya symantri Cash-Office Jl. Surya Sumantri No. 06 RT. 05 RW. 04 Phone: 62-22-2021760 Asabri Cash-Office Jl. Gayungan PTT, No. 43, Surabaya – 60235, Gedung Kantor Asabri Surabaya Phone: 62-31-82517971 KK KEMANG Kemang Square Lt 2, Unit I-11 & I-12, Jl. Kemang Raya No. 3 A Phone: 6221-22716210 KK CIKANDE Jl. Raya Jakarta - Serang KM 68, Ruko Grand Permata No. 10 Phone: 6225-47951546 Kalasan Cash-Office JL. Laksda Adisucipto KM.10, Ruko Airport Square RT.001 RW.001 Purwomartani, Kalasan, Sleman, D.I Yogyakarta 55281 Phone: 6227-44332487 Dalem Kaum Functional Office JL. Dalem Kaum No.5 Bandung Phone: 6222- 4233810 Phone: 55-11-3511-3350 Myanmar Woori Finance Myanmar Plc. 115/A, Pyay Road, Saw Bwar Gyee Kone Ward(10 miles), Insein Township Yangon, Myanmar Phone: 95-01-643798 MingaladonI Branch 115/A, Pyay Road, Saw Bwar Gyee Kone Ward(10 miles), Insein Township Yangon, Myanmar Phone: 95-01-643798 NorthOkkalapa Branch No. M(56), Thiriyadanar Wholesale Market NorthOkkalapa Township, Yangon, Myanmar Phone: 95-99-6889-2300 MingaladonII Branch 4F, 115/A Pyay Road, Saw Bwar Gyee Kone Ward(10miles), lnsein Township, Yangon Myanmar Phone: 95-1-643798 Nyaungdon Branch Room No. 103, 1st Street, 5 Quarter, Nyaungdon Township, Ayarwaddy, Myanmar Phone: 95-99-7674-7709 Taikkyi Branch Room No.9, Natsinkone Road, Ohtan Ward, Taikkyi Township, Yangon, Myanmar Phone: 95-9-7717-81028 Hmawbi I Branch 2F No(26) Tatkyee Kone village, Hmawbi Township, Hong Kong Woori Global Markets Asia Limited Rooms 1907-1909, 19/F, Gloucester Tower, Yangon, Myanmar Phone: 95-9-974563586 Hmawbi II Branch The Landmark, 15 Queen's Road Central, Hong Kong 1F No(26) Tatkyee Kone village, Hmawbi Township, Phone: 852-3763-0888 Russia AO Woori Bank Yangon, Myanmar Phone: 95-9-97456395 Maubin I Branch 8th floor., Lotte Plaza, 8, Novinsky Boulevard, Plot No(34), No(396), Building 01, Yei Le road, Ward 7, Moscow, 121099, Russia Phone: 7-495-783-9787 Maubine Township, Ayeyarwaddy, Myanmar (2F) Phone: 95 9 9712 25895 AO Woori Bank Saint-Petersburg Br. Maubin II Branch 1st Floor, Atlantic City, 126 Savushkina Street, Plot No(34), No(396), Building 01, Yei Le road, Ward 7, Saint-Petersburg, 197374, Russia Phone: 7-812-327-9787 Maubine Township, Ayeyarwaddy, Myanmar (1F) Phone: 95 9 9616 12763 AO Woori Bank Vladivostok Representative Office Kawhmu Branch Vladivostok Business-Center Office No. 614, No 192/B, Bogyoke St. South Wd Kawhmu Townshop, 29, Semenovskaya Str. Vladivostok, 690091, Russia Yangon Phone: 7-423-240-7014 Phone: 95 9 9742 91112 Brazil Woori Bank Brasil Insein Branch 115/A, Pyay Road, Saw Bwar Gyee Kone Ward(10 miles), Avenida das Nacoes Unidas, 14,171, Crystal Tower, Insein Township Yangon, Myanmar Conj.803, Vila Gertrudes, 04794-000, Sao Paulo-SP,Brasil Phone: 95 1 643798 Phone: 55-11-3511-3300 yangon Township, Yangon, Myanmar Phone: 95 9 975 890019 Zalun Branch Bogyok St. Nyaung Pin Zay Ward, Zalun Township, Ayeyar- wady, Myanmar Phone: 95 9 960996083 Kyimyindaing Branch No. 101, Tha Yet Taw(3) Upper St. Tha Yet Taw Ward, Kyimyindaing Township, Yangon, Myanmar Phone: 95 9 960996092 Hinthada I Branch No. 49, U Wisarra St. Pha Tar Gyi Ward, Hinthada Township, Ayeyardady, Myanmar Phone: 95 9 960996099 Hlaing Branch No. 101, Tha Yet Taw(3) Upper St. Tha Yet Taw Ward, Kyimyindaing Township, Yangon, Myanmar Phone: 95 9 960996089 Hinthada II Branch No. 93, Nat Maw St. Panbetan Ward, Hinthada Township, Ayeyarwady, Myanmar Phone: 95 9 961010611 Hinthada III Branch No. 93, Nat Maw St. Panbetan Ward, Hinthada Township, Ayeyarwady, Myanmar Phone: 95 9 961010611 Twantay Branch No. 49, Bo Kyoke St. Kon Gyan(Middle) Ward, Twantay Township, Yangon, Myanmar Phone: 95 9 961010511 Pyapon I Branch No. 18C, 8th St. 9th Ward, Pyapon Township, Ayeyarwady Phone: 95 9 950311093 Pyapon II Branch No. 18C, 8th St. 9th Ward, Pyapon Township, Ayeyarwady Phone: 95 9 950311096 Pantanaw I Branch No. 1, Sel Myaung St. Myo Kwet Thit 1, Pantanaw Township, Ayeyarwady, Myanmar Phone: 95 9 764433931 Pantanaw II Branch No. 1, Sel Myaung St. Myo Kwet Thit 1, Pantanaw Township, Ayeyarwady, Myanmar Phone: 95 9 764433932 Gyobingauk I Branch No. 154, Ashay Myopat St. Pan Tin Ward, Gyobingauk Township, Bago, Myanmar Phone: 95 9 764433935 WOORI FINANCIAL GROUP ANNUAL REPORT 2019325 Gyobingauk II Branch No. 154, Ashay Myopat St. Pan Tin Ward, Gyobingauk Township, Bago, Myanmar Phone: 95 9 764433936 Taungwingyi Branch No. 174, Ohntaw No. 2 Ward, Taungdwingyi Township, Magwey Phone: 95-9-692687628 CEBU TABUNOK BRANCH Ground Floor, AGSy Bldg., National Hi-Way, Tabunok Talisay City, Cebu Phone: 63-32-272-2955 Zigon Branch Natmauk Branch CEBU MANDAUE PACIFIC MALL METRO BRANCH Hlaing Htate Khaung Tin St. No. 1 Ward, No.22, Plot U Paing No.105, East Aung San Ward, Ground Floor, Mandaue Pacific Mall Metro Zigon Township, Bago, Myanmar Phone: 95 9 780 113417 Natmauk Township, Magway Phone: 95-9-891504155 National Highway corner M.B. Fernan Ave. Estancia, Ibabao, Mandaue City, Metro Cebu Phone: 63-32-239-1072 Paungde I Branch Nattalin Branch Plot No. 79, Shwetaung Street, Min Kwet 3, Ward, No.52, Apyin Tharzi Street, Tharzi Ward, CEBU MAMBALING BRANCH Paungde Township, Bago, Myanmar Phone: 95 9 780114012 Paungde II Branch Plot No. 79, Shwetaung Street, Min Kwet 3, Ward, Paungde Township, Bago, Myanmar Phone: 95 9 780114068 Lewe I Branch No. 17 Plot, Min Wine Yat, No. 4 Ward, Lewe Township, Nay Pyi Taw, Myanmar Phone: 95 9 402187901 Pyinmana I Branch No. 181, Yarza Htarni St. Aung Thar Yar Ward, Pobbathiri Township, Nay Pyi Taw, Myanmar Phone: 95 9 402187923 Pyinmana II Branch No. 181, Yarza Htarni St. Aung Thar Yar Ward, Pobbathiri Township, Nay Pyi Taw, Myanmar Phone: 95 9 402187924 Lewe II Branch No. 241, Office Street, Min Wine Yat, No. 4 Ward, Lewe Township, Nay Pyi Taw, Myanmar Phone: 95 9 441580466 Dekkhinathiri Branch No. Da-2410, Wai Da 10 St. Dekkhinathiri Township, Nay Pyi Taw, Myanmar Phone: 95 9 441580468 Lewe III Branch No. 241, Office Street, Min Wine Yat, No. 4 Ward, Lewe Township, Nay Pyi Taw, Myanmar Phone: 95 9 403663020 Takkon I Branch No. (ma-127), Yin Mar Street, Area (3), Mya Waddy Ward, Takkon Township, Nay Pyi Taw Phone: 95 9 441473341 Takkon II Branch No. 93, Thatoeminsaw Yat, Aung Zaya Ward, Takkon Township, Nay Pyi Taw Phone: 95 9 441481276 Ottarathiri Branch No. Ou-1513, Shwe Nant Thar Ward, Ottarathiri Township, Nay Pyi Taw Phone: 95 9 893642032 Nattalin Township, Bago Phone: 95-9-773579731 Philippines Wealth Development Bank Taft Financial Center, Cardinal Rosales Avenue, Cebu Business Park, Cebu City, Cebu Phone: 63-32-415-5265 G/F Metro Store Mambaling, Cebu, N. Bacalso Avenue corner F. Llamas Street, Basak San Nicolas, Cebu City Phone: 63-414-4233 TAGBILARAN BANKING CENTER Ground Floor, No. 15 JS Torralba St., Poblacion 2, Tagbilaran City, Bohol Phone: 63-411-4860 ALABANG BRANCH Unit 103, South Center Tower Condominium 2206 Market Street, Madrigal Business Par Alabang, Muntinlupa City Phone: 63-2-801-5335 ILOILO BANKING CENTER Ground Floor, ACCE Bldg., Mabini Ledesma St., Liberation, Iloilo City Phone: 63-338-4419 ANGELES MARQUEE MALL BRANCH Ground Floor , Marquee Mall, Don Bonifacio St., Pulung Maragul Angeles City, Pampanga Phone: 63-45-624-0072 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 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 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 CEBU AYALA BRANCH Ground Floor, Taft Financial Center, Cardinal Rosales Avenue, Cebu Business Park, Brgy. Luz, Cebu City Phone: 63-32-415-4888 CEBU RAMOS BRANCH Ground Floor, Hilario Chu Bldg., No. 148 F. Ramos St. Santa Cruz, Cebu City Phone: 63-32-412-6302 CEBU CARBON BRANCH Ground Floor, M.C. Briones & Plaridel Sts., Cebu City Phone: 63-32-416-9077 CEBU MANDAUE BRANCH Ground Floor, G/F Meritz Building, A.C. Cortes Ave. Ibabao, Mandaue City, Cebu Phone: 63-343-8144 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 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 TACLOBAN BRANCH Sukwan Bldg, corner Real and Burgos Streets, Tacloban City Phone: 63-053-832-3435 CALOOCAN BRANCH Rizal Avenue Extension, East Grace Park, Caloocan 1400, Metro Manila Phone: 63-0917-870-7335 GENSAN BRANCH Gaisano mall, Jose Catolico Sr. Avenue, General Santos City, South Cotabato Phone: 63-083-250-1238 DUMAGUETE BRANCH 1F Jose Building South Road Calindagan, Dumaguete City Phone: 63-035-523-5532 BACOLOD BRANCH Lacson-Luzuriaga Streets, Bacolod City, Negros Occidental Phone: 63-034-447-0227 BUTUAN BRANCH JC Aquino Ave, corner, Pareja Subdivision, Butuan City, Mindanao Phone: 63-0917-870-7390 Woori OverviewBusiness OperationsGlobal NetworkFinancial Review326 NAGA BRANCH Ha Nam Branch Leuk Daek (Kampong Phnom) Branch Office Ground Floor, Super Metro Camarines Sur, 1st and 2nd floor, Tien Loc Building, Commercial Service National Road No. 1, Ampil Tuek village, Kampong Panganiban Drive, Naga City, Casmarines Sur Zone 4, Thanh Chau ward, Phu Ly City, Phnum commune, Leuk Daek district, Kandal province Phone: 63-054-881-2836 BAGUIO BRANCH Ha Nam Province, Vietnam Phone: 84-266-730-0020 Phone: 087777279 Prey Veng Branch Office NRC Building, Abanao Street, Baguio City, Benguet, Da Nang Branch National Road No 11. Village 8, Sangkat Kampong Leav, Cordillera Administrative Region Phone: 63-074-665-2394 BINONDO BRANCH Lucky Chinatown Mall, Reina Regente St. Binondo, Manila, 2nd floor, Phi Long Technology Building, 52 Nguyen Van Prey Veng city, Prey Veng province Linh Road, Nam Duong Ward, Hai Chau District, Phone: 010855644 Da Nang City, Vietnam Phone: 84-236-730-0321 Sithor Kandal Branch Office Preaek Sandaek Village Preaek Changkran Commune, Sithor National Capital Region Bien Hoa Branch Kandal District Prey Veng Province. 5th Floor, Sonadezi Building, No 1, Road 1, Bien Hoa 1 Phone: 010855220 Vietnam Wooribank Vietnam 34F, Keangnam Landmark 72, E6 Pham Hung Road, Tu Liem District. Hanoi, Vietnam Phone: 84-04-7300-6802 Hanoi Branch 24F, Keangnam Landmark 72, E6 Pham Hung Road, Tu Liem District. Hanoi, Vietnam Phone: 84-4-3831-5281 Hochiminh Branch No. 7,8,9, 2nd Floor, Mplaza Saigon, 39 Le Duan St., Ben Nghe Ward, Dist. 1, HCMC, Vietnam Phone: 84-8-3821-9839 Bac Ninh Branch 1-2 Floor Halla Bld, Yen Phong Industrial Zone, Yen Trung Commune, Yen Phong District, Bac Ninh Province, Vietnam Phone: 84-222-369-9431 Hai Phong Branch NO. 4, Lot 22A, Le Hong Phong Street (Cat Bi Airport New Urban Area), Dong Khe Ward, Ngo Quyen District, Hai Phong City, Vietnam Phone: 84-255-730-0101 Thai Nguyen Branch 2nd Floor, Gate 1, Samsung Electronics Vietnam Co.,Ltd. Thai Nguyen, Yen Binh Industiral Zone, Dong Tien ward, Pho Yen town, Thai Nguyen Province, Vietnam Phone: 84-208-730-0010 Binh Duong Branch Industrial Zone, An Binh Ward, Bien Hoa City, Dong Nai Province, Vietnam Phone: 84-251-730-0270 Svay Rieng and Svay Chrom Regional Office Keansang Village, Svay Rieng Commune, Svay Rieng City, Svay Rieng Province Sai Gon Branch Phone: 068855973 Ground floor and 8th Floor, E-Town 1 Building, no. 364 Cong Hoa St. Ward 13, Tan Binh District, Ho Chi Minh City, Vietnam Phone: 84-28-7300-2710 Vinh Phuc Branch 1st and 2nd Floor, Bao Quan Hotel, 396 Me Linh Street, Lien Bao ward, Vinh Yen City, Vinh Phuc Province, Vietnam Phone: 84-211-730-0010 Cambodia WB Finance Preah Sdech Branch Office Krasang Tong village, Angkor Reach commune, Preah Sdach district, Prey Veng province Phone: 0889201571 Kampong Trabaek Branch Office Doun Tong village, Prasat commune, Kampong Trabaek district, Prey Veng province Phone: 0886450320 Mesang Branch Office Vang Villege Chiphouch Commune, Mesang District, Prey veng Provinece Phone: 010855188 Buliding 398, Preah Monivong Blvd, Sangkat Boeun Keng Kang 1, Khan Chamkarmon, Phnom Penh 12302, Chantrea Branch Office Kingdom of Cambodia Phnom Penh Head Office Lot No. 398, Monivong Blvd., Sangkat Beung Keng Kang 1, khan Chamkar Mon, Phnom Penh. Phone: 023969269 Kandal Regional Office #240, National Road 2, Krapeu Ha Village, Thnal Cheat Village, Sangkat Chrok Mates, Bavith City, Svay Rieng province Phone: 0889204613 Romeashek Branch Office Tatrav Village, Kampong Trach Commune, Romeashek District, Svayreing province Phone: 0884831787 Sangkat Preak Ruessei, Ta Khmao City, Kandal Province Kampong Ro Branch Office Phone: 087634444 Sa'ang Branch Office Svay Anat Village, Nhor Commune, Kampong Rou District, Svay Rieng Province Phone: 0889204643 National Road no.21, Preaek Run village, Preaek Koy commune, S'ang district, Kandal province Rumduol Branch Office 10th Floor, Becamex Building, No.230, Binh Duong boule- vard, Thu Dau Mot City, Binh Duong Province, Vietnam Phone: 087777993 Phone: 84-274-222-2631 Kien Svay Branch Office National Road no.1, Tuol Tnaot village, Kaki commune, Kien Svay district, Kandal province Phone: 087777488 Kandal Stueng Branch Office #86, National Road no. 2, Preaek Roka village, Chak Village, Kampong Chak commune Rumduol District Svay Rieng Province Phone: 0889204641 Takeo Regional Office National Road No. 2, Thnorl bek village, Sangkat Roka Krao, Doun Kaev city, Takeo province Phone: 015493888 Preaek Roka Commune, Kandal Stueng district, Bati Branch Office Kandal province Phone: 087777132 National Road no. 2, Smau Khnhei village, Trapeang Sab commune, Bati district, Takeo province Phone: 0884839823 Phu My Hung Transaction Office Unit SA-01, Riverpark Residence Complex, 341 Ha Huy Tap Street, Tan Phong Ward, District 7, Ho Chi Minh City, Vietnam Phone: 84-28-7303-0510 Dong Nai Branch Ton Duc Thang road, Nhon Trach 3 Industrial Zone, Phase1, Hiep Phuoc, ward, Nhon Trach district, Dong Nai Provincem Vietnam Phone: 84-251-730-0370 WOORI FINANCIAL GROUP ANNUAL REPORT 2019327 Tramkok Branch Office Korng Pisey Branch Office Phnum Kravanh Branch Office Prey Rumdeng Village, Angk Ta Saom Commune, Tuol Ta Sokh Village, Saen Die Commune, Pich Ban Village, Leach Commune, Phnum Kravanh Tram Kak District, Takeo province Samraong Tong District, Kampong Speu Province District, Pursat Province Phone: 060855213 Phone: 068855662 Phone: 0884845057 Kirivong Branch Office Oudong-1 Branch Office Veal Veaeng Branch Office Po Khvet Village, Phrah Bat Choan Chum Commune, Bat Doeung village, Khsem Khsan commune, Pramaoy village, Pramaoy commune, Kirivong District, Takeo Province Phone: 060855886 Oudongk district, Kampong Speu province Veal Veaeng district, Pursat province Phone: 060855776 Phone: 0884845556 Koh Andaet Branch Office Kraing Chek (Oudong II) Branch Office Kampong Thom Regional Office Prey Malong Khang Tbong Village, Prey Khla commune, Ta Ni village, Krang Chek Commune, House #009 Group 01 National Road no. 6, Koh Andaet district, Takeo province Odongk District, Kampong Speu province Stueng Saen Village, Sangkat Kampong Krabao, Phone: 0884839711 Phone: 0884839856 Stoung Sen City and Kampong Thom Province Samraong Branch Office Thporng Branch Office Krang Lang Village, Cheung Kuon Commune, Tranh Veaeng Village, Prambei Mum Commune, Romlong Branch Office Samraong District, Takeo province Thpong District, Kampong Speu Province Rom Chek Village,Treal Commune, Baray District, Phone: 067855333 Phone: 0888551219 Prey Kabas Branch Office Phone: 0884839945 Oral Branch Office Kompong Thom Province Phone: 060855388 #408, St 108, Prey Lavea Ket Village, Phsar Kontourt village, Sangkea Sartorb Commune, Stoung Branch Office Prey Lavea Commune,Prey Kabas district, Takeo povince Oral district, Kampong Speu province. National Road no. 6, Leap Tong village, Kampong Chen Phone: 0884839908 Phone: 066574593 Tboung commune, Stoung district, Kampong Thom province Kampot (Chhouk) Regional Office Phnum Sruoch Branch Office National Road no. 3, Damnak Toap Khang Tboung village, Krang Khcheay village, Tang Sya commune, Baray Branch Office Krang Snay commune, Chhuk district, Kampot province Phnum Sruoch district, Kampong Speu province Prey Ta Trav Village, Balang Commune, Baray District, Phone: 0884836778 Phone: 0974855014 Phone: 0884837957 Banteay Meas Branch Office Tuek Phors Branch Office Kampong Thom Province Phone: 0713855039 Samrong village, Samrong Krom commune, Srae Ta Chey Vallage, Akphivoadth Communce, Sandan Branch Office Banteay Meas district, Kampot province Tuek Phos District, Kampong Chhnang Province Toekmleang village, Sandan commune, Sandan district, Phone: 0884844237 Phone: 087777010 Kampong Thom province Phone: 0884827690 Angkor Chey Branch Office Kampong Chhnang Regional Office Pral Village, Tani Commune, Angkor Chey District, National Road no.5, Tuol Kralanh village, Sangkat Prasat Sambour Branch Office Kampot Province Phone: 060855085 Kampong Trach Branch Office Kampong Chhnang , Kampong Chhnang city, Sambo Village ,Sambo commune, Kampong Chhnang province Phone: 0974855006 Prasat Sambour district, Kampong Thom province Phone: 0884836883 Kampong Trach Ti Muoy Village, Kampong Trach Khang Kampong Leaeng Branch Office Chamka Loeu Branch Office Kaeut Commune, Kampong Trach District, Kampong Boeng village, Kampong Hau commune, Thnol Bek Lech Village, Svay Tearb Commune, Kampot Province Phone: 060855075 Kampong Leng district, Kampong Chhnang province Chamkar Loeu District, Kampong Cham Province. Phone: 090855763 Phone: 0888472236 Kampong Som Branch Office Village no. 03, Sangkat Lak 02, Quarter, Metapheap Ward, Preah Sihanouk City Phone: 068855997 Sre Ambel Branch Office Trapeang village, Sre Ambel commune, Sre Ambel district, Koh Kong province Phone: 0884837124 Basedth Branch Office Kampong Tralach Branch Office Battambang Regional Office Soben Village, Peani Commune, Kampong Tralach #99, No. 03, Mphey Osakphea village, Sangkat Svay Pao, District, Kampong Chhnang Province Battambang city, Battambang province Phone: 090855820 Phone: 066855022 Boribour Branch Office Banan Branch Office Cheung Khnar Village, Ponley Communce, Banan Village Kantueu Pir Commune, Boribour District, Kampong Chhnang Province Banan District, Battambang Province Phone: 0886007498 Pursat Branch Office Phone: 010855775 Ratanak Mondul Branch Office Slab Leaeng village, Svay Rompea commune, #475, National Road 5, Krang Pophleak Village, #34, Sdau village, Sdau Commune, Basedth district, Kampong Speu province Svay At Commune, Pursat District, Pursat province Rotonak Mondol distrcit, Battambang province Phone: 0884874229 Phone: 0886007540 Phone: 010855977 Kampong Speu Regional Office Krakor Branch Office Moung Ruessei Branch Office # 85, national road #04, Borei Kammeakkar Village, Rokar National Road 5, Phsar village,Anlong Tnaot commune, Kra- Pou Muoy Village,Kear Commune, Thum Commune/Sangkat, Chbar Mon kor district, Pursat province Moung Ruessei District, Battambang Province Municipality/District/Khan, Kampong Speu Province Phone: 0884838011 Phone: 069855585 Phone: 066746666 Woori OverviewBusiness OperationsGlobal NetworkFinancial Review328 Bakan Branch Office Chulkiri Branch Office Bavel Branch Office Khnach Romeas Village, Beung Khnar Commune, Prey Kri Tbong Village, Prey Kri commune, #15, st. Aksor Te, Bavel 1village, Bavel commune, Bakan District, Pursat Province Phone: 0886007538 Chulkiri district, Kampong Chhnang province Bavel district, Battambang province Phone: 0884839707 Phone: 090281942 Pailin Branch Office Tbong Khmom Branch Office Phnom Proek Branch Office O'Tapuk Le village, Pailin commune, Pailin city, National Road no. 7, Cheung Lang village, Phnum Toch village, Pech Chenda commune, Pailin province Phone: 0884873724 Sangkat Suong, Suong city, Kampong Cham province Phnum Proek district, Battambang province Phone: 0886007526 Phone: 090855342 Samlout Branch Office Ou Tontuem village, Ta sanh commune, Samlout district, Battambang province Phone: 0884873767 Kamrieng Branch Office Dong Village, Boeng Reang Commune, Kamrieng District, Battambang Province Phone: 090309180 Preah Vihear Regional Office Koh Sotin Branch Office Siem Reap Regional Office Phsar Thmey Village, Pearm Pror Thnours Commune, Koh #76, National Road no. 6, Chong Kao Sou village, Sotin District, Kampong Cham Province Sangkat Slor Kram, Siem Reap city, Siem Reap province Phone: 0883031098 Phone: 0884845477 Ponhea Kraek Branch Office Puok Branch Office National Road no. 7, Peao Srok village, Puok Chas Village, Puok Commune, Puok District, Kaong Kang commune, Ponhea Kraek district, Thbong Khmom province Phone: 0979111030 Siem Reap Province Phone: 0884836879 Srey Snom Branch Office Lor Et village, Sangkat Kampong Branak, Kratie Regional Office Chroy Neang Nguon village, Chroy Neang Nguon commune, Preah Vihea city, Preah Vihea province Oreussey Village, Kratie Ward, Kratie City, Srey Snam district, Siem Reap province Phone: 0884488844 Kuleaen Branch Office Kratie Province Phone: 0888848041 Kuleaen Tboung Village, Kuleaen Tboung commune, Chhloung Branch Office Phone: 060270442 Angkor Chum Branch Office Kbal Cham Village,Char Chhuk commune, Kuleaen district, Preah Vihear province Chrouy Thma Kraom village, Chhloung commune, Angkor Chum District, Siem Reap Province. Phone: 0886007523 Chhloung district, Kratie province Phone: 087555476 Sangkum Thmey Satellite Office Tbeang Village, Chamraeun commune, Snuol Branch Office Sangkom Thmei district, Preah Vihear province Kbal Snuol Village, Snuol Commune, Phone: 0888816546 Phone: 060855749 Rovieng Branch Office Snuol District, Kratie Province Phone: 0884818019 Samraong Chong Kal Branch Office at Doun Kaen Village, Samraong Commune, Samraong District, Oddar Meanchey province Phone: 087666741 Chi Kraeng Branch Office Tang Trak Village, Robieb commune, Rovieng District, Keo Sema Branch Office #079, Group 01, Kampong Kdey1 Village, Kampong Kdey Preah Vihear Province Phone: 0884845242 Trapaing Prasat Branch Office Ou Arm Village, Sre Khtom Commune, Commune, Chikrek District, Siem Reap Province. Keo Sema District, Mondol Kiri Province Phone: 087555474 Phone: 0884818026 Preah Net Preah Branch Office Trapeang Prasat Village, Trapeang Prasat commune, Dambae Branch Office National Road 6, Phnum Chonhcheang village, Trapeang Prasat District, Oddar Meanchey Province National Road no. 73,Thnal village, Dambae commune, Chob Veari commune, Preah Netr Preah district, Phone: 0884845248 Dambae district, Kampong Cham province Banteay Mean Chey province Choam Khsant Branch Office Phone: 0884843373 Phone: 060855553 National Road 69B, Choam Khsant village, Memot Branch Office Phnom Penh (Tuol Kork) Regional Office Choam Khsant commune, Choam Khsant district, Masin Tuek Village, Memot Cummune, #152B2, St 516, 13 Village, Sangkat Boeung Kork 1, Preah Vihear province Phone: 0884845291 Memot District, Kampong Cham Province Khan Toulkork, Phnom Penh. Phone: 0884381224 Phone: 0719833384 Kampong Cham Regional Office National Road 7, village Boeng Snay, Banteay Mean Chey Regional Office Stueng Mean Chey Branch Office National Road no.6, Kampong Svay village, No. 19 and 21 EoE1, Street Veng Sreng, Group 1, Kampong Cham city, Kampong Cham province Sangkat Kampong Svay, Serei Saophoan city, Ruessei Commune, Sangkat Stueng Mean Chey, Phone: 0884840089 Prey Chhor Branch Office Banteay Mean Chey province Phone: 0884838900 Khan Mean Chey, Phnom Penh Phone: 087888277 Doun Die village, Chrey Vean commune, Ou Chrov Branch Office Punhea Lueu Branch Office Prey Chhor district, Kampong Cham province #15A, National Road no.5, Palilai village, Sangkat Paoy #87, National Road No. 5, Tep Pranom village, Vihea Phone: 0884842218 Paet, Paoy Paet city, Banteay Mean Chey province Luong commune, Ponhea Lueu district, Kandal province Phone: 0884845706 Phone: 0884843228 Stoeung Trang Branch Office Tnaot Ta Say Village, Preak Kak Commune, Thma Puok Branch Office Mukh Kampoul Branch Office Stueng Trang District, Kampong Cham Province. Kasen village, Thma Puok commune, Thma Puok district, La Edth Village, Preaek Dambang Commune, Phone: 0884842804 Bantey Mean Chey province Phone: 0884839749 Mukh Kampul District, Kandal Province Phone: 0884842169 WOORI FINANCIAL GROUP ANNUAL REPORT 2019329 Khsach Kandal (Preaek Tameak) Branch Office Khemarak Phoumin Branch Ang Snoul Branch Knong village, Preaek Tameak commune, Street Khemara Phoumin, Group 7, Phum Ti Pir Village, House No 183, National Road 4, Trapeang Krasang Village, Khsach Kandal district, Kandal province Sangkat Smach Mean Chey, Khemara Phoumin Baek Chan Commune, Angk Snuol District, Kandal Province Phone: 0884842027 Svay Pak Branch Office Municipality, Koh Kong Province Phone: 855-88-8558025 Phone: 855-023-999-355 Phsar Depo Branch National Road No. 5, Lu Village Svay Pak, Cheungprey Branch House No 138D, St 215, Sangkat Veal Vong, Khan Russey Keo, Phnom Penh Phone: 0884845604 Chaom Chau Branch Office National Road No.6 Skon Village, Soutlib Commune, Khan Prampir Meakkakra, Phnom Penh Cheung Prey District, Kampong Cham Province Phone: 855-23-900-455 Phone: 855-97-6447373 AreyKshat Branch Prey Svay Village, Sangkat Chaom Chau, Krolkor Branch House No 76, Road No.380, Preaek Lvea Village, Khan Pur SenChey, Phnom Penh Phone: 0884840208 Chruoy Changvar Branch Office St 1 Thlok Village, Kraol kou Commune, Preaek Ta Kov Commune , Khsach Kandal District, Svay Chrum District, Svay Rieng Province Phone: 855-87-666945 Kandal Province Phone: 855-24 900-488 lot No. A-01, Street 6A, Phum 3, Sangkat Chrouy Chang Var, Peraing Branch S'ang Branch Khan Chroy Chang Var, Phom Penh City National Road No.8, Snay Pol Village, Roka Commune, Pea House No 154, National Road 21, Preaek Khsev Village, Rokar Phone: 0884841986 Srey Sonthor Branch Office Santey village, Preaek Po commune, Srey Sonthor district, Kampong Cham Phone: 0884845245 Ratanakiri Regional Office Reang District, PreyVeng Provice Phone: 855-81-709967 Khpos Commune, S'ang District, Kandal Province Phone: 855-24 901-455 Prey Nop Branch Steung Meanchey Branch Road No.4 Veal Meas Village, Veal Renh Commune, House No 19A, Samdech Preah Monireth Blvd, Prey Nop District, Preah Sihanouk Province Phum Domnak Thum, Sangkat Stueng Meanchey 2, Phone: 855-68-855997 Khan Meanchey, Phnom Penh Phone: 855 23 901 345 Chey Chumnas Village, sangkat Labanseak, Baphnom Branch City Banlung, Ratanakiri Province #022 St317 Chheu Kach Village, Chheu Kach Commune, Ba Chom Chao Branch Phone: 0884830845 phnom Distirict, Prey Veng Province House No 4A, Veng Sreng Blvd, Phum Chrey Kaong, Phone: 855-93-855773 Sangkat Chaom Chau 2, Khan Pur Senchey, Phnom Penh Stoeung Treng Branch Office Spean Thmor Village, Stoeung Treng Commune, Stoeung Koh Thom Branch Phone: 855 23 901 355 Treng District Stoeung Treng Province Kampong Svay Kraom Village, Preaek Thmei Commune, Koh Char Ampov Branch Phone: 0713261010 Koh Nhek Branch Office Thom District, Kandal Province Phone: 855-87-777985 House No 610B, National road No 1, Deum Slaeng Village, Sangkat Chbar Ampov Ti Pir, Khan Chbar Ampov, Phnom Penh Phone: 855 023 999 026 Reangsei village, Srae Sangkum commune, Woori Finance Cambodia Plc. Kaoh Nheaek district, Mondul Kiri province Building No. 119B, Street271, Sangkat Phsar Doeum Toul Kork Branch Phone: 0713855124 Borkeo Branch Office Phum Muoy village, La Minh Commune, Bar Kaev District, Ratanakiri Province, Phone: 0713260505 Saen Monourom Branch Office Thkov Khan Chamkarmon, Phnom Penh. House No 1C, St 355, Phum 1, Sangkat Boeng Kak Ti Muoy, Phone: 855-23-999-661 Russey Keo Branch Khan Tuol Kouk, Phnom Penh Phone: 855 023 999 025 House No 1A, National Road 5, Phum Kraol Kou, Sangkat Chamkar Doung Branch Kilomet Lekh Prammuoy, Khan Russey Keo, Phnom Penh. House No 2039, St 217, Ta lei Village, Sangkat Dangkao, Phone: 855-23-999-664 Khan Dangkao, Phnom Penh Phone: 855 023 999 027 Chambak Village, Spean Mean Chey Commune, Pursenchey Branch Saen Monourom District, Mondul Kiri Province House No 6A, Russian Federation Blvd, Phum Ta Ngoun, Kampongspeu Branch Sangkat Kakab, Khan Pur Senchey, Phnom Penh. House No 751, National Highway No 4, Chambak Village, Phone: 855-23-999-803 Voa Sar Commune, Samraong Tong District, Kampong Bay Khang Cheung Village, Kampong Bay Sang- Kean svay Branch Kampong Speu Province Phone: 855 025 900 555 House No. 330, National Road 1, Toul Tnaot village, Korkir Communce, Kien Svay district, Kandal province Pshar Dey Huy Branch Phone: 855-23-720-632 House No. 11, Phnom Penh-Hanoi Friendship Blv (1019), Phone: 0713855100 Kampot Branch kat, Kampot City, Kampot Province Phone: 855-68-435555 Kamchaymear Branch National Road No. 8, Tean Phleung Village, Takhmao Branch Smaong Khang Cheung Commune, Building No. 31, National Road 2, Ta Khmau village, Kamchay Mear District, Prey Veng Province Sangkat Ta Khmau, Krong Ta Khmau, Kandal Province Roung Chakr Village , Sangkat Kouk Kleang, Khan Saensokh, Phnom Penh Phone: 855 023 900 466 Phone: 855-10-855747 Phone: 855-24-998-333 Kandal Stueng Branch Thmakoul Branch National Road No. 5, Paoy Yong Village, Ta Pung Commune, Thma Koul District, Battambang Province Phone: 855-69-855755 PrekPhnov Branch National Road 5, Phum Kandal, Sangkat Preaek Phnov, Kandal Stueng District, Kandal Province Phone: 855 024 900 066 Land No. 5, St. 38, Svay Ming Village, Barku Commune, Khan Preae Phnov, Phnom Penh Phone: 855-23-900-345 Woori OverviewBusiness OperationsGlobal NetworkFinancial Review330 Odongk Branch National Road No. 5, Mlu Meun Village, Phsar Daek Com- mune, Ponhea Lueu District, Kandal Province Overseas Branch Patheingyi Branch Phone: 855 024 900 077 Mukh Kampul Branch House No 271, National Road 6A, Kraom Village, Preaek Anhchanh Commune, Mukh Kampul District, Kandal Province. Phone: 855 024 900 099 Europe Woori Bank Europe MesseTurm, 29th floor, Friedrich-Ebert-Anlage 49, 60308, Frankfurt am Main, Germany Phone: +49(0)69 299 254 0 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: 60-3-2163-8288 Myanmar Woori Bank Yangon, Myanmar Office No.115(A) First Floor), Pyay Road, 10 Miles, Insein Township, Yangon, Myanmar Phone: 95-01-646951 Poland Woori Bank Poland Represetative Office Uniwersytecka 13, 40-007, Katowice, Poland Phone: 48-323-076-417 No. 19, 58st, Between 19th and 20th street, A Nate Taw Quarter, Aungmyaytharzan Township, Mandalay Phone: +95-9405243993 Kyaukse Branch No. 83, Tal Soe Gate, Aye Mya Kyi Lin(East)Ward, Railway Parallel Street, Kyaukse Township, Mandalay Phone: +95-9400208422 Tharyarwaddy Branch No. 204 , Yangon-Pyi Street(Lan Ma Taw) Middle Ward, Thone Sae, Tharyarwaddy Township, Bago Phone: +95-9400230933 Madaya Branch No. 2/1203, Yinn Mar Street , No. 2 Ward, Madaya Township, Mandalay Phone: +95-9400208299 Pyin Oo Lwin Branch No. 2, 28th Street, Thumingalar, near Bazarr and Thumin- galar Football Studium, In Front of Thumingalar Chapel, Pyin Oo Lwin Township, Mandalay Phone: +95-9443365122 Wundwin Branch No. 3, Myoma Ward, Myoma Street, Wundwin Township, Mandalay Phone: +95-9255450099 Kume Branch TharyarAye Ward, Yangon-Mandalay Highway Road, Near by B.E.H.S, Kume Township, Mandalay Phone: +95-9251902656 Pakokku Branch Corner of 4th Street and Myaing Street, Ward 11, Pakokku Township, Magway Phone: +95-9251902655 Letpadan Branch No. 36, Bo Phone Myint Street, Ma Au Kone Ward, Letpadan Township, Bago Phone: +95-9256923758 Yamethin Branch No. 179, Khwar Nyo Street, Thilawa-1 Ward, Woori Card (Tutu Finance_WCI Myanmar) Yamethin Township, Mandalay Phone: +95-9898291199 Head Office Shwebo Branch Room 8, Block 6, Mingalar Mandalay, Between Thazin Street and Ngu Shwe Wah Street, 73rd Street, Chanmyatharsi Township, Mandalay Phone: +95-22000219 Overseas Office Yangon Office Near by No.10 Kone Baung Market, Tap Myo Taung 3 Lane, Kyae Lat Office Street, Shwe Bo Township, Sagging Phone: +95-9899948011 Kanbalu Branch No. 4 Ward, Near Myoma Market, Southern Part of Main Road, Kanbalu Township, Sagaing Phone: +95-9266362426 Yesagyo Branch No. 386/R 8, Sa Ward, Thudamar Street, No. 45, Pinlone Road, No.3 Ward, North Okkalapa Township, Yangon Phone: +95-9420146551 Yesagyo Township, Magway Phone: +95-9446944080 Salin Branch No. 69/70, Maharthamainhtaw Streets, Pahtoephyu Quarter, Salin Township, Magway Phone: +95-9409701392 Pwintbyu Branch No.1, Kantkaw Street, Ahlaepai Quarter, Pwintbyu Township, Magway Phone: +95-9406030200 Thazi Branch No. 111, Ward-4, Htain Kan Quarter, Tharzi Township, Mandalay Phone: +95-9407217185 Pyawbwe Branch No. 50, Ward-159, Yan Aung Streets, Shwe Pyi Yan Lone Quarter, Pyawbwe Township, Mandalay Phone: +95-9407217186 Taungtha Branch No. 4/94, No.4 Quarter, 9th Street, Taungtha Township, Mandalay Phone: +95-9406030201 Kyaukpadaung Branch Poppa-Myingyan Road, Nearby No.1 Bridge, Northern Pyi Taw Thar Quarter, Kyaukpadaung Township, Mandalay Phone: +95-9964434368 Chanmyathazi Branch No. Sa-6, Owner No. 53-Ka, Myothit 2 Ward, Between 69th and 70th street, Between KhaingShweWah street & ZalattWah Street, Chanmyathazi Township, Mandalay Phone: +95-9977579424 Khin-U Branch No. 353/354, Beside of Yae U-Khin U Road, Mya Kan Thar Quarter, Khin-U Township, Sagaing Phone: +95-9894747433 Sagaing Branch Owner No. 2, No.4 Ward, Ad Choke Su Street, Ad Choke Su Quarter, Moe Zar Township, Sagaing Phone: +95-9966767133 Myinmu Branch No. 3/301, Kann Nar Street, Min Ye Kyaw Swar Ward, Myinmu Township, Sagaing Phone: +95-9984998602 Woori Asset Management Vietnam Overseas Office Woori Asset Management Hochiminh Representative Office Suite 615-4, MeLinh Point, 2 Ngo Duc ke st., dist.1, HCMC. Phone: (84-28)-3520-2811 WOORI FINANCIAL GROUP ANNUAL REPORT 2019Contact Information Directed by Ko, Hyunsoo Manager & IR Officer Investor Relations Department, Woori Financial Group Tel: 82-2-2125-2055 hyunsoo.ko@woorifg.com Designed by Reddot Branding Tel: 82-2-584-0418 51, Sogong-ro(203, Hoehyeon-dong 1-ga), Jung-gu, Seoul, 04632, Korea Tel. 82+2-2125-2000 www.woorifg.com

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